the margin kitHow to price handmade products (the formula that pays you)
Most makers price by gut feel, then wonder why they're busy and broke. This formula covers every cost, pays you for your time, and still leaves a profit.
The formula
Why divide instead of adding a markup? Marketplace fees are a percentage of the price. If you add them as a flat amount, you'll always come up short. Dividing by what's left after fees and margin gives you a price that hits your margin exactly.
Step by step
- Materials. Work out the cost per unit you actually use, such as per gram of wax, per bead or per sheet, not per pack. Include packaging.
- Labor. Time one batch, divide by the number of items, and multiply by the hourly wage you want. $15–25 an hour is common for skilled handmade work.
- Overhead. Add up your monthly running costs (tools, software, Etsy Ads, studio share) and divide by the items you make a month.
- Shipping you absorb. If you offer free shipping, the label cost goes in here.
- Fees. On Etsy US that's 9.5% (transaction plus processing) and $0.45 fixed (processing $0.25 plus listing $0.20). See Etsy fees explained.
- Target margin. This is profit on top of paying yourself. 25–40% is healthy for handmade work, and it funds growth, slow months and discounts.
Worked example: a soy candle with free shipping
| Wax, wick, jar, fragrance, label | $4.20 |
| Box and tissue | $0.80 |
| Labor: 15 minutes at $20/hour | $5.00 |
| Overhead share | $1.00 |
| Shipping label (free shipping) | $4.50 |
| Fixed Etsy fees ($0.25 + $0.20) | $0.45 |
| Total to cover | $15.95 |
Fees are 9.5% and the target margin is 30%, so divide by 1 − 0.095 − 0.30 = 0.605.
$15.95 ÷ 0.605 = $26.36, so list it at $26.50.
Check: at $26.50, Etsy fees are $2.97 and your costs are $15.50, which leaves $8.03 profit (30.3%). That's on top of the $5 you already paid yourself for your time.
Wholesale and retail
If you sell to shops, they'll usually pay about half of retail. Check that your wholesale price still covers materials, labor and overhead. If it doesn't, your retail price is too low to wholesale at all.
Signs your prices are too low
- You sell out but your bank balance doesn't grow.
- You can't afford to run a sale or pay for ads.
- Your "profit" disappears once you count your hours.
Handmade Pricing Calculator
Price every product so you're paid for your time, with materials, labor, overhead and marketplace fees all included.
See the Handmade Pricing Calculator · $12 Free fee calculatorFAQ
What markup should I use for handmade products?
Instead of a fixed markup, use the formula above. It accounts for marketplace fees as a percentage of the price, which a simple markup (like 2× materials) ignores.
Should I include my time in the price?
Yes. If labor isn't in the price, you're working for free and the 'profit' is really your wage. Count labor as a cost, then add margin on top.
What profit margin is good for handmade?
A margin of 25–40% after paying yourself for labor is a healthy target for most handmade sellers. It leaves room for discounts, ads and slow months.