How to price handmade products
The most common mistake in handmade pricing is not charging for your time at all. The second most common is adding materials and time together and then stopping, before platform fees and postage have taken their share.
The formula
Price = (materials + (hours × your hourly rate) + packaging) ÷ (1 - fee% - margin%)
The division at the end is the part people miss. Fees and margin are percentages of the selling price, so you cannot simply add them as a number. Two makers with identical costs will need different prices if one sells on a 20% commission platform and the other on a 3% one.
Worked example
| Line | Amount |
|---|---|
| Materials | $12.00 |
| Your time (1.5 hours at $18/hour) | $27.00 |
| Packaging and label | $2.00 |
| Cost so far | $41.00 |
| Platform fees (say 10% of price) | — |
| Target margin (40%) | — |
| Price needed | $82.00 |
That is $41 divided by (1 - 0.10 - 0.40). Selling at $41 would return nothing, and selling at $55 would leave roughly $8.50 — less than half the hourly rate you assumed.
Run your own numbers in the Etsy fee calculator to see the break-even price and the price that hits your target margin on each platform you sell on.
Choosing an hourly rate
If you have never charged for your time, start with what you would pay someone else to do the work, not the minimum wage. A maker who undervalues their hour ends up working more hours to earn the same money, which is the opposite of what a business should do.
Keep the rate consistent across products. Changing it per product makes your prices look arbitrary and makes it impossible to tell which products are actually worth making.
When to raise prices
- When a fee goes up. A commission increase is a price increase you did not choose, so pass it on.
- When postage rises. Recheck packaging and label costs at least twice a year.
- When returns creep up. Add a returns reserve rather than absorbing it silently.
- When you are consistently sold out. That is demand telling you the price is low.
Discounting without wrecking the margin
A discount comes straight out of profit, not out of revenue. On a product with a 40% margin, a 15% discount removes 37% of your profit. If you want to run promotions, use the target price field in the calculator to see which products can survive a sale before you run one.