How to Price Your Handmade Products — The Complete Formula for Makers (2026)
Most makers are guessing at their price. Here's the formula that tells you exactly what to charge — with a worked candle example.
Most pricing advice tells you to look at what competitors charge and match it. That’s backwards. If you don’t know what it actually costs you to make something, you’re just guessing — and guessing is how makers end up busy but broke.
In this guide, we’ll walk through the complete formula for pricing your handmade products: from raw materials to overhead to markup, with a worked candle example so you can see the numbers in action.
Know your true cost before you set a price.
Craftybase calculates your true cost per product automatically — materials, labor, and overhead — and shows you a suggested price based on your target margin. Try it free today and stop guessing.
Why do I need a pricing strategy?
Before we dive in, let’s stop for a minute to talk about why you need to have a deliberate approach to your product pricing.
Simply put, how you price your product will directly impact how profitable your business is.
It may sound obvious but it’s worth going over: if you charge too little, you may not make enough to cover your costs. Unless you like losing money, this is not a situation that results in the growth of any business.
If you charge too much, you may find it difficult to attract enough customers and will suffer from cashflow tied up in unsold inventory. This is also not the path to success.
Both of these situations are clearly ones you want to avoid, so making guesses at your pricing is thus not a great idea if you want to scale your business and generate the profits you want.
Pricing is thus a tough tightrope to walk: it can take a while to get completely right, so it’s wise to have patience, be willing to experiment, and to arm yourself with as much information about pricing as possible.
Step 1: Determine your Cost Price
Your Cost Price is how much it costs you to buy or make one unit of your product.
For resellers, your Cost Price is amount you pay for the product from your vendor. This usually should include any shipping / freight you pay to bring the item to your warehouse — this total is known as your landed cost. Use our free landed cost calculator to factor in tariffs, import duties, brokerage fees, and shipping all at once.
For manufacturers, your Cost Price is a little more involved to calculate as it involves tallying up all the costs to produce your product from raw materials (this is otherwise known as your COGM or COGS).
Your Cost Price is also the price that would make you 0% profit if you were to sell it at this price point (this is important to note when we cover margins and markups later in this article).
You might also like to factor in the following costs, if you can calculate this easily per product. If not, you’ll want to make sure they are covered in your overheads in Step 2.
- The cost of any packaging required
- The cost of shipping your product (only if the customer doesn’t directly pay this)
If you make soap, our free soap making cost calculator walks you through this step automatically — just enter your ingredients, batch size, and labor to see your cost per bar.
To automate this calculation across your entire product range, see: Recipe Costing Software: The Complete Guide →
Read more: How do I calculate the unit price for a product? →
Step 2: Factor in your Overheads
Your Unit Cost for buying or making your product is only one part of the equation. You also need to account for your in-direct costs. These are all of the other costs associated with making and shipping your product, such as:
- Rent for your studio or workshop space
- The cost of any tools or equipment you use
- Salary for any employees (if you have any)
- Technology and website costs
- Accounting, legal, and professional fees
- Marketing and advertising expenses
To calculate your indirect costs, you will need to track all of these costs for a period of time (a month is usually a good starting point). Once you have these figures, add up all of your indirect costs to get your total overhead costs.
You can either divide this total figure by how many products you sold in that period to get your overhead costs per product, or alternatively you can use a percentage of your Cost Price to represent an estimate across the board.
Read more: How to factor in overheads in your product pricing →
Worked Example: Pricing a Soy Candle
Let’s put the formula into practice with a concrete example. Here’s how a handmade soy candle maker would price a single 8oz candle:
Step 1 — Materials cost (COGS):
| Ingredient | Cost per unit |
|---|---|
| Soy wax (approx. 6oz) | $0.45 |
| Fragrance oil | $0.32 |
| Cotton wick | $0.18 |
| Glass jar | $0.22 |
| Label + packaging | $0.08 |
| Total materials | $1.25 |
Step 2 — Labor: At $15/hr and 12 minutes to pour, set, and label one candle: $3.00
Step 3 — Overhead allocation: Monthly studio costs ($150 rent, $30 utilities, $20 supplies) ÷ 200 candles/mo = $1.00/candle
Step 4 — True cost (COGS + labor + overhead): $1.25 + $3.00 + $1.00 = $5.25
Step 5 — Apply markup: Using a standard 2.5x retail markup: $5.25 × 2.5 = $13.13 → round to $13.00
This is your baseline retail price before channel fees. If you’re selling on Etsy, you’ll need to factor in platform fees — more on that below.
For candle-specific pricing strategies, see our in-depth guide: How to Price Candles →
How Etsy Fees Affect Your Pricing
If you sell on Etsy, platform fees reduce the amount you actually receive for each sale. These aren’t just overheads — they need to be built into your pricing calculation.
For our $13.00 candle example, here’s what Etsy takes:
| Fee | Amount |
|---|---|
| Listing fee | $0.20 |
| Transaction fee (6.5%) | $0.85 |
| Payment processing (~3% + $0.25) | $0.64 |
| Total Etsy fees | $1.69 |
Your net after fees: $13.00 − $1.69 = $11.31
With a true cost of $5.25, your actual profit margin is: ($11.31 − $5.25) ÷ $11.31 = 53.6% — which is healthy.
But if you’d priced at $10.00 (matching a competitor without knowing your costs), you’d net $8.31 after fees. Profit margin drops to 37%, and you’re not paying yourself for the actual labor it took.
This is why pricing from your costs — not competitors’ prices — matters.
