The true cost of selling your handmade products

by tolmema on January 14, 2012

***Update: I’ve created a Product Pricing Worksheet to go with this blog post.

Free download can be found here.

 

Pricing your handmade products is really, really hard. Not only do you have to include factors like your overhead and material costs, you also have to set a price point that your customers will buy at. Sometimes the true cost of your products and a popular price point don’t match at all.

So how much should you price your products for? Well, lots of crafters use the pricing formula below to determine the price of their products:

product pricing formula | tolmema

Setting Your Costs

For an example, I will use my crochet house slippers to create a cost guideline. Each pair of house slippers requires two skeins of coordinating fabrics. Say that I spend $6 per skein on something that is mid-range in price, like Patons yarn or Caron yarn – the material cost comes to $12. I generally pay myself $10/hour to create crochet items, which may be high or low to other crafters (I think it’s pretty meager). It takes me a little less than an hour to make a pair, so say about $8 in labor. The total for my first formula of materials + labor = $20.

So, if I wanted to charge a wholesale price to someone, it would be $40. And if I were to charge a retail price for them, they would cost $80! To me that seems pretty high for a pair of slippers. Not that I personally don’t think they are worth it, but most people would not purchase a pair of slippers for $80. And even though I believe that I could sell my slippers for $40/pair, I don’t – I sell them for just $20, which means that I very rarely, if ever, make a legitimate profit from each pair.

It’s obvious that I am selling myself short, and that I really need to take a look at my pricing structure again if I ever want to actually profit from my crafting. However, I get so many orders at the $20 price point, and I LOVE making things for people, so I haven’t raised them. I work very hard to make great products, and if I am not 100% happy with the finished product I will go back and revise/fix/improve until it’s perfect. The love, integrity, and time that I put into each product is worth something, and I fully believe that $40  is a fair price for that. Some people may not agree, but in the end, wouldn’t you want to sell your products to someone who truly wants them, and will truly cherish them for what they are – labors of love?

As you can see, it is very hard to set your pricing at a point that is fair to both you and what the consumer thinks is a valid price. If you want to actually profit from your crafting, you HAVE to charge what your product is worth. It’s going to be higher than Walmart pricing, and that’s okay, because your items are made by hand and that takes time, effort, materials, and more. If the consumer truly appreciates the products that you are selling, they will buy it, regardless of the price. The biggest factor is demonstrating the value to your customers. Once you do that, people will realize that your products are worth their cost, and you will see more sales!

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{ 25 comments… read them below or add one }

fabulous converse jack purcell online shop September 25, 2014 at 1:51 pm

Hola! I’ve been reading your website for a long time now and
finally got the courage to go ahead and give you a shout out
from Kingwood Texas! Just wanted to tell you keep up the excellent work!

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robyn August 7, 2014 at 1:03 am

is there an editable version of this? I would like everything to be typed out not hand written.

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robyn August 7, 2014 at 1:03 am

is there an editable version of this? I would like everything to be typed out not hand writen.

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tolmema August 7, 2014 at 8:47 am

Hi Robyn — at this point I do not. However, as an alternative you could use a tool like http://www.pdfescape.com to write directly onto your file.

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a June 24, 2014 at 12:24 am

Fantastic site you have here but I was curious about if you
knew of any user discussion forums that cover the same topics talked about in this article?
I’d really like to be a part of community where I can get opinions from
other knowledgeable people that share the same interest.
If you have any recommendations, please let me know.
Thanks a lot!

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rose rudkin May 31, 2014 at 3:40 pm

entered required info for download, did not receive download??

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Charles March 18, 2014 at 1:56 pm

Thank you for taking the time to break down the pricing structure for hand made items. It’s been a big help in pricing the pieces that I make.

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tolmema March 18, 2014 at 11:26 pm

Thanks so much, Charles! I’m glad that you found the information useful!

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Omily (Naomi Brignola) February 25, 2014 at 7:58 am

Thanks so much! I am so stuck here… I sell handmade cards…if I would ask the price they are worth according to this method, I would have to ask 12 dollars..and that’s still low. (12 for retail, 6 for wholesale)

Right now I ask 4 euros for 1 card, and I sell 3 cards for 10 euros.

Handmade greeting cards are just not profitable, I guess. I’ve been trying to think of something I can make similar to greeting cards that I can ask more for, but haven’t come up with anything so far :)

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tolmema March 4, 2014 at 9:50 am

Hi, there! I’m so glad that you found this article helpful. I understand your pricing concerns…it’s hard to sell your items for what they are worth. It requires a movement from handcrafters to price items according to their value, and requires lots of education for buyers – aka teaching them that handmade items are worth their price. Good luck with your pricing! If you have more questions, please feel free to email me. I’d love to help you and your store. :)

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Keith October 31, 2014 at 10:02 am

Naomi.

You could trying simple earrings. I make chain mail jewellery out of silver plated wire.
I sell a pair of earrings for £2.50, which only take 5 mins to make.

You can make ear wires from .8mm wire, and use the same wire for bead wrapping.

