Price your handmade goods for profit
Before you begin
You’ll need to gather up a few numbers:
- The total cost of your materials (be precise, don’t guess, and don’t include any one-time discounts
- Hours to make your product (time your process without breaks)
- The hourly wage you’d like to pay yourself OR that you’d expect to pay someone you’ll hire to make your products. Don’t put $0 here, even if you make your products yourself. Leave yourself room to scale and hire help!
- Any other fixed expenses you may incur and want to build into your prices (like selling fees, free shipping, etc.)
- Your profit per item in dollars. Be sure to include enough cushion to cover your overhead, reinvest in your business’ growth, and pay yourself. If you don’t know what to put here, I recommend you at least make this equal to your labor and materials cost, which would give you a 50% profit margin. (If you plan to sell wholesale, this number can be lower as you’ll be adding additional margin onto your retail orders)
- If you plan to sell wholesale, you’ll also want to know your wholesale margin. Tap here to access the wholesale calculator.
Congrats! You’ve unlocked the perfect retail price for your product based on the time your product takes to make and the materials you’ve selected. Now it’s time to start selling! If your calculated price has left you thinking, “I could never sell this for that much!” you have a few options
- Find a niche that is willing to pay a premium price for your product (Bloomingdales’s customers aren’t shopping at Walmart – how can you position yourself as a luxury brand in your product category?)
- Find ways to work more efficiently so you can make your product faster and decrease your labor costs
- Decrease your materials costs by buying in bulk, changing suppliers, or using different materials.
Don’t forget, if you want to sell wholesale you’ll need to use a different pricing formula. You can find it here.