Do your calculations and price what you're worth

{This post is part of a FREE 5-part e-course on growing the profits in your online handmade business, running on Create & Thrive this week. Subscribe to our email updates to make sure you don’t miss a lesson. You can see Lesson 1 here, and Lesson 2 here.}

Welcome to Day 3 of our 5-day course!

Today we’re talking pricing. Yep, pricing. The bane of us all!

However, we’re talking about money and profit here, and examining our prices is a big, important part of this process.


The bottom line is: you don’t want to be leaving money on the table.

Finding the right price for your work is crucial.

You need to strike a balance – price too high and your work won’t sell; price too low and your profits will be too low to be sustainable.

You need to find the sweet spot!

And (sorry) you need to do some calculation.

It’s not hard, I promise! In fact, below I’ve given you 2 pricing formulas to try.

Yep, it’s time to whip out those receipts and a calculator, and actually crunch the numbers.

Have a go at the following 2 pricing formulas and see which one works best for you.

Example 1

Base price = (cost of materials + packaging) x 4
+ your pro-rated hourly labour rate
then + 10% of that total for overhead costs.

(Source) (This site/resource is no longer available)

Okay, say you have a labour cost of $20 per hour (think about how much you could live on if this was your full-time business!) and your materials cost for an item was $5. Lets say I made a pair of earrings that took 1/2 an hour. The packaging averages at $1, and let’s say $1 for overheads, too.

($5 + $1) x4 + $10 + $1 = $35

Now, this is the base price. You can’t sell it below this price without losing money. To make a profit, however, you will need to increase the price (or decrease your costs!).

Example 2

Cost Price (labour + price of materials) x 2 = Wholesale
Wholesale x 2 = Retail
Using the same details as we did in the first example…

20 x .5 = $10 labour + $5 materials = $15
$15 x 2 = $30 = Wholesale Price

Now, if you want to make a profit – which is the amount you have to grow and re-invest in your business, you should double this amount for Retail, which equals $60.

Sounds like a lot, hey? It is. Well, that’s why you need to take other factors into account, too.


1. Choose a calculation and apply it to your range.

2. Research your niche. Look around and see what others in your niche are charging, particularly those who have a high number of regular sales. You want to be profitable, but you also want to be competitive. If you’re charging twice as much as someone else for a seemingly similar item, you want to know why that is, and be comfortable with it.

3. Now go by feel! If some of your items come out of the calculations too high or too low, now is the time to adjust the price – once you have a firmer foundation to stand on! I wrote a lot more about this part of the process in this article.

Always remember that pricing calculations are crucial to keep track of your profit margin – but they’re not hard and fast rules. You have to take the market into account in your pricing, too.

Can you perhaps sell some of your ‘bread-and-butter’ items a little cheaper, while upping the price on your more unique, high-end designs? Don’t be afraid to spread profit across your product line in this way.

Questions? Thoughts? Share with us on the Create & Thrive FB Page, or in the comments below.

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