Pricing Handmade Items Guide

The Guide To Pricing Handmade Items

Pricing handmade has been a discussion among artisans for the longest time.

It’s also what makes or breaks your business. Here’s what I mean:

When your prices are too low…

You won’t make enough money to stay in business.

You risk running a loss because you don’t have enough money to pay for your marketing.

Not to mention the perception you allow your customers to have about your products and brand: cheap, poor quality, low value, bargain buy, unmemorable.

When your pricing is in the middle…

You won’t make enough money to grow.

You’ll forever be in that cycle of creating, selling, creating, selling, but never breaking out of it to create more and sell more because you don’t have enough money for more.

Yes, you do need to have more money to make more of it.

When you price too high…

You risk alienating customers.

You might get a sale every now and then and make big bucks, but the thought of when you’ll get your next sale scares you because your handmade items are not priced accessibly in your market.

Did I scare you enough yet?

Pricing is serious stuff, and deserves your attention if you want to build a sustainable business for the long haul.

Fortunately, there’s an easy way to figure out all of this math (and it’s not terribly hard either!)

Here’s a formula many artisans use:

Supplies + Your Time = Item Cost

Item Cost x Markup (between 2.0 – 2.5 or more) = Wholesale Price

Wholesale Price x Markup = Retail Price

Bonus: Download my FREE and easy plug-and-play pricing calculator to figure out what to price your items under a minute without any math!

Here’s an example. Say it takes 15 minutes for you to make a pair of earrings and your hourly wage is $20. Your time spent to make these earrings cost $5 ($20 divide by 4). The beads and findings for the earrings cost $0.85. We’ll use a 2.5 markup.

$0.85 + $5 = $5.85 (Item Cost)

$5.85 x 2.5  = $14.60 (Wholesale Price)

$14.60 x 2.5 = $36.50 (Retail Price)

What the heck is a “markup”?

Your markup is where your profit fits in the picture. But don’t confuse this with money you pay yourself with!

Profit is the money you spend on growing and investing in your business, such as with:

  • buying materials and supplies
  • buying new tools
  • attending business conferences
  • taking an online marketing course
  • hiring help
  • paying for apps and software

You can set your markup to more than 2 times if you want, as long as your market can bear the higher prices!

Most pricing formulas would advise on a 2 times markup from wholesale to retail pricing, but I’m suggesting you use at least a 2.2 times markup because this will appear more attractive to your wholesale prospects.

It’s the norm and expectation with seasoned retailers and brick and mortar shops.

The Guide To Pricing Handmade Items

Even if you’re not going to sell wholesale, account for it

You never know what might change your mind a few years down the road, so you want to be set right off the bat.

So many artists I know forego the wholesale markup so they can price more affordably in the beginning.

But when they want to grow their business, sell in galleries or brick and mortar stores, or do a daily deal (or any other kind of sales promotion), they find their pricing isn’t adequate and it’s impossible to expand because you wouldn’t be making any money!

So even if you just want to do this as a hobby for now, don’t box yourself in. Assume this is a serious business, because it might turn into that soon!

Pricing is an ongoing adventure for you and your business.

Coming up with your prices includes surveying your competitors and being aware of how much money your customers can afford to give until they stop buying.

There’s a sweet spot, and for that you can definitely call this an art.

Your competitors can be your benchmark for your own pricing.

Here’s how:

  • Price lower than them to steal their business
  • Price the same to compete
  • Price above them to create the perception of more valuable service and product

Download the free pricing calculator!

I made a pricing calculator just for you, and it’s free.

All you need to do is plug in your numbers and it’ll magically show you your wholesale and retail pricing!

pricing calculator download2

Questions?

Let me know if you have any questions, concerns or even tips for how you price your products.

I’d love to hear from you!

Liked this post? Then you'll want to get the FREE 30-day email course: The Epic A Sale A Day Challenge

Every step will be emailed to you daily. Join hundreds of makers who’ve taken the challenge and grow your business!

