How to price handmade items so you actually make money

You sold 40 items last month. You were busy every evening. Then you added up the yarn, the packaging, the fees and the hours, and worked out you'd made about $3 an hour. Maybe less.

This happens to a lot of handmade sellers, and it's almost always the same cause: the price covers the materials and a bit extra, but not your time, not the small costs and not the fees. This guide gives you a simple formula that covers all of it, with Etsy's fees taken from Etsy's own help pages and a worked example.

The formula

Price = materials + labour + overhead + profit + fees

Labour and profit are the two people skip. Labour pays you. Profit pays the business, for new tools, more stock, or a slow month.

Etsy's fees, from Etsy

From Etsy's help page on fees for selling on Etsy:

• Listing fee: "a flat rate charge of $0.20 USD per listing", charged whether or not the item sells. Auto-renewed listings that sell, and each extra item in a multi-quantity sale, are also charged $0.20.
• Transaction fee: "Etsy charges 6.5% of the total order amount in your designated listing currency."
• Payment processing fee: a set rate plus a percentage of the total sale price, which varies by country. It's taken from the total, including shipping and any applicable sales tax.

From Etsy's page on payment processing fees, the rate for the United States is 3% + $0.25 USD. Check the page for your own country.

From Etsy's page on Offsite Ads:

• If your shop has always made less than $10,000 USD in any 365-day period, you're charged 15% on orders that come from an Offsite Ad, and you can opt out.
• If your shop has made $10,000 USD or more in any 365-day period, the fee is 12%, and you can't opt out.
• The Offsite Ads fee for one order is never more than $100 USD.

Etsy Ads and shipping labels bought on Etsy cost extra on top of these. Fees change, so check those pages before you set prices.

A worked example

This is a made-up example. "Wren & Thistle" isn't a real brand. Wren & Thistle sells hand-knitted beanies on Etsy, in the US, and charges $5 shipping, which covers the label.

Step 1: materials

Step 2: labour

One beanie takes 1.5 hours. The maker picks $15 an hour as the lowest rate she'd accept. That's just an example; use a number that's fair for you and your area.

1.5 hours x $15 = $22.50

Step 3: overhead

Needles, the photo setup, electricity and the shop's share of a craft fair stall come to about $60 a month. She makes about 40 beanies a month.

$60 / 40 = $1.50 per beanie

Step 4: profit

Materials + labour + overhead = $31.50. She adds 20% profit: $6.30.

What she needs to keep from each sale: $37.80.

Step 5: add the fees

On Etsy in the US, about 9.5% of the order total goes in fees (6.5% transaction + 3% processing), plus $0.25 processing and $0.20 listing. The order total includes the $5 shipping.

At a price of $43:

$37.99 covers the $37.80 she needs. So $43 works. Sales tax, where it applies, adds a little more to the processing fee.

Step 6: check the Offsite Ads case

If the same order comes from an Offsite Ad, the 15% fee adds about $7.20 on a $48 order. She'd keep about $30.79, which is below her $31.50 costs. So she either accepts a small loss on those sales, prices a little higher, or opts out while her shop is under $10,000 a year. It's her choice, but it should be a choice, not a surprise.

Then check the market

The formula tells you the lowest price that works for you. It doesn't tell you what buyers will pay. Next, look at similar items:

• If similar items sell for much more, you may be underpricing. Raise it.
• If they sell for much less, look for ways to lower costs, or show clearly why yours is worth more: better materials, photos that show the detail, a description that explains the work.

Our guide to how to price products with competitor research shows how to do this properly.

Common pricing mistakes

• Leaving out your time. If labour isn't in the price, you're working for free.
• Forgetting packaging. Tissue, tape and mailers add up fast.
• Ignoring fees. Around 10% plus fixed fees on Etsy in the US is a real cost.
• Shipping at a loss. If your shipping charge is less than the label, the difference comes out of your item price.
• Never raising prices. Material costs go up. Check your numbers at least once a year.
• Pricing to match the cheapest seller. There's always someone cheaper. Price for your costs and your buyers.

Where YelloShelf fits

The formula above only needs a spreadsheet, and that's still the right place to work out your costs. YelloShelf can suggest a price along with the titles, descriptions and tags it drafts from your product photos. Treat that as a starting point, and check it against your own costs and fees using the steps above. It doesn't have a free plan or trial. You buy a credit pack, starting at $10, and your first purchase comes with a money-back guarantee. We're helping you remove the manual, tedious, time-consuming work. You still read it, edit it and paste it in yourself.

When your price is set, our Etsy description template helps you explain why the item is worth it.

Quick checklist

• Materials per item, including labels and packaging.
• Labour: hours per item x a rate you'd accept.
• Overhead per item: monthly costs divided by items per month.
• Profit added on top of costs.
• Etsy fees: $0.20 listing, 6.5% transaction, payment processing for your country.
• Offsite Ads case checked: 15% or 12% on attributed orders, $100 max.
• Shipping charge covers the label.
• Price checked against similar items.
• Numbers reviewed at least once a year.