Pricing guide
How to calculate profit on handmade products
Revenue is not the same as profit. A useful handmade-product price must repay materials, compensate labor, cover overhead and selling fees, and leave money for the business after the order is complete.
Separate revenue from profit
The customer payment is revenue. Subtract materials, labor, overhead and transaction or marketplace fees to find the estimated profit that remains.
Give labor a real hourly value
Track the active minutes needed to design, prepare, make, finish and pack an item. Multiply that time by an hourly rate instead of assuming your own labor costs nothing.
Account for percentage-based fees
Marketplace and payment fees are usually taken from the selling price, so simply adding the fee percentage to cost can undercharge. The calculator works backward to estimate a price that still supports the target margin.
Use profit to make decisions
Compare profit across products, not only sales totals. A popular item that requires heavy labor may earn less per hour than a simpler product with fewer orders.
Frequently asked questions
How do I calculate profit on a handmade product?
Subtract materials, labor, overhead and selling fees from the customer price. What remains is the estimated profit before income taxes and other business-wide expenses.
What costs should handmade sellers include?
Include direct materials, packaging, labor, equipment and workspace overhead, marketplace fees, payment processing and a reasonable allowance for waste or remakes.
Why does a profit-margin calculator divide instead of simply adding a percentage?
A target margin is a percentage of the final selling price. Dividing by the remaining percentage accounts for fees and profit without understating the required price.