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Comments

  1. says

    Hi, Mei.. Thanks for your article.. It’s really helpful to me.. :) Hope you can write more article on handmade business tips.. You are so awesome!! Hope can success like you in the future.. :) Have a nice day.. I really like your product.. but they are too pricey to me.. because I am from Malaysia and the exchange rate for US dollar to Ringgit Malaysia is very high.. So, maybe I need to earn more money, then only can buy your adorable items from you.. :) Hope you can read this comment.. :)

  2. Kimberley says

    Hi folks from Pricing Handmade Items I like the formula but could you please do a second or third example of this for formula because I was abit confuse how; I taught when it said supplies+your time= item cost what I did however was add up all the supplies I brought and whatever I got out I then add to my time & that was my item cost and continue from there. However in the example shown it was done differently from what I was doing. Look forward to your response soon thanks.
    Also I would like to know if I was on the right track or what or where I was going wrong based on your example of the formula. Hope prob’ to give this one a try at sometime. Thanks again for sharing this.

    • Mei says

      Hi Kimberley,

      Can you explain how you are currently pricing?

      Here’s a further explanation on the pricing formula:
      The basic concept is that you want to include EVERYTHING you used to create the item, this will include your time, the materials, the electricity cost and other utility bills (overhead), gas for your car if you drove to the store for the supplies/shipping if ordering online, etc.

      This ensures that when you sell your products, you are not paying for these elements out of pocket. All of these should fall total to your item cost.

      If you purchase your materials in batches/bulk, you’ll need to figure out how many quantities of your product you can create from it and divide the price by the quantity to get your cost per unit.

      Say I buy 1 yard of cloth for $10 and I can make 10 units of my product, so for the cost of cloth per unit is $1.00.

      Then say I want to make $60 and hour, so each minute of my time is $1.00. If I take 10 minutes to make the item, my cost is now $11 ($10 + $1 for cloth).

      Then keep adding other materials, supplies, costs to derive your final item cost.

      There are many ways of pricing your products, but the main critical point here is that you are including ALL costs to make your item.

      • Kimberley says

        Hi ok when I do my pricing formula it is: material+labour=
        cost *2 is how I does price my items sumtimes however I dnt often use it. I just estimate how much the item is based on the work I put into it. Secondly I find that when I do use it I find that my prices does be high and I does think that if I price it at that price noboby would pay that much for it.
        An example is sumtimes I make my own cloth dolls I priced at $15.each but when I do the above formula just for the material & labor alone it came out to $46.85 and I haven’t even *2 it yet so I don’t use the formula for those. Thanks again for your feedback look forward to your next response soon. Thanks!

        • Mei says

          Kimberley, I think this depends on whether you’re a hobby or a business. And if it’s a business, where do you want to take it, how far do you want to go?

          If you’re just in it as a hobby, pricing your dolls at $15 can be enough for you.

          But if you’re a business, you definitely want to x 2 again for $46.85. Even if you think no one will buy it at that price, you will be surprised because there is always someone out there who will buy at that higher price.

          People spend A LOT of money on things that don’t always make sense at first. For example, I can never imagine spending thousands of dollars on a Gucci or other branded handbag (although tons of other girls would!), but I don’t blink an eye when I spend that money towards self-improvement products (like courses, workshops, etc.)

          Have you gotten my free ebook, Your Handmade Business foundation? It talks a lot more about pricing in there and explains what you must do to justify the higher price. You can get it here: http://blog.craftivity.me/free-ebook/

  3. esther says

    it’s clear and though i understand i find it hard to use see you say earring materials at 85c. so that would be plastics and base metals for me, then say you’d wanna use the real stuff and use sterling/gemstones your materials would get up to say 3 or 4$, it doesn’t really reflect in the price so much at the end and time used,
    I vary between 5 min and 20 hour earrings, so my time weighs most of the cost, if i charged a price like you suggest i’d ask for so much money no-one would want to buy it… i always feel like the variation between them is too large, either my lower priced items are too cheap or my higher priced items too pricey, how do i even that out a bit more? my variable always seems how much of a salaris i want to give myself. and i’m struggling with that

    • Mei says

      Hey Esther, you’re not alone with this challenge with pricing! More often that not it ends up being a concern that no one would be willing to pay for the price you’ve come up with.
      For this exact scenario you’re going through, it’s amazing what this pricing exercise can tell you about your business. What I’m hearing you say is you want to even out the pricing to something that makes sense to you, but what I’m seeing with your business is that your product line and designs need to change. If you’re spending 20 hours making a pair of earrings, I sure hope you’re charging good money for that – that’s half a week’s worth of work if you’re working 40 full time hours per week! You need to think of creating sustainable designs that don’t take too long to make, or be ready to charge higher prices and brand your shop to back up your pricing. I know as a creative that feels limiting, and it is. But if you want to support yourself with your business and make an income, there are mindset shifts we have to make!

