How to Price Handmade Items: A Simple Formula (With a Worked Example)

What is the formula for pricing handmade items?

The formula for pricing handmade items is: price = materials + packaging + labour + overheads + profit. Labour is the hours you spend multiplied by an hourly rate you choose for yourself. Add the first three to get your true cost, then add a share of overheads and a profit margin on top.

Most undercharging happens because only the first item on that list gets counted. Here is the whole process in six steps:

1. 1. List your materials for one finished item, using the share of each pack that one item uses.
2. 2. Add packaging: labels, boxes, tissue, ribbon, stickers and cards.
3. 3. Add your time: hours for one item multiplied by your chosen hourly rate.
4. 4. Add overheads and fees: your running costs per item, then divide by one minus your fee rate.
5. 5. Add your profit: choose a margin on top of true cost on purpose.
6. 6. Sense-check against similar makers, and against wholesale if you sell to shops.

Prefer to skip the arithmetic? Try our free handmade pricing calculator: add your materials, time and fees and it works out your price and your real hourly pay as you type.

The sections below walk through each step with a worked example. If you want to see why the usual shortcuts fall short, our guide to the hidden costs eating handmade profit covers the leaks most sellers miss.

How do I work out my materials cost?

Work out the share of each material that goes into one finished item, not the price of the whole pack. If a 1kg bag of wax costs £7 and one candle uses 200g, the wax costs £1.40 per candle.

Include everything that ends up in the product: wax, wicks, jars, fragrance, thread, findings, glue. Then add packaging separately: labels, boxes, tissue paper, ribbon, stickers and the thank-you card. Customers see packaging as part of the product, so it belongs in your cost.

How do I choose an hourly rate for my time?

Choose the hourly rate you would accept if someone else employed you to make this product, then time one item from start to finish, including prep, making, cleaning up and packing. Labour cost is hours multiplied by that rate.

For UK makers, a useful reference point is the government’s National Living Wage, which is £12.71 an hour for workers aged 21 and over from 1 April 2026 (GOV.UK). It is not a rule for the self-employed, but it is a sensible floor to compare against. The examples on this page use £12 an hour to keep the arithmetic simple, so if you are in the UK you would usually set yours higher.

If you leave your time out, you are not charging less for the product. You are working for free and calling it a discount.

What does a worked example look like?

Here is a 200g soy candle that takes 45 minutes to make and pack. At £12 an hour, the time costs £9.00.

Selling at £17.50 leaves a true profit of £4.35 per candle, about 33% on top of cost. Selling at £12 because it “feels right” would lose £1.15 on every sale while you are very busy. The numbers are illustrative, so swap in your own.

How do I include fees and overheads in my price?

Fees come out of the sale price, so you divide rather than add: price = (true cost + profit) ÷ (1 − fee rate). If your sales platform and payment provider take 10% in total (an example figure, so check your own), a candle that needs £17.10 to cover cost and profit must be priced at £17.10 ÷ 0.9 = £19.00.

Overheads are the running costs that are not tied to one product: workspace, equipment, insurance, stall fees, postage you do not pass on. Add up a typical month, divide by the number of items you sell, and include that amount in each price. Even a rough figure is far better than none.

How much profit should I add?

There is no single correct margin, so decide a number on purpose. Profit is what remains after you have been paid for your time, and it funds growth: new equipment, better materials, a slow month. Many makers pick a percentage on top of true cost (30% on £13.15 gives about £17.10), then round to a tidy price.

Whatever you choose, the check is simple: if profit per item is zero or negative, the product is costing you money.

How do I price handmade items for wholesale?

Shops and stockists commonly buy at around half of your retail price so they can make their own margin. Before saying yes, run your numbers at that price. At half of £17.50, the candle above would sell for £8.75 against a true cost of £13.15, a loss of £4.40 each.

That does not mean wholesale is impossible. It means you need to lower cost (batch making, buying in bulk, quicker production) or raise your retail price first. Knowing this before you agree is the point.

Should I match what other makers charge?

Use competitor prices as a sense-check after you have done the formula, not as the starting point. They may be undercharging too, and their costs and time are not yours. If your calculated price is well above theirs, look at what makes yours different (materials, quality, design, story) before cutting it. If it is below theirs, you have probably been undercharging.

How often should I review my prices?

Review prices whenever a supplier raises their costs and at least twice a year. A price set once and never revisited quietly turns into a discount as materials get more expensive. This is the step most people skip, because redoing the sums by hand for every product is tedious, which is where a recipe-based tool helps.

Frequently asked questions

How do I price handmade items for Etsy or other marketplaces?

Work out your true cost and profit first, then divide by one minus your total fee rate so the fees are covered. For example, with 10% total fees, a £17.10 target becomes £19.00. Check the current fee schedule on your platform, and remember to include postage you do not pass on.

What hourly rate should I pay myself?

Choose the rate you would accept from an employer for the same work. In the UK, the National Living Wage is £12.71 an hour for workers aged 21 and over from 1 April 2026, which is a useful floor to compare against even though it does not legally apply to the self-employed.

Should I include my time if making things is a hobby?

Yes. Including your time shows whether the business could ever pay you. You can start with a lower rate and raise it as you grow, but leaving time out hides the real picture.

How much profit margin should handmade products have?

There is no universal figure. Pick a margin on purpose, enough to cover unpaid tasks, slow months and reinvestment, and check profit per item is above zero. A common approach is a percentage on top of true cost, such as 30%.

How do I price handmade items for craft fairs?

Use the same formula. Add the stall fee, travel and display costs to your overheads, divide by the number of items you expect to sell, and include that share in each price.

What if my calculated price feels too high?

First check your numbers, then look at lowering cost through batching or better supplier prices, and at raising perceived value through quality, presentation and story. Dropping the price below true cost only means working for less.

Sources and further reading

• GOV.UK: National Minimum Wage and National Living Wage rates (checked 5 October 2026)

Figures in the examples are illustrative. Check your own costs and any official rates before you rely on them.