How to Price Handmade Items to Make a Real Profit.
A practical guide to pricing handmade products so you can actually get paid what you’re worth.
How to price a handmade item. For makers and creators.
The United States market for handmade items is valued at over $319 billion and is projected to more than double to $666 billion by 2033. The Etsy online platform alone has reported $12.6 billion in gross merchandise sales. That doesn't account for all the other online maker websites and the thousands of craft fairs, craft shows, street fairs, and holiday craft markets taking place across the United States.
These numbers demonstrate that a vast number of makers and creators are selling handmade products like soap, candles, leather handbags, Christmas ornaments, wood carvings, fall wreaths, quilts, jewelry, and so much more.
But the question is, are these creators making money?
Are you making money? Enough money to cover your materials, time, website expenses, booth fees, and other costs?
Are you making a profit?
Definition of profit
Profit is the money left over after you've paid for everything it takes to run your business. That includes materials, tools, time, event fees, shipping, rent, and other expenses. If you bring in more money than you're spending, that's profit. If you don't, it's time to revisit your pricing.
If you’re not making money, what is your strategy for pricing your products? Is it simply a guess based on what you think a customer will pay? Do you add up the cost of your materials but completely ignore additional expenses like advertising and gas to get to events?
Pricing your handmade items is one of the most intimidating parts of running a small product-based business. You don't want to charge too much and scare people away. But you also can't afford to charge too little and have more money going out than coming in.
Most pricing advice either oversimplifies the process by recommending that you just triple your costs or overcomplicates it by providing advanced accounting formulas meant for companies with finance departments.
This article is different. I'm talking to you. The artist, maker, creator, and side hustler trying to make a real income from handmade products. Until now, you may have considered this a fun hobby or a way to relax and do what you love. Now, it's becoming a serious business.
Here is a six-step pricing procedure that is easily doable and not overwhelming. My goal is to give you a better understanding of how to price a handmade item in a way that's fair and sustainable for you as well as fair to your customers.
Let's start with step 1.
Step 1: Know what your handmade product really costs.
Before you can price any item, you need to know what it actually costs to make it. And I don't just mean the materials. Real costs include everything it takes to bring that homemade item to life and get it into someone's hands. Things like material costs, tools and equipment, labor, and overhead expenses.
Material costs.
Material costs include every piece and part used to create your item. If you're making a quilt, this will consist of fabric, thread, and any embellishments you add. If you make burlap wreaths, the materials include burlap, a wreath frame, hot glue, ribbon, and decorative accessories. In addition to the actual materials used in making your items, don't forget about the decorative packaging. If you sell jewelry in a gift box, remember to include the cost of the box and any foam insert. Be specific and list every component.
Tools and equipment costs.
A quilter's tools and equipment, for example, will include needles and a sewing machine. Don't forget the electricity needed to run the sewing machine. Think about the tools and equipment you need. You may not buy new tools every time you make a product, but your tools wear out. Factor in the cost of maintaining or replacing tools over time.
Labor costs.
Yes, your time counts. It has value even if you're not paying yourself a wage right now. This is where many beginners get tripped up. They think their 'business' isn't significant. Since it's not a raving success yet, they feel they're being dishonest by adding labor to the cost of their product.
There is no business in this world that doesn't include labor in the cost of their products, and you should, too. If it takes two hours to make one item, you must decide what your time is worth per hour and include that in your cost.
Overhead expenses.
Overhead expenses are those ongoing costs of running your business that aren't tied to making your product. It includes things like rent, utilities, business software, and insurance. It also includes:
Packaging and shipping costs.
Envelopes, stationery, shipping boxes, shipping labels, postage, tissue paper, thank you cards, and stickers add up. While these are not directly related to how you make your product, they are additional overhead that you have to pay for, and they will affect how much money you end up with at the end of each month.
Advertising costs.
Running a Google PPC campaign online is another expense often left off the list when determining the real cost of a product. Any online or offline paid advertising campaign, whether you run it for two weeks or six months, should be included.
Fees and commissions.
If you sell on Etsy, at craft fairs, or through a payment processor, they all charge a fee for you to use their services. You need to factor in those fees so they don't affect your profit.