      We can talk about this in more detail if you’re interested. I recently helped a client believe she could charge the correct prices when she was undercharging 200% and that empowerment is amazing. https://www.creativehiveco.com/consulting

      Good luck!

  4. Cynthia Marin says

    Oops, wasnt finish. How would I price a wreath that costs dollars but takes a week to make. Not able to buy tools, pre-cut cards, colored stock, draw and painting is all me. I would love and need xtra cash but the formula for pricing wont work for me. Ideas? Think sales wil come by word of mouth, they are beautiful. Thank you for your time.

    • Mei says

      Hey Cynthia!

      The pricing formula exists for many reasons, one of them being your guideline for how to design and craft your wreaths and other products in the future. If it’s taking you 100 hours to make, but you can’t sell it for more than say $200, then the formula is your gentle nudge to go back to the drawing board for your wreathe’s creation process. Here’s the thing though, most artists I’ve worked with don’t believe they can sell their products for what it’s worth (after they do the pricing formula). I’m willing to bet you can find artisanal wreaths that charge premium prices and that do well. And if you can’t, there’s no reason why you can’t blaze your own path with a line of exclusive, handmade and upscale wreaths. You just need to back up your prices and communicate clearly through your brand, copy, photos, etc. as to why the price is justified.

  5. says

    Very helpful, Mei! The distinction between pricing as a business vs. pricing as a hobby is fantastic. I have not heard it described that way, and it really explains it well. My physical product is knitting, and it’s extremely time consuming. All the cost is in my time spent to make the pieces. I did go up on my price significantly in the fall, but I would like to plug in using your spreadsheet to see what that says. I’m getting some views but not purchases, so I think my branding is off. I might need one kind of branding to sell patterns and classes and something else to sell products. If I got my money out of it, I would not mind knitting for people, but when my item turns up next to Chinese imports, it’s very hard to make the distinction to a customer who doesn’t understand the difference. I’m talking about being on Etsy, of course. I want to have my own store on my website this year. Thanks for this great article!

  6. says

    Hello Mei,

    Firstly I would like to say thank you for your invaluable information that you have shared on your site. I am following your advice and readjusting a few things. I was just wondering with regards to the pricing issue. I sell original artwork and after doing your price calculator it comes up as approximately double of what I am currently charging. Your system of pricing makes total sense and that is definitely in the area of what I would like to charge for my work. But even at the prices I am charging now, I am making very infrequent sales. Do you have any suggestions on this matter?

    Thank you for your time,

    Best Wishes,
    Kiran

    • Mei says

      Hi Kiran!

      You’ve seen original art being sold a lot more than what you’re selling them for currently in your Etsy shop. So it may not be a matter of not being able to sell them at a higher price, but more of a how do you market them to people who will pay for a higher price.

      If you’re worried that higher prices will make running a business so much harder for you, then you need to start making products and art at different price points. This is a great reason why lots of artists sell prints of their work.

      Good luck!

      • says

        Hello Mei,

        A big thank you for your considered response and taking the time to look at my shop. It is much appreciated and I will be following your advice.

        Thanks again and all the best,
        Kiran

  7. Kari says

    Thank you for the information.

    I was curious what you do (if you do) sell consignment, how do you factor that in?

    I started selling consignment and they charge me 30% of each sale. When I do your equation, and add the 30% on to that, it seems very, very high. Do you think that is fair?

    Thank you!

    • Mei says

      Hey Kari!

      If you do consignment, that 30% comes out of the 2.2 markup as you calculate your retail price.

      Here’s the formula again:
      Supplies + Your Time = Item Cost
      Item Cost x 2.2 (up to 2.5, depending on how much you want to markup) = Wholesale Price
      Wholesale Price x 2.2 (consignment percent comes out from this 2.2) = Retail Price

      So you don’t have to factor it in, because it already has been considered.

  8. says

    Dear Mei,
    I have read your article and it is helpful for some of what I make. I make nuno felted and hand painted, Zentangle scarves. The last Zentangle scarf took 50 hours to paint by hand. There is no way to charge for the hours, at even 20$ an hour it would make it a 1,000$ scarf. It is not a scarf that can be reproduced, and I only make one of these once in a while. I could do a similar design on the computer and have ones like these printed in limited number, but that would mean those are no handmade. But I digress, how the heck do I price something that can take me hours and hours to paint by hand? If it were an oil painting, your formula would work, but in this case….