Step 3: Determine Your Target Profit Margin
A profit margin is the difference between how much your product costs to make / buy and how much it’s sold for. This difference is what’s left over after you’ve covered all of your costs, both direct and indirect.
For example, if you make a product that costs $10 to make / buy and you sell it for $20, your profit margin would be 50%. In other words, for every unit sold, you’re making 50% profit.
Your target profit margin is how much profit you would like to make on each unit sold. This will be different for every business, and will also change over time as your business grows and develops.
Read more:
- How Much to Mark Up Your Products: Tips for Small Businesses →
- The difference between markup and margin: A simple breakdown →
Step 4: Calculate Your Selling Price
Now that you have your total costs, how do you determine how to price your product so that you make a profit?
There are three main ways to do this. We’ll introduce them here, and then go into more detail on each method in the sections below:
- Cost-plus pricing
- Target pricing
- Competitor pricing
1. Cost-plus pricing
With cost-plus pricing, you start by calculating how much it costs you to make your product (your cost of goods sold or COGS), then add a margin on top of this. The margin is what will become your profit.
This is the most straightforward way to price your product, as it doesn’t require any guesswork or estimation: you simply add up all of your costs, then add your desired profit margin on top.
To calculate your cost-plus price, use this formula:
COGS + (COGS x markup) = cost-plus price
For example, let’s say it costs you $10 to make a product, and you want to add a 50% margin. This would give you a retail price of $15:
$10 + ($10 x 0.5) = $15
You can then expand this pricing formula to include internal labor (to create your product), overheads / in-direct expenses, and any commissions and fees involved in selling the product.
COGS + (COGS x markup) + labor + overheads + fees = cost-plus price
2. Target pricing
With target pricing, you start with how much you want to sell your product for, then work backwards from here to determine how much it can cost you to make it. A word of warning here: if you can’t figure out a way to make it for this cost or less, then you’ll want to try another approach to avoid losing money!
This is, however, a useful method if you understand how much your target market is willing to spend on products like yours. It also allows you to consider any shipping or other fees when calculating your target price.
To calculate your target price, use this formula:
Retail price - shipping & seller fees = Target price
For example, let’s say you want to sell your product for $40, and you estimate that shipping and other fees will add up to $10. This would give you a target cost price of $30:
$40 - $10 = $30
With this target cost price, you’ll now want to calculate your COGM and then see if you can make this number less than your target cost price.
3. Competitor pricing
With competitor pricing, you start by researching how much similar products to yours are selling for, then price your product accordingly.
This is a good method to use if you are just starting out and don’t understand your target market or how much they would be willing to spend on a product like yours.
It’s also useful if you understand your direct competitors and how they price their products.
Step 5: Test and Adjust Your Pricing
Once you’ve determined how to price your product, it’s important to test this out and see how it goes.
You may find that you need to adjust your prices up or down based on customer feedback and sales data.
It’s also important to keep an eye on your competitors and how they are pricing their products. If they start selling at a lower price than you, this could impact your sales.
Finally, as your costs change (e.g. you find a cheaper supplier for your raw materials), make sure to adjust your prices accordingly so that you can continue to make a profit on each sale. Using pricing software to automatically manage this can be useful if you have a large product range with fluctuating material costs.
Pricing your product doesn’t have to be difficult or time-consuming. By following the steps above, you can confidently price your products to maximise your profit margins.
See more: Pricing Mistakes (And How To Avoid Them) →
To put these steps into practice right away, download our free Etsy pricing calculator spreadsheet — it walks through cost price, overheads, and margin in a ready-to-use format.
Frequently Asked Questions
How do I calculate the selling price of a handmade product?
Add up your material costs, labor, and overhead to get your true cost (COGS). Then apply a markup — most handmade sellers use 2x to 3x their COGS as a starting point. For example, a candle with a true cost of $5.25 would retail at $13.00 using a 2.5x markup. Craftybase can calculate this automatically once you've entered your recipe and overhead figures.
What is the 3x rule for pricing handmade items?
The 3x rule is a common markup guideline: price your product at three times your material cost. It's a useful starting point, but it doesn't account for labor or overhead — which means many makers using this rule are actually underpricing. A more accurate approach is to multiply your total cost (materials + labor + overhead) by 2x to 2.5x.
Should I price based on what competitors charge?
Competitor pricing can give you a useful market reference, but it should never be your starting point. If you set your price based on what others charge without knowing your own costs, you risk selling at a loss. Start from your true cost, then check whether the market will bear that price — not the other way around.
How do Etsy fees affect my product pricing?
Etsy fees (listing, transaction, and payment processing) typically reduce your net payout by 10–15% of the sale price. For a $13.00 item, that's roughly $1.69 in fees, leaving you $11.31. Factor this into your pricing calculation before publishing — your target price should be high enough to cover all fees and still deliver your desired margin.
What is a fair profit margin for handmade products?
Most handmade sellers target a gross margin of 40–60% after all costs (materials, labor, overhead, and platform fees). If your margin falls below 30%, it's worth reviewing your pricing or finding ways to reduce production costs. Craftybase shows your real-time margin for every product so you always know where you stand.
Stop Guessing — Know Your Numbers
Craftybase is inventory and manufacturing software built for handmade sellers. Add your materials, set your labor rate, and assign overhead — Craftybase calculates your true cost per product and suggests a price based on your target margin.
No more spreadsheets. No more guessing. Just clear numbers that tell you exactly what to charge.