You don't need to obsess over every last penny but you do need a legitimate estimate. Once you understand your actual costs, the next step is ensuring your pricing supports your 'business,' not just your 'hobby.' That means building in enough margin to keep going, even when expenses change.
Step 2: Build a profit margin. Even if you're just starting out.
It's easy to think you don't deserve to make a profit yet. Many beginner makers feel this way. But if you don't build profit into your pricing from day one, you'll never make enough to grow and cover business and personal expenses. Taking profit into consideration doesn't mean you're greedy. Profit is what keeps your business alive.
A markup isn't just for big companies. Your pricing should cover your costs and then some. A typical markup for handmade products is between 2x and 3x your total cost. If your item costs $10 to make, a price between $20 and $30 is reasonable. Again, this is an average. Some business owners have a smaller markup, and others have a larger markup.
Use long-term thinking. Profit isn't just the money you put in your pocket right now. It's the accumulation of money that allows you to reinvest in materials, sell at regional events, buy better equipment, and eventually pay yourself a living wage.
If you undercharge, your business can't grow. A low price might deliver quick sales, but they won't sustain you over time. In addition, you will begin to resent that low price, questioning why you're working so hard for so little money.
Building a profit margin into your pricing is where many small business owners get uncomfortable. Pricing homemade items should reflect the care, time, and skill behind your product. You're putting in real work, so your price should reflect that.
This is where you begin to decide what kind of business you really want. Are you building something that will last a long time and enable you to feed your family and pay your bills with some money left over? Or are you just scraping by? Is this a business you are committed to and ready to do what it takes to succeed, or do you consider it a hobby you enjoy doing when you have time? How serious you are about including a realistic profit says a lot about your answer.
Now, let's move beyond the math. Pricing is also about how your customers perceive and value your work.
Step 3: Understand your customer's perspective. How do they value handmade products?
Just because you might never pay $1,000 for a one-off, hand-made jacket doesn't mean someone else won't. Your customer's view of value is shaped by their lifestyle, budget, and what matters to them. If you want to price accurately, you need to get inside their head.
Understand what customers are really buying. People don't just buy a product. They buy a feeling. A story. A connection. A lifestyle. Your handmade candle might cost more than a store brand, but it smells better, looks better, contains all-natural ingredients, and was made by a real human with a passion for what you do.
Understand what a price anchor is and the center stage effect. Businesses use the terms price anchor and center stage effect to get their customers to see what a good price their product is. They demonstrate that 'how you sell' matters as much as your chosen price.
Using a price anchor, the seller shows a higher price first and then displays a lower price (the actual price), making the second price seem worth the cost. It's about making the real price look better by comparison.
The center stage effect is when people frequently pick the middle option when given three choices. For example, if you see products priced at $50, $100, and $200, most people will choose the $100 item because it feels like the safest, best value. Businesses use this to guide customers toward the option they want them to buy.
Understanding the center stage effect and price anchors enables maker and creator business owners to get paid what their work is worth, and customers feel like they're making a wise choice. It's a win-win for both of you.Don't compete with mass-market brands. Your competition is not Walmart and Amazon. It will be a race to the bottom if you're trying to sell on price alone against large manufacturers. You're offering something personal, custom, and high quality. Price accordingly. If you're making homemade products, your real competition isn't a big-box store; it's other makers.
Getting clear on your customer's mindset helps you frame your pricing, not as a number but as a story they're willing to invest in.
Now that you understand what your product is really worth to you, it's time to put it all together into a price that makes sense, feels right, and enables your products to sell well.
Step 4: Find your handmade pricing sweet spot and test it.
There's no one perfect blueprint for pricing. It's part math, part instinct, and part market research. But let's start with this simple formula to help guide you.
Pricing formula for handmade goods
(Materials + Time + Overhead) × Markup = Product Price
Let's break this down.
Materials: What it costs to acquire the supplies to physically make the item.
Time: What your time is worth. If it takes 2 hours and you want to earn $20 per hour, that's $40.
Overhead: Packaging, tools, administrative time, utilities, seller fees, etc.
Markup: This is your profit margin. A typical markup is two to three times the total cost.
Product Price: This is the price you charge your customer.
Pricing formula for handmade goods example.