    Sincerely,
    Tabitha Warren
    PS. I wish I could have included a picture.

  9. Brian Wolfe says

    I dont understand or I missed something. Where did you get the 12.90 from in your figures?
    Also if my cost for supplies are $55 and I make $20 hr for @ 8 hrs of work what should my selling price be?

    $0.85 + $5 = $5.85 (Item Cost)

    $5.85 x 2.5 = $14.60 (Wholesale Price)

    $12.90 x 2.5 = $36.50 (Retail Price)

    • Mei Pak says

      Hey Brian!

      So sorry for the confusion. That was a typo that I fixed. Here’s the correct example:
      $0.85 + $5 = $5.85 (Item Cost)

      $5.85 x 2.5 = $14.60 (Wholesale Price)

      $14.60 x 2.5 = $36.50 (Retail Price)

      Using your numbers, your final retail price should be $860 – $1343 depending on how much you want to mark up. You should download the free pricing calculator in the post above so you can price your products, it’s super helpful and really easy to use!

  10. Jenni says

    Love your blog posts! So helpful. I’m definitely struggling with deciding on pricing for the company I’m hoping to launch on New Years. I’ve been following the materials/expenses + labor = item cost, item cost x 2= wholesale price, wholesale x 2 is retail price. But most places that I find using this formula are making things like jewelry that they can make multiple products in an hour, and their materials are very low. However, I crochet and knit, and I find/hear that I make products very quickly in comparison to the average person, but to use even medium quality materials my prices are huge in comparison to what is the average on etsy, which is where I plan to sell. It’s so stressful! For example, a blanket I’m making will take ten skeins of yarn (atleast) and I’m buying the yarn at a discounted price ($13/ skein vs $20 a skein) , but even so the cost of materials is $130. The blanket will likely take me around 16-18 hrs to complete. If I charge $8 an hour, that’s atleast $128. So if I use the formula, I’d have to charge $1032.00 where most are selling their blankets for around $100. I’m using baby alpaca which is a nice quality yarn, but even if I were to use crappy acrylic yarn that isn’t even close in quality, the price would be way more than $100. And who would buy a blanket for $1000? I know I wouldn’t! But that’s the price I get for using the formula. The formula always makes my items so much more expensive than everyone else’s. So confusing to try to apply the usual formula for things this time consuming and costly especially when others selling on etsy can some how charge so much less!!

  11. says

    Hi Mei!😊
    I had questions about the pricing. Do you have a personal email so we can discuss in private? Thank you. Your tips are so helpful. I really need help pricing my items.

    Xoxo,
    -Melissa

  12. Carolina says

    Hello Mei,

    Thanks for this article!
    I was wondering how to price digital items? I sell digital invitations and once I make them, they can be sold many times.

    Thanks very much

    • Mei says

      Carolina,

      Since digital items benefit from passive income, the disadvantage is you have less freedom to charge more than what other shops are selling for a similar product. Unless you can provide your customers clear reason why your invitations are better or have more value. I would use other shop prices as a benchmark. Figure out what’s the high point, and what’s the low point and decide how you want to position yourself amongst your competitors.

  13. says

    We’ve been in business for about a year and a half now. We make one product that sells like crazy. This product costs us just under $12 to make and takes around 2 hours. We currently sell them for $50 each. However, according to your pricing, we would know need to sell them (setting an hourly wage of a low $10) for $64 for wholesale and over $125 retail!

    I feel really overwhelmed by that number. Although, I will admit that we never seem yo have money laying around for new products and machines that we would like. But I am scared that our regular customers would run for the hills if we came out with new pricing of over 2x’s what we normally charge. We actual chose that price because that tends to be the average price you can get our item from other Etsy sellers.

    I’m just scared!

  14. Britt says

    I think this particular formula is based on crafts that aren’t time intensive. For example, crocheting a fairly simple scarf with a cheap yarn may take around 3 hours.

    3 (time) x 9 (hourly wage) = 27
    Materials = $8 for two balls of cheap yarn
    Item cost = $35
    x 2.5 = $87.50 (wholesale) <- Already this is quite expensive and will rarely sell
    x 2.5 = $218.75 (retail) <- I can't see anyone buying a 3-hour scarf for this price. It may sell with an intricate stitch pattern and lovely luxury yarn with some colorwork or personalization for the buyer, but this would be at least a 9-hour scarf

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