How to Price Your Handmade Products: Download a Free Pricing Calculator
You can’t escape knowing that today is Black Friday. The brick-and-mortar stores have slashed their prices, that is, as long as you are willing to stand in line for hours upon hours while you have to be careful to avoid the occasional stray elbow. Then there’s Cyber Monday, when online retailers (and many Etsy sellers) slash their prices for the bargain hunting gift givers.
If you are a seller on any of the handmade marketplaces, have your own site, or even have a cute storefront (jealous!), dropping your prices drastically to compete with the Big Box chains isn’t always possible, or even beneficial. Pricing is definitely an art, and by no means a science. As a seller, you should be careful not to undervalue your work.
Etsy advises sellers to use a general formula for price calculation:
Cost Price (Labor + Materials Cost) x 2 = Your Wholesale Price
Wholesale Price x 2 = Retail Price
What are the components that go into each?
Labor is your hourly wage (or include a portion of the wages of your assistant if you’re lucky enough to have one). This is hard to set, but generally be sure to “pay” yourself what hourly rate you would pay someone else to do the same task. Labor cost includes your time developing the idea of the item (especially if its one-of-a-kind), making the product, packaging the product, and marketing that specific product.
Materials cost is the cost of any of the raw materials: fabric, zippers, beads, paint, etc. All of the elements that make up your product must be accounted for. Depending on how you charge your customers for shipping, don’t forget to include the cost of packaging: labels, ink, tissue paper, etc.
After you have added up all of your elements of your product, your retail price (and Etsy price!) is roughly 4x your total cost. This might not be exact and might be way higher than what you are currently charging for your products, but maybe that’s a signal that you are undervaluing your own work. Your calculated price might not line up with what you think is a realistic price for your products. The Makery Blog suggests that one way to combat this is to find a new customer base who will appreciate the properly-valued price of your products or finding ways to lower the cost of your current products (but without skimping on quality, of course). You could even broaden your line and develop a product that has a lower cost to make, and thus a lower retail price in order to capture a wider market.
I have made a handly little Excel spreadsheet for you to use to calculate your price based on the above formula. In this spreadsheet, you just need to enter values into the green shaded cells, everything else will auto-calculate for you. Your prices (at-cost, wholesale, and retail) will be displayed on the yellow line at the bottom.
Here is a screenshot, the link is below:
Download the Excel template here.
Still need help figuring it out? I would love to help- contact me (firstname.lastname@example.org) to figure how how I can help you price your products and set your business up for success.