How to price handmade products so every sale makes money

Why simple formulas fall short

You'll often hear that you should price handmade work at twice your material cost, or three times. Those rules are easy, but they leave out three things that decide whether you make money: your time, your shipping and packaging, and the platform fees that grow with your price.

A better approach is to add up every cost of one sale, decide what margin you want, and then solve for the price that delivers it after fees.

Step 1: Materials per item

Work out what goes into one finished item. If you buy in bulk, divide the batch cost by the number of items it makes. A 10 lb bag of soy wax that fills 40 candles costs a fortieth of its price per candle. Include small things like wicks, labels and glue.

Step 2: Pay yourself

Time how long one item takes, including prep and cleanup, and multiply by an hourly rate you'd accept. If you leave your time out, your “profit” is really your wage, and you'll find it hard to ever hire help or step back.

Step 3: Packaging and shipping

Add the cost of boxes, tissue, tape and inserts for one order. If you offer free shipping, add your average label cost too, because it now comes out of the item price.

Step 4: Overhead and ads

Overhead is everything you pay monthly or yearly that isn't tied to one item: tools, software, subscriptions, a share of your studio costs. Divide the monthly total by the items you sell in a month. Do the same with advertising: ad spend divided by sales.

Step 5: Solve for the price after fees

Platform fees are a percentage of the price, so you can't just add them on at the end. Use this formula instead:

Price = (all costs + fixed fees) ÷ (1 − percentage fees − target margin)

For a US Etsy sale with free shipping, the percentage fees are 9.5% (6.5% transaction plus 3% processing) and the fixed fees are $0.45 ($0.20 listing plus $0.25 processing). Write percentages as decimals: 9.5% is 0.095 and a 25% margin is 0.25.

Worked example: a soy candle

For a 25% margin on Etsy: ($18.00 + $0.45) ÷ (1 − 0.095 − 0.25) = $18.45 ÷ 0.655 = $28.17. Round up to $28.50. At that price Etsy's fees are $3.16, your profit is $7.34 and your margin is 25.8%, on top of the $5 you've already paid yourself.

The break-even price, where you'd make no profit at all, is $20.39. Anything between $20.39 and $28.50 still pays you for your time but leaves little room for refunds, discounts or Offsite Ads fees.

Step 6: Check the market

Now look at what similar products sell for. If your price is close, you're in good shape. If it's much higher, you have three options: lower your costs (cheaper supplies, faster production, batching), change the product (a larger size or a set), or position it as premium with better photos, packaging and a clear reason it's worth more.

What you shouldn't do is cut the price below your costs to match a cheaper seller. Each sale would lose money, and selling more would only make it worse.

A note on wholesale

If you sell to shops, they usually expect to buy at about half your retail price. Check that your wholesale price still covers your costs, without platform fees, and leaves a profit. If it doesn't, your retail price is too low.