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# 3 Secrets To Pricing Your Handmade Goods Correctly

The ongoing discussion of “*How do I price my work” *with artisans is a common topic among forums and blogs with many different variations of pricing formula and thoughts on the best way to price accordingly.

In this article I’m going to look at how some people price their work and then show you how to do it right, plus we have a free gift at the end, which will help anyone who wants to do this automatically.

## So How Do Most People Price Their Work?

Some people simply look at what others are making that is similar to them and price according to that.

One popular formula is to add up the cost of the materials and labor then multiply that by 2.I would say that using this formula particularly is wrong. There should be no need to multiply your hourly rate by anything. If you are doing that you simply haven’t worked out what you need to charge per hour correctly.

## The 3 Key Things You Need To Price Your Handmade Goods Accurately

By following these three key principles you will always know exactly what it cost you to make anything and more importantly that when you sell it you are making a profit.

**Work out what your hourly rate should be, not what you think it should be**.

This means you need to work out how much you want to earn based on the actual real time you will be working creating goods PLUS you need to work out the indirect costs for you business such as electric, internet, phone, tools etc etc**Calculate exactly the cost of the goods that went into your item.**

So that’s fairly self-explanatory but depending on what you are making this could be lots of small items and all of these need to be accounted for. And don’t forget about packaging materials and postage.**Calculate your items total cost value plus labor.**

Once you have the first two then this is obviously simple enough and getting here at least gives you a true cost of your work so at least you know the very minimum you need to sell it for to at least cover your time and material costs.

Once you have these figures then you can price your goods accurately using this formula.

*((Cost of Goods used *Markup Value) + Cost of labor) +Tax = Sale Price*

* *Working out your hourly rate accurately is a crucial step here if you really want to make any money. And once you have done this then there is never any need to markup your hourly rate in your pricing formula since you know exactly what you need to earn to make the salary you want AND cover your business costs.

## Here’s How To Work Out Your Hourly Rate Correctly.

In order to do this I suggest you work backwards and follow these steps:

So, write down:

- How much income would you like to make per year? (#1)
- How many weeks will you work a year? (#2)
- How many hours will you work a week? (#3)
- How many hours do you spend on admin a week? (#4)

Then you can calculate what your hourly rate **SHOULD BE** by doing this calculation.

Income (#1) / weeks (#2) * [Work hours (#3) – Admin hours (#4)]

Try it and you will be surprised at what you come up with as your new hourly rate and we haven’t even got started on the overheads yet.

Even if your small you still have overheads. You still bought tools right? You still use electric to run your soldering iron right? You still need to use the phone or the Internet to call suppliers right?

All these things are a direct cost attributable to your business.

So again write down what your costs are every week and tally them up. If you direct overheads per week are $20 and you are working 20 hours per week on your business you need to add an extra dollar an hour to the figure you already worked out that your time is really valued at.

If you don’t do this you’re really running your business blind with no idea of the true costs involved for creating your handmade pieces.

## How To Do This Easily & Automatically

Ok, so I promised at the start that I would show you a way to do this quickly and easily for free and here it is.

Using our free craft and jewelry pricing calculator you can do all this by simply following a few steps and you only have to fill in a few boxes and the calculator will take care of all that nasty math for you J

## Step 1 – Your Hourly Rate:

All you need to do is simply fill in the four fields in orange to calculate your hourly rate before tax:

- Gross income you would like to make
- How many weeks per year will you work
- How many hours TOTAL per week will you work
- How many hours will you spend on admin

## Step 2 – Your Indirect Costs

Next we need to work out the overheads for your business. This may take a few minutes because I want you to list EVERYTHING..!!!

The sheet has a lot of ideas pre-filled for you but make sure that you put in what’s right for you.

Once you have done Steps 1 and 2 you shouldn’t really need to do these again and you can just focus on the cost of goods that go into your finished creation.

## Step 3 – Direct Costs

Now we just need to add in the cost of all the parts that go into creating our finished piece. Add in everything, including packaging and postage.

## Step 4 – Your Selling Price!

All you need to do now is simply put in a markup value and the tax rate that applies for you and then you are done.

A simple few steps and you can price your finished work accurately every time.So there you have it, quickly, easily and accurately price your handmade goods every time.

Download your free copy of the crafting and jewelry pricing calculator from our blog now and see how your pricing compares to how you have been doing it in the past.

Article written by Gary Capps of CraftMakerPro.com

Craft Maker Pro software is designed to help the small handmade business organize their inventory, pricing, customers, invoicing and more so they can spend more time on creating and less time on admin.

Tags: craft market, Handmade, Handmade Artists, how to price handmade, selling price, selling price calculator

Posted in Handmade, Selling Tips

### 9 Responses to “3 Secrets To Pricing Your Handmade Goods Correctly”

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What a great article!

Glad that you liked the article. I hope that you find the pricing calculator useful

Gary – http://www.craftmakerpro.com

Glad you like it, the owner of the price calculator contacted us and offered it free for our members, I thought it was kind

Very helpful information. It was very nice of them to offer this to member

No problem Cr8tivelefty, glad you enjoyed it

Gary – http://www.craftmakerpro.com

Great article and a great offer for all our members

Your welcome Beadthing, please share this with your friends as pricing is such an important part of running a successful handmade business – Gary – http://www.craftmakerpro.com

Great article and I love your pricing calculator. It is very helpful to explain the different costs associated with a product in a crafting business.

But I have a couple questions:

1. Why do you suggest doubling the cost BEFORE labor?

2. Why are sales tax amounts added to the cost of a product? If you are reselling, you should be able to apply for a sales tax exempt status to buy without paying taxes. And when you resell, you collect taxes when you sell and pay those amounts to the state you live in.

Thanks,

Sandy Dell

‘Gift Rep Sandy’

http://www.SellingtoGiftShops.com

Hello Sandy,

No one answered your questions so I will try to answer them briefly.

1. This is called “Keystone” pricing. Double or Triple Keystone pricing is a simple and quick way to price an item. The materials cost $5.00 to make your item. If you doubled that 5 x 2 = 10 or $10.00 if you triple that 5 x 3 = 15 or $15.00, add your labor cost ($8.00 an hour), you worked for an hour on your piece. So the price of the piece is calculated like this 10.00 + 8.00 = 18.00, the price of your piece to a customer is $18.00. If that is too “cheap” you can do it again using the 15 + 8 = 23 so the item would be $23.00 total. The idea is that you recoup the cost of your materials (overhead) and charge for your time.

2. Taxes are factored in because in the end the reseller must pay Sales Tax to his or her state. Idaho is 6%. So if I sell your item for $23.00 + $1.38 = $24.38, I owe Idaho the $1.38. if I make 100 sales of that $23.00 item that is $138.00 I owe Idaho. If you add the tax prior to final pricing you’ll get a better idea of the final cost and if you need to charge more or perhaps less for your item. It is just another tool to calculate cost and profit.

I hope that helped a little.