Pricing handmade work: the cost you are not counting
#guide#pricing#craft#business
Conclusion: pricing handmade work is not material times a multiplier. It is putting everything you spend on this piece into the number, then deciding whether it should be sold at all. What you leave out does not disappear; it becomes invisible loss.
Six things that must be in the number
| Item | What gets forgotten |
|---|---|
| Material | Only the main material, not the small parts, packaging or waste |
| Labour | Only making, not sourcing, shooting, support, packing, shipping |
| Failure rate | Ten made, two ruined: those two belong in the cost of the eight |
| Platform fees | Commission, payment fees, ads, promotions |
| Shipping and returns | Free shipping is not free; one return often costs two shipments |
| Your time | If your hours are priced at zero, they stay at zero forever |
A formula you can use today
floor = (material + small parts + packaging) / (1 - failure rate)
+ total hours x your hourly rate
+ shipping + platform fees + returns reserve
price = floor x your premium factor (1.5 - 3)A structural example (replace the numbers): material 60, small parts and packaging 15, failure rate 20% → 94 after amortisation; 4 hours at 80 = 320; shipping and fees 40 → floor about 454; premium factor 2 → price about 900.
If you do not dare quote that number, either the hourly rate is too high for your current skill, or the product cannot carry the premium — not daring to quote is usually a product problem, not a pricing problem.
Three judgements
- Set the price before you make the piece. Deciding afterwards means you will rationalise the cost you already spent.
- The premium has to be sayable: scarce material, non-replicable process, customisation, after-sales promise. Buyers pay for reasons they can read.
- Raise in steps: 10–15% at a time, each with a note (new process, new packaging, new promise) so returning buyers read it as an upgrade.
“Luxury never disappears — because what is luxurious is not efficiency but scarcity: the value a person endows.” — from my own notes (redacted)
Handmade pricing was never cost plus margin. It is what you endow. Counting cost tells you the floor; saying what you endow is how you reach the ceiling.
Questions
What hourly rate should I use?
Start from the lowest rate you could reliably outsource your own work at, then multiply by 1.5 to 3. You are selling irreplaceable work, not interchangeable labour. Every time you raise it, have a reason you can say out loud.
Do platform fees and shipping go into the price?
Yes. The order is material plus labour plus failure-rate amortisation plus packaging plus shipping and fees plus a returns reserve equals your floor. Profit only exists above that floor.
Competitors are cheaper. Should I match them?
No. They are often cheaper because they do not count their own hours or use cheaper inputs. Matching them means paying for their accounting error. Your job is to make the reason for your price legible.