How to Price Your Handmade Items

Pricing your handmade items can be challenging because you’ll need to balance what customers want, the cost of materials, and the value of your time and skills. You also want to make sure that your product is competitive enough to make a profit. 

Well, you’re in luck because this article will guide you on how to put a price on your creativity and be content with your sales. For more insights on monetizing your creativity, check out our guide on how to make money as an artist . There are some items you must consider to achieve this. Keep reading to find out more.

Here are 7 steps to pricing your handmade items:

The first thing to consider is the cost of your materials when pricing your handmade items. When calculating the cost of your materials, you must include all the raw materials plus the wastes and mistakes that can lead to waste. This includes small items such as threads, glues, pins, mats, and any other material you use during production. When purchasing raw materials in bulk, you need to divide the total cost by the number of items the material can produce. 

For example: If the total cost of materials that can produce 95 HTV shirts for the Halloween holiday is $380, then the material cost of producing 1 t-shirt will be (380/95) = $4.

You need to calculate your labor costs per hour. Setting your hourly rate should be based on the level of your skills and experience. You then multiply your hourly rate by the time it takes to make each item. To achieve this, you must be honest about the time you spend on designing, fixing mistakes, and producing the final product. 

For example: If you set the hourly rate at $15/hour, and it will take you 30 minutes to make a single item, then your labor costs will be ($15*0.5)= $7.5 per item.

Overhead costs are simply additional expenses that you’ll incur when making your handmade items. These costs include electricity bills, workspace, tools, shipping of supplies, website fees, marketing fees, and packaging costs among others. Overhead costs are normally difficult to assign to a single item. 

Therefore, you should add a certain percentage to the value of each item you’ve made. This percentage is normally 5% to 20% depending on your total overhead costs and the number of items produced.

Now it’s time to decide the profit margins you’ll want from your item. Many handmade item makers normally aim for a 10% to 30% profit margin. However, these margins are purely dependent on the competitive nature of your handmade items and what your target audience will be willing to pay. Unique and quality products can attract higher profit margins of beyond 50%. 

You can purchase your raw materials in bulk at wholesale prices thereby increasing the profit margins you can work with. For example, if the total cost of producing 1 HTV Tumbler is $1.5, you can add a 30% profit margin and sell it at $1.95. Your profit will be ($1.95-$1.5) = $0.0.45 per tumbler.

After coming up with your total costs and the profit margins you want to work with, you also need to compare the prices of similar handmade items in the market. This is to make sure that your pricing is competitive enough and not overpriced or underpriced. 

You can find the prices of your competitors on platforms such as Etsy, eBay, or at your local craft fairs. For example, if your competitors sell the price of their handmade item at $25 and you make a similar item but of higher quality, you can price yours at $28.

You also need to consider not only retail pricing but also wholesale pricing for your handmade items. As a producer, you’ll need to price your items lower for wholesale buyers so that retailers can mark them up. To account for wholesale rates, the price of handmade items is normally doubled. 

Therefore, Retail Price = 2 * (Overhead Costs + Labor Costs + Costs of Materials). It is necessary to consider wholesale and retail prices because not all of your customers will be retailers.

Even after matching your competitors’ prices in the market, you’ll need to adjust your pricing mechanisms based on the feedback from your target customers, your sales trends, and changes in the cost of raw materials. To adjust your prices accordingly, you’ll have to keep track of your sales and expenses on a real-time basis. 

For example: if a certain design has not met your monthly sales target, it will be prudent to consider lowering the prices. For a design that has exceeded your sales target, you can consider increasing the prices.

Let’s say you’ve started a t-shirt printing business, and you want to know how to price your product, here is how you’ll go about it if you have the following costs to consider:

This article has provided you with the necessary information you’ll need when pricing your next handmade items. Share it with friends and family so that they can also get the most from their handmade items.