How to Price Handmade Products: Materials, Time, Fees and Margin
Pricing is where many makers lose money without realising it. It's tempting to add up the materials, double it and call it a price, but that often leaves out your time, packaging and the fees taken by the platform or payment processor. This guide goes through a pricing method step by step, using a handmade candle as the example. The same steps work for jewellery, soap, prints, knitwear or anything else you make.
Amounts are written without a currency symbol. Fee rates vary by platform, country and payment method and they change over time, so always check the current fee page for wherever you sell.
Step 1: Work out the cost per unit of each material
You buy materials in packs, but each product uses a fraction of a pack. The formula is:
cost per unit = pack price ÷ pack size
For the candle:
| Material | Pack | Cost per unit | Used per candle | Cost |
|---|---|---|---|---|
| Wax | 12.00 for 1,000 g | 0.012 per g | 200 g | 2.40 |
| Fragrance oil | 15.00 for 100 ml | 0.15 per ml | 12 ml | 1.80 |
| Wicks | 8.00 for 100 | 0.08 each | 1 | 0.08 |
| Jar | – | 1.50 each | 1 | 1.50 |
| Label | – | 0.20 each | 1 | 0.20 |
| Materials total | 5.98 |
Include the small things: wick stickers, labels, test burns, and the waste from failed pours if it's regular. They're tiny per item but add up across hundreds of items.
Step 2: Add packaging
Packaging is easy to forget because it isn't part of the product. Box, tissue, filler, tape and a thank-you card: say 0.80 per candle.
Step 3: Pay yourself for your time
If you leave your time out, you're working for free, and your price won't support you if the business grows. Choose an hourly rate you'd be happy to be paid, then work out how long each item really takes. Include making, pouring, labelling and packing. Batch work makes this easier: time a batch and divide by the number of items.
Say each candle takes 10 minutes of hands-on time when you make them in batches, and you pay yourself 18 an hour:
18 × 10 ÷ 60 = 3.00 per candle
Step 4: Add it up to get your cost
| Cost | Amount |
|---|---|
| Materials | 5.98 |
| Packaging | 0.80 |
| Your time | 3.00 |
| Total cost per candle | 9.78 |
This is the number to beat. If you sell below it, you're either losing money or paying yourself less than the rate you chose.
Step 5: Allow for fees and choose a margin
Marketplaces and payment processors usually take a percentage of the sale price, sometimes plus a fixed amount per order. Because the fee is a percentage of the price, you can't just add it to the cost. You need to solve for the price.
Margin is the profit as a percentage of the selling price. If you want a 40% margin after a fee of 10% of the price, the cost has to fit into the remaining 50% of the price:
price = cost ÷ (1 − fee % − margin %)
price = 9.78 ÷ (1 − 0.10 − 0.40) = 9.78 ÷ 0.50 = 19.56
You might round that to 19.95. Check it:
- Fee: 10% of 19.95 = 2.00 (rounded)
- Profit: 19.95 − 2.00 − 9.78 = 8.17
- Margin: 8.17 ÷ 19.95 = 41.0%
The 10% fee here is only an example. Use the real fee structure of your platform, including any listing, transaction, payment processing and currency conversion fees. If you also sell in person, card readers usually take a percentage too.
Margin vs markup: don't mix them up
Markup is profit as a percentage of cost. Margin is profit as a percentage of price. They're easy to confuse:
- An item that costs 10 and sells for 20 has a 100% markup (10 profit ÷ 10 cost)
- The same item has a 50% margin (10 profit ÷ 20 price)
If someone tells you to "aim for a 50% margin" and you add 50% to your cost, you'll end up with a much lower margin than intended. Decide which one you're using and stick to it.
Step 6: Sense-check against the market
The formula gives you a minimum sensible price, not necessarily the right price. Look at similar handmade items. If yours comes out much higher, ask whether you can explain the difference (materials, size, design, finish) or whether you can reduce costs, for example by buying materials in larger packs. If yours comes out much lower, you may be underpricing, which can make buyers question the quality.
Wholesale is a separate calculation. Shops usually expect to buy at a price well below retail so they can add their own margin, so make sure your wholesale price still covers your cost.
Step 7: Review when costs change
Material prices, postage and fees change. Recalculate at least once or twice a year, and whenever a supplier raises prices. A small change in a material you use a lot can wipe out much of your margin.
Keep track of what actually sells
Pricing is the start. Tracking sales, fees, shipping and expenses shows whether the business is really making money month by month. If you'd like a spreadsheet for all of this, my Handmade Business Tracker & Pricing Calculator has a materials list that works out cost per unit, "recipes" that add up the materials in each product, a pricing calculator with your hourly rate, estimated fees and a suggested price for your target margin, plus sales, expenses, stock and a monthly summary. It also includes printable pricing, market tally and custom order sheets.
Disclosure: the tracker is my own product on Payhip and costs $1. The example figures are illustrative, and fee rates vary by platform and country. This isn't tax or financial advice.