Small Business School: How to price your handmade items.
“What would you charge for this?” Is one of the most common questions we get in our Facebook Community- and for good reason!
Pricing something we’ve made is hard! We put our knowledge, skills and patience to the test for each item we create to sell and pricing that appropriately can feel hard. Here is my no-fuss way of pricing things.
1.Cost-Plus Pricing Formula (Base Price)
This is the most straightforward method and involves calculating your costs and adding a markup.
Formula: Price=(Material Cost+Labor Cost)×Markup Percentage
Material Cost: The cost of all raw materials used to create the product.
Labor Cost: The time spent making the product multiplied by your hourly wage.
Markup Percentage: Typically ranges from 2x to 4x the total cost, depending on the desired profit and market standards.
Example: If materials cost $10, labor is $15 (1 hour at $15/hour), and you use a 3x markup: Price=(10+15)×3=$75
Once I have my base price, I adjust it for the market that I’m selling in, using a market-based pricing formula.
2. Market-Based Pricing Formula
This method considers the pricing of similar handmade items in the market and positions your product competitively.
Formula: Price=Average Market Price×Differentiation Factor
Average Market Price: The average price of similar items in the market. Sometimes this is just my Base Price.
Differentiation Factor: Adjust based on the uniqueness, quality, or brand reputation of your product (e.g., 1.2 if your product is superior).
