How to price handmade items: the formula, with your time and the fees included
Updated · Fernhart Labs
Short answer
Add up what one item really costs you: materials (pack price ÷ how many items it makes), your time at an hourly wage, machine time, and a share of overhead. Then set a price that still leaves your target profit after the platform's fees:
price = (unit cost + fixed fees per order + postage you pay) ÷ (1 − target margin − percentage fees).
Two quicker rules of thumb are cost plus a markup, and "keystone" pricing: cost × 2 = wholesale, wholesale × 2 = retail.
Step 1: what one item really costs
- Materials per item. Divide what you paid for a pack by what it yields: a $12.99 pack of 100 beads costs about $0.13 a bead. Spread the shipping and tax you paid on the pack over it too, and allow for waste (offcuts, spills, rejects).
- Packaging, counted separately so you can see it.
- Your time, at an hourly wage you choose, for every step: making, finishing, photographing, packing. If you leave your time out, every sale quietly pays you nothing for it.
- Machine time at a running cost (a cutter, laser, kiln or sewing machine wears out and uses power).
- Overhead: shop plans, insurance, studio rent and the like, per month, spread over the items you make or the hours you work.
Their sum is your unit cost, the number every price method below starts from.
Step 2: three ways to set the price
| Method | Formula | Good for |
|---|---|---|
| Cost plus | unit cost × (1 + markup) | A quick floor that always covers your costs and wage |
| Keystone (rule of thumb) | wholesale = unit cost × 2; retail = wholesale × 2 | Selling to shops: the shop pays wholesale and charges retail |
| Target margin after fees | (unit cost + fixed fees + postage you pay) ÷ (1 − margin − percentage fees) | Selling online, where fees take a share of every sale |
The keystone multipliers are a retail convention, not a law: use them as a check that your retail price leaves room for a shop to stock you at half of it.
A worked example
A pair of earrings uses $6.40 of materials and packaging, takes 45 minutes at a $20/hour wage ($15.00), and carries $1.10 of overhead: a unit cost of $22.50.
Suppose your platform takes 9.5 % of the price in percentage fees plus $0.45 per order (example rates; check your own platform's current fees), the buyer pays postage separately, and you want a 25 % margin after fees:
| Method | Price | What you keep |
|---|---|---|
| Cost plus 20 % | $27.00 | Your $15.00 wage plus $4.50, before fees |
| Keystone | $45.00 wholesale, $90.00 retail | At wholesale, your wage plus $22.50 |
| 25 % margin after fees | (22.50 + 0.45) ÷ (1 − 0.25 − 0.095) = $35.04 | Fees $3.78, profit $8.76 (25 % of the price), plus your $15.00 wage |
Many sellers then round to a price ending they like ($35.99, say), which only raises the margin. What you really earn per hour of work is your wage plus the profit, divided by the hours: here ($15.00 + $8.76) ÷ 0.75 ≈ $31.68 an hour at $35.04.
Markup is not margin
Markup is profit as a share of cost; margin is profit as a share of price. Margin = markup ÷ (1 + markup):
| Markup on cost | Margin on price |
|---|---|
| 25 % | 20 % |
| 50 % | 33.3 % |
| 100 % | 50 % |
| 200 % | 66.7 % |
Fees are charged on the price, so margin is the number to watch when selling online.
Fees and postage
- Percentage fees (transaction, payment processing, referral) come off the price, so they shrink your margin at every price: they belong in the divisor of the formula.
- Fixed fees (a listing fee, a per-order payment fee) are added to the cost in the formula.
- Postage: if you charge the buyer exactly what the label costs, it cancels out; if you offer free shipping, add the label to the cost. Some platforms also charge their percentage on the shipping you collect.
- Craft fairs: spread the booth fee over the number of items you expect to sell there.
Questions
What is the formula for pricing handmade items?
Unit cost = materials + your time at an hourly wage + machine time + a share of overhead. Then price = (unit cost + fixed fees + postage you pay) ÷ (1 − target margin − percentage fees), or a simpler rule such as cost × 2 for wholesale and × 4 for retail.
Should I pay myself an hourly wage?
Yes: put your time into the cost at a wage you choose, separately from the profit. Otherwise a sale can look profitable while paying you nothing for the hours.
What is keystone pricing?
A retail rule of thumb: double your cost for the wholesale price, then double that for the retail price. It leaves room for a shop to stock your work.
What is the difference between markup and margin?
Markup is profit divided by cost; margin is profit divided by the price. A 100 % markup is a 50 % margin.
How do I include marketplace fees in my price?
Add fixed fees to the cost, and divide by one minus your target margin minus the percentage fees. In the example, (22.50 + 0.45) ÷ (1 − 0.25 − 0.095) gives $35.04, which keeps a 25 % margin after fees.
How do I price materials bought in bulk?
Divide the pack price, including the shipping and tax you paid on it, by the number of items it yields, and allow for waste.
Makerledger: Craft Pricing
Pricing calculator for handmade goods, with Etsy and craft-fair fees.
Makerledger does all of this for each product: materials entered the way you buy them, labour steps, machine time and overhead, then the three prices side by side and what you keep on each sales channel after its fees, with your break-even price and your real hourly earnings. Fee presets are included and every fee is editable. It also tracks stock, sales and market days, offline.
Sources
- Arithmetic only: every formula above is exact algebra, the same Makerledger uses (integer-cent money maths, fees rounded per charge). The keystone multipliers and the default 20 % markup are conventions, not rules. Makerledger