Most makers price from the gut. Materials cost roughly this much, the last one sold for that much, so this one should probably be similar. That approach works until a busy month leaves you with a full inbox and an empty bank account, and you cannot work out why.
By the end of this guide you will be able to build a full cost sheet for one product, from raw materials to the price on the tag, and know exactly what you earn on every sale. It takes about 45-60 minutes for your first product and 10 minutes for each one after that.
What you need before you start
- One product you actually sell, not a hypothetical one
- Receipts or order confirmations for its materials
- A rough idea of how long it takes you to make, start to finish
- Your monthly business overheads (software, insurance, storage, website fees)
- A calculator, or the free calculators on this site
- Honesty about your time. This is the hard part.
Step 1: List every material, including the boring ones
Write down everything that goes into one unit. Not just the leather or the yarn, but the thread, the clasp, the backing card, the label, the tissue paper, the box, the tape on the box.
Why it matters: packaging and small findings are where cost sheets leak. A 40-cent box and a 15-cent label feel like nothing until you multiply them by 200 orders.
Practical tip: keep a "consumables" line with a rough monthly figure instead of itemising every glue stick. If you spend about £20 a month on glue, needles, blades and sandpaper and make 50 items, that is roughly 40p per item. Adjust to your own numbers.
Step 2: Work out the true cost per unit of materials
If you buy a 500g spool of yarn for £12 and use 80g, that unit costs £1.92. If you buy a sheet of leather for £60 and get four bags from it, each bag carries £15 of leather.
Do this for every line. For anything you buy in bulk and use in tiny amounts, estimate the fraction used and mark it as approximate.
Why it matters: buying in bulk makes you feel efficient, but it hides the fact that a £60 sheet is still £15 per bag. The cost does not disappear because you paid for it last month.
Practical tip: if you sell on a platform that takes a cut, do not add that here. Keep fees separate so you can see materials, labour and fees as three clear numbers. A cost calculator handles this split for you and keeps the maths clean.
Step 3: Time yourself honestly, then price that time
Set a timer next time you make the product. Include cutting, assembling, finishing, photographing, listing, packing and the trip to the post office. Not just the fun middle part.
Say the timer shows 90 minutes. Now decide an hourly rate. This is a business decision, not a moral one. Many makers start somewhere between £12 and £25 per hour and raise it as demand grows. Use a number you would accept from an employer for the same skill. Verify what similar skilled work pays in your area rather than guessing.
At 90 minutes and £15 per hour, labour is £22.50 per item. Yes, that is often more than the materials. That is normal, and it is the number most makers avoid calculating.
Why it matters: if you do not price your time, you are funding your customers' discounts with your own unpaid evenings.
Practical tip: separate "making time" from "admin time" in your notes. Admin is real, but you can spread it across a batch. If you make ten items at once, the listing and photography time per item drops sharply.
Step 4: Spread your overheads across realistic volume
Add up your monthly business costs that exist whether you sell one item or fifty: insurance, software subscriptions, website hosting, market stall fees, storage, bank charges. Say that totals £120 a month.
Now divide by how many items you realistically sell in a month. At 30 items, that is £4 per item. At 10 items, it is £12. Same overheads, very different burden.
Why it matters: overheads per unit fall as volume rises, so your break-even price changes month to month. Pricing as if you sell 50 when you sell 12 quietly loses money.
Practical tip: if you are unsure of your realistic monthly volume, use your worst honest month, not your best. If the numbers feel shaky, run them through the calculators here with both a low and high sales estimate and compare.
Step 5: Add payment and platform fees
Subtract, do not add. If Etsy, Shopify, Amazon Handmade or your card processor takes a percentage, that fee comes out of the sale price, not your cost. A fee of around 6-10% is common across platforms, but rates change often, so check your current dashboard or agreement.
The trap: if you price at cost plus margin and then lose 8% to fees, your margin shrinks. Calculate your price so that after fees you still hit your target.
Practical tip: easy formula. Desired take-home = P minus (P times fee rate). Solve for P. If you want £40 after an 8% fee, P is about £43.50. A calculator saves you the algebra on every product.
Step 6: Build the full cost and set your price
Add it up for our example:
- Materials: £8.40
- Labour (90 min at £15): £22.50
- Overheads (£120 / 30 items): £4.00
- Total cost per item: £34.90
Now add your profit. If you want a 40% margin on the cost, the pre-fee price is about £48.90. Add the fee adjustment and you land near £53. That is your tag price.
Why it matters: this is the whole point. You now know that anything under about £35 loses you money, and anything under about £49 barely pays you for your time.
Practical tip: jot the break-even number on your product notes. Next time someone haggles, you know your floor without doing mental maths at a market stall.
Step 7: Recheck quarterly
Material prices move. Yarn goes up, your supplier changes, your hourly rate should rise as your skill does. Rebuild the sheet every three months, or whenever a key material changes price.
Why it matters: a cost sheet from two years ago is a historical document, not a pricing tool.
Practical tip: use the checklists on this site to build a repeatable quarterly review so nothing gets skipped.
Pro tips
- Batch your time tracking. Time five units, divide by five. Single-item timing is noisy.
- Price your time at what you want to earn next year, not what you earned last year.
- Keep a "cost creep" note. Every tiny material upgrade adds up; track them as they happen.
- Photograph your cost sheet and keep it with the product. Future you will thank present you.
- If a product cannot cover materials, labour and overheads at a price customers will pay, that product is telling you something. Listen.
- Run a quick comparison between two pricing scenarios before you commit to a launch price.
Common pitfalls
- Forgetting your own labour entirely. This is the single biggest error. If you would not do the work for free for a stranger, do not price it as if you would.
- Pricing from the last sale. One sale is not a market. Build the cost, then test the price.
- Ignoring fees and shipping supplies. Tape, labels and boxes are costs. So are platform fees. Both eat margin silently.
- Using best-case volume for overheads. Optimistic volume makes overheads look tiny and prices look cheap. Use a realistic month.
- Never revisiting the sheet. Costs drift upward. A stale sheet is a slow leak.
Useful resources
For fee rates and payout rules, check your platform's own seller help centre, since these change and generic advice goes stale fast. For tax treatment of materials, labour and home workspace, speak to an accountant; this guide covers costing, not tax. For deeper background, the practical guides and articles on this site walk through related pricing and budgeting questions, and the glossary explains terms like margin, markup and break-even if any of them are fuzzy.
FAQ
Do I really have to pay myself for the fun parts? Yes, if you want this to be a business rather than an expensive hobby. The making is the value you provide. Price it.
What if my price becomes too high to sell? Then either your costs are too high, your time estimate is generous, or the product is not viable at your skill level yet. All three are useful information. Consider simplifying the design or batching to cut time per unit.
Should materials or labour be the bigger number? For handmade work, labour usually is. If materials dominate, you may be underpricing your time.
How often should I recalculate? Every three months, and any time a key material changes price or a platform changes its fees.
Can I use a spreadsheet instead of a calculator? Absolutely. A calculator is just faster for one-off checks. Use whichever you will actually keep using.
One last thing
The first time you do this, the total may surprise you, and not in a nice way. That reaction is normal, and it is the moment most craft businesses either get serious or get honest about being a hobby. Either is fine. What is not fine is not knowing. Build the sheet, look at the number, and price like the skilled maker you already are.
Ready to act on what you just read? Explorethe practical guides and articles on this site, the glossary of key terms or the free calculators. The rest of this site is built to help you take the next step.