How to pay yourself in your creative business – the formula

Unlock a Profitable Handmade Business
in Just 12 Weeks Without Using Etsy
or Social Media

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This workshop is for anyone who makes and sells a handmade or physical product, including jewelry designers, artists, paper designers, bath & body product makers  and more!

What You'll Discover

The #1 mistake people make with Etsy & social media that causes shops to FLOP

 The secret to making it with your handmade shop so it's no longer just a hobby

How to make sales in your handmade shop with ease so you can finally get to 6-figures

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What to do when you think your handmade business is struggling
  1. Mei! What a great article and wonderful way to break down a complex concept and make it easy to understand. It’s far too easy to fall into the trap of doing your craft for the love of the craft and not reaping the financial rewards. Well done! Will definitely share this with my network. :-)

  2. Susan says:

    I am glad I came across your post! Important, useful information simply put. I think I finally have a clear understanding of the numbers (now I need to make some money).
    Thanks!

    • Mei says:

      Thanks for stopping by Susan! And no problem. There are tons of free articles in here to help you make money :-)

  3. lynn says:

    Nice workable formula. One basic question though, with the very first formula for pricing: ” Supplies+Your Time=Item cost. What do you mean ” Your Time” ?….. Is there a dollar value attached to ” Your Time” ? Surely you don’t mean $30 for supplies + 6 hrs of your time=Item Cost.~~~How do you account for: Degree/Quality of workmanship, Artistic value, Marketability Value of the Art Piece?????

    • Mei says:

      Hi Lynn!

      I do mean that exactly. You need to decide what hourly rate you want to pay for your labor if you’re making your own products. If you’re charging $25/hour, then 6 hours of your time would add $150 to your Item Cost.

      You can account for your education/background, quality/workmanship, artistic value, demand in the marketplace with the markups that I mentioned. Charge higher markups where you see fit, you don’t need to limit yourself to 2.5 markup.

  4. […] give themself a paycheck from their Etsy sales, anyway? It’s tough! Mei at Creative Hive Co covers all the basics and gives a pretty good argument for implementing this method […]

  5. Veronica says:

    Today is my first day of being a full time business owner, I left my job Friday and I am freaking out a little. This is a great post to get me more prepared. Thanks.

    • Mei says:

      Hey Veronica! Congratulations on that huge new chapter in your life! That scary feeling will never truly go away. Unfortunately that’s our curse of being self employed but there are definitely things we can do to promote stability and consistency in our business. Thanks for dropping by. Congrats again!

  6. Natalie says:

    This post was nothing short of amazing! I love love LOVE numbers, although I’m creative entrepreneur, I still have accounting and taxes to take care of. I actually love this formula! I had a different system but this is much more simplier! Thanks for a great post!

    • Mei says:

      Hey Natalie! I luuurve numbers too. High five! I’m curious to hear what formula you were using before! Can you share?

  7. Sara Mariah says:

    What a helpful post! I’m still in the pre-planning trenches and this is going to be the biggest help in nailing down my financial goals. Better yet, you’ve explained it so incredibly simply! Thanks so much for posting this!

  8. Hi

    I stumbled upon this article, and I’m so glad I did. I stopped treating my business as a hobby, and got serious with my craft. This article was just what I needed on how to pay myself.

    It was not complicated and straight to the point, but I do have a question. You mention the things we should be paying from our personal account, but when we set aside the .30% for taxes, should we pay that from our business account? or do I put that amount in a separate account until tax time?. Also, what about donations to your local church? I know I can itemized those donations given through out the year, but should I do that from personal account, or my business account?

    Thanks,

    Diahann

    • Mei says:

      Hi Diahann!

      I’m glad the formula helped!

      When you set aside the 30% tax money (again, this % will depend on you and may be different) it needs to be paid from our business account. You should be filing taxes quarterly, but what I like to do with the money in the meantime is put it in Betterment (https://www.betterment.com/)which invests your money in mutual funds, stocks and bonds so you’re collecting a bit of interest over the three months. Separating the tax money every month like this also ensures that I don’t spend it!

      Now, I’m not a CPA or a lawyer, but I believe charitable donations depend on the purpose. If you’re donating old clothes, that ties in with your personal account. But if you’re donating product from your business (like for a fundraiser) then it should be deductible from your business account.

      Hope that helps!

  9. Shaleen Batra says:

    Thank you so much for a wonderful article. I am not sure if I can apply this to my business yet. I started last year but still in loss. Cost of setting up and buying materials is way too much and I am not sure if I would be able to get any profit selling a $5 card. By no means I would be able to pay myself. Ifi would be able to make some profit it would be so good at this stage.

  10. CubanQuilter says:

    My business is mostly custom work. The client brings me most of the supplies (quilt top, batting and backing) and I quilt them on a longarm machine. My expenses are therefor minimal – thread, sometimes batting if it is not provided, and sometimes a pattern for the quilting design. I work from home and do expense a portion of my housing costs on my taxes.

    Up until this year everything has gone back into the business. In calculating what to pay myself, should I include my hourly rate as part of the expenses in the “Revenue minus Expenses” calculation?

    • Mei says:

      Hey there!

      Your hourly rate spent on client work would be a part of expenses, but since you *are* your labor, a lot of that money will go into your pocket at the end of the day.

      Think of yourself as separate from the business, like you were a part time employee or contractor. Labor you pay them is considered an expense, right? So labor you pay you is also an expense… until you cut yourself a check every two or four weeks.

      Does that make sense?

      • Aisha says:

        Love this article! So should “Your Time” in the pricing formula for all projects within 2 weeks (the time in which you pay yourself) be less than, equal to, or greater than the 60% profit (also known as your paycheck)?

  11. Glad to came across this post. I think treating yourself every two weeks is a great idea. There are some who spends more than what they can and some they other way around within two weeks. Awesome suggestions. Thanks!

    http://www.cybergenic.net/

  12. Karena says:

    HI Mei,
    I’ve just discovered your article via Pinterest and it has confirmed that stirring in my spirit that I have been operating my business incorrectly where it comes on to managing the money! Thank you for sharing these tips. I’m a graphic designer so my supplies are basically my machine and software. Any suggestions on how to work out the pricing formula? Currently I just breakdown my costs at an hourly rate. Thanks again for sharing!

  13. JR says:

    You have done a great job. It shows in your blog. Very useful.

  14. Beth Licht says:

    Hello!

    I provide a service so I don’t really have material costs. I do have supplies I use but there’s no easy way to figure out how much I use per dog.

    How can I use the calculator?

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