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Lauren January 2, 2014 at 9:30 pm

I love love love this. I too, have a handmade shop and it IS tough. People who are “in the blogging world” as I call them tend to know fair market value for handmades because they often peruse Etsy. But regular peeps on your personal Facebook, friends or co-workers make you feel like you’re ripping them off! So on one hand, you have fellow hand crafters saying it’s not ethical to “lowball” and I get that, but you’re right- how do you hit the sweet spot? I’ve learned through browsing product that the price someone can sell something for has everything to do with their online presence/popularity and nothing to do with actual product quality, which is sad! Thank you for this post. I have printed the free PDF and will use it to rework my pricing should I need to!

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tolmema January 3, 2014 at 6:50 pm

Hi, Lauren! I’m so glad that you found this information useful. It is so hard to price your handmade items when you feel like you need to compete with lowballing competitors or manufacturers like WalMart.

In regards to popularity/presence – I agree, to an extent. I know a lot of great crafters who sell high-quality items and have a large audience. I also know a lot of great crafters who have only a very small audience. I think it’s a mix of luck and inbound marketing best practices.

Good luck with your crafting – if you have any questions or want to chat, feel free to contact me at any time! I’d love to help improve your shop if I can! xoxo

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Sherry February 28, 2013 at 11:07 pm

I would believe $40 was a fair price for,your slippers. As a consumer, I expect that I am buying directly from the manufacture ( wholesale) and eliminating the additional markup to,full retail. Thus making your slippers a fabulous bargain!

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tolmema March 1, 2013 at 5:08 pm

I am incredibly happy to hear that! I think it’s a fair price as well, but I already know how much work goes into a pair. :) Plus, by purchasing from a local crafter, you’re funding them directly, and the money stays within your community.

Thank you for stopping by!

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Laura Guest February 10, 2013 at 5:35 am

I never come across this formula but was told that I should
Work out cost of product and multiple that by 2 and then add time to cost = Retail price/ wholesale price I guess would be cheaper if in bulk maybe!

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tolmema February 11, 2013 at 9:09 am

I’m not sure that there’s one magical formula that is “right”. In the end there’s so many variables and price points to consider, and the right price for each product is different for everyone. You’re right, though – bulk pricing is always cheaper, but you run the risk of losing quality or profits if you don’t sell enough product to cover the cost of the wholesale materials. In the end I think it’s best to go with whatever you feel comfortable with and what actually makes a profit.

Thanks for stopping by, I appreciate your insight!

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Rosie January 28, 2013 at 2:20 am

Hi, I really loved the way you set out the formula. This might seem like an odd question…. but what font did you use… I just love it. Thanx

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tolmema January 28, 2013 at 10:23 am

Hey there! I don’t remember exactly (I can’t find the PNG right now), but I think it’s a mixture of “Valerie’s Hand” and “Waiting for the Sunrise”. I’m so glad that you like it!! Thanks for stopping by! :)

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Johane Levesque August 12, 2012 at 11:00 pm

I was going to leave a reply explaining why I don’t agree with this formula, but it needed a “stage of it’s own”… You can find my response to your post here:

http://cookingcacophony.blogspot.ca/2012/08/the-economics-of-profitable-crafting.html

Along with a modified formula which might be more useful for crafters to find their break even and profitability points, without pricing themselves out of the market.

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tolmema August 14, 2012 at 9:08 am

I really liked your post – you went a lot deeper into the actual costs and specific numbers vs. my pretty light post. The idea was to demonstrate to non-crafters how difficult it is to compete with Walmart pricing and the heavy cost of crafting for profit. Thanks for posting such an informative reply on your blog – I think it’s very important for people to realize the costs of hand-crafting anything, whether it be slippers or bread or horseshoes. :)

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tialys January 25, 2012 at 2:46 am

I’ve seen that formula before but don’t know how anybody can actually put it into practise and still sell things! Having said that, I always hope that people who are interested in handmade items will realise the time and effort that has gone into them and will be prepared to pay for that – in the same way that people expect to pay a higher price for designer branded goods.
I have been wondering lately about how much I am adding to, and not charging for, the cost to myself in terms of packaging. Boxes, jiffy bags, tissue paper, cello bags, ribbons, tape, stickers, business cards – it doesn’t bear thinking about really!

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tolmema January 25, 2012 at 5:12 pm

Packaging is expensive, especially when it looks nice! I’m sure that the packaging alone adds at least a dollar to the overall cost of your products. While it’s not much in the scheme of thing, a dollar here and a dollar there will result in no profits. :(

Thanks for stopping by!

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atomiclulu January 15, 2012 at 11:28 am

Reblogged this on AtomicLuLu and commented:
Always a very tough subjec to approach when you consider your handmade marketplace. This great thought helps demystify much of what someone should consider when pricing their efforts.

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tolmema January 15, 2012 at 11:30 am

Thanks for the link love. It is indeed a very tough subject, but I think it is important that artists price their products according to their value, and that consumers understand the numbers behind handmade stuff so that they can appreciate the item for what it is, not its price tag.

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