Let's say you're making decorative wooden sculptures of animals for people's homes.
Your materials cost $8.
Your time is worth $30.
Your overhead per item is $4.
That gives you a base cost of $42.
Multiply that by 2.5.
Your product price should be around $105.
Use this formula as your starting point. Now, here's how to dial it in even further.
Create a price range. You might decide your target price is between $95 and $115 based on your costs, time, and desired profit.
Start in the middle and test. Try pricing it at $105 and watch how it sells. Are people buying it without hesitation? Are they hesitating or asking for discounts? Use that feedback to adjust accordingly.
Raise your prices over time. Most makers start too low. As demand grows and your confidence builds, inch your prices up. And don't apologize for it.
Use odd number pricing. Research shows that prices ending in 9 or 7, for example, $109 or $97, tend to convert better than round numbers. Consumers tend to perceive prices ending in 9 as cheaper than those ending in even numbers. Even if the difference is just a cent or two. Using the odd number 7 as the final digit makes the amount stand out due to the number seven's infrequent use. This rarity frequently attracts more customer attention.
This testing matters when figuring out how to price a handmade item. Even a great formula needs a reality check. Today's target price might change six months from now.
Now that you've landed on a price you're comfortable with, you'll need to communicate that price clearly and confidently. That's where presentation comes in.
Step 5: Present the price of your handmade products with confidence.
How you present your price to potential customers matters as much as the dollar amount itself. They will hesitate if you sound hesitant because you're concerned about the person's possible reaction. If you project confidence that your product is worth the money, others will be confident, too.
Avoid qualifying your message. Don't say, "I know it's a little pricey, but…" That instantly devalues your work and forces you to decrease the price rather than lose the sale.
Use language that reinforces the value. For example, say,
"This handmade bag takes 4 hours to make and uses ethically sourced leather. Every stitch is done by hand, not machine. The leather is full-grain, which develops a beautiful patina over time instead of wearing out. This is an investment that's made to last. It's $145."
The tone is more confident. The customer can see the value in the price, and the new messaging sounds better than, "It's kind of expensive, but…" Doesn't it?
Now, take a minute to create your own product description. Instead of listing features, discuss how the product fits into your customers’ lives. "A durable, stylish bag you'll use every day for years."
Remember, you're not just selling a product. You're selling trust, quality, care, and a story. If you treat your handmade items like they're worth it, others will agree.
Pro tip: Demonstrate your work.
Have you reserved a table at a street fair or craft market? Display photos or run a video of yourself working on your products. Passersby will see your process, technique, and artistry. People who see what goes into making something valuable are more willing to pay for it. Be sure to also add these images and videos to your website so anyone who visits and buys remotely can see them.
Step 6: Keep adjusting as your business and pricing confidence grows.
Pricing isn't set in stone. As your skills grow, your brand strengthens, and your customer base evolves, your prices should, too.
Review your pricing every quarter. Look at your profit margins, material costs, and time. Are you still making the amount of money you need to make?
Next, watch for scope creep. That happens when the work on a product gradually grows beyond what you originally planned. For example, a design gets more detailed, has extra steps, or takes additional time to complete without you adjusting the price.
If your handmade products get more detailed or labor-intensive over time, but your prices stay the same, you're doing more work for the same pay. That's why your prices should reflect any added effort or complexity. Otherwise, you're losing money on every sale.Don't be afraid to raise your prices. If you've sold out multiple times or have a wait list of people who want what you're selling, that's a signal. Raise your prices and see how customers respond.
The more you sell, test, and tweak, the more natural the pricing process becomes and the more comfortable you will feel.
Own your value.
So, what does all this mean for you? You're not just making beautiful things. You're building something real. Something that can benefit you financially for the time, energy, and care you put in.
You've got the tools now to price with confidence, not guesswork. Your pricing will be grounded in real numbers, thoughtful strategy, and an understanding of your customer.
Yes, it's scary to charge more. Yes, people might walk away. But the right ones won't. The people who appreciate what you've created will pay your price when they see that you believe in the value of your work.
This is how you begin to shift from hobbyist to business owner. By owning your worth.
Keep making. Keep learning. Keep growing.
And never forget your work has value, because it does. Price your products like you believe it.
