It’s that time of year again! Time for the crochet groups to fill up with questions about how to sell handmade crafts, and specifically how best to price them.
Tis’ also the season for awful advice. Womp womp.
In this post, I’m going to flip the script on the most common pricing formulas people use to sell handmade crafts. I’m going to show you a better way to calculate your prices (spoiler: it’s super simple!). I’m also going to encourage you to value your time and ignore what customers think you should charge.
The pricing formula most people use is bad bad bad. Makers don’t value their time nearly enough, and they often let other people dictate what their time is worth.
Makers need to give themselves a much-deserved raise. Our work is higher quality than similar manufactured items in the stores, and we shouldn’t try to compete with those prices to make sales anyway.
Just because Walmart sells $6 scarves doesn’t mean we have to or should be expected to.
Making things by hand takes talent and time. The most common advice given on how to sell handmade items ignores both of those things.
What I hope you take away from this post is that your time is valuable, and the value of your time should be at the forefront of your pricing decisions.
Skip the formula to sell handmade crafts for the highest price
The most common formula shared, cost of materials x 3, leaves out the most important factor in the equation: YOU. It places no value on the magic you use to turn those materials into something amazing.
You’ve spent time to develop your talents. Without you, craft supplies would sit there in a lump doing nothing. Sure, anyone can go to the craft store and buy the same materials you buy. But, they’re not going to be successful in making the thing unless they put the time and effort into learning, just like you did.
Handmade items are more about your talents than they are about the materials. Why would you make materials the most important factor in the equation?
Cost of materials x 3 works fine for manufactured items because there is limited human labor involved. To sell handmade items, it’s a lousy equation.
Don’t use it.
I’ve seen a much more complicated formula that goes something like this:
- Calculate material cost (include raw materials, tools, and patterns)
- Determine your hourly rate (at least minimum wage) and multiply that by the number of hours you spend making
- Add 1 + 2 from above, and then add overhead and operating expenses (10% to 20% of this sum)
- Add 30% for profit, and this is the wholesale price
- Double that number to get the retail price
Is your head spinning yet? Mine is.
This is, however, a slightly better approach because it factors in your time.
Here’s an example of what that would look like for a simple crocheted item:
Material Cost: $5 (I already have patterns and crochet hooks and such. But, if I had to buy a specific hook or pattern, I’d add that cost here.)
Hourly Rate: $8/hr x 3 = $16
$16 + $5 = $21 (material cost + hourly rate)
$21 x 15% = $3.15 (overhead)
$3.15 + $21 = $24.15
$24.15 x 30% = $7.24
$7.24 + $24.15 = $31.39 (wholesale price)
$31.39 x 2 = $62.79 (retail price)
Would I like to get $63 for a crocheted hat that took me three hours? Heck. Yes. I love the result of this equation!
But, I don’t feel it’s a fair price to ask because the whole equation feels a little arbitrary to me. I’m not comfortable passing on imaginary overhead costs. And to be honest, my hourly rate is much higher than $8 an hour, so that three hour hat would cost more like $120 using this formula.
I mean sure, businesses factor expenses like electricity, internet connectivity, salaries, insurance, etc. into the price of their goods. And yes, makers are small businesses. But it feels squicky to me to add those costs when I sell handmade items. I have to have electricity and insurance whether I’m crocheting or not.
This second formula is good, but I still think we can do better.
Your time has value
What is your time worth? Sit down and give this one a reallllllly good think.
Forget about what people will pay, how much your materials cost, and whether you’d be crafting in your free time anyway. None of this is relevant right now.
What hourly rate would make you feel like you were paid fairly for your level of skill and the effort you put in? I hope your answer is at least minimum wage – it should be. The answer to this question will be your baseline hourly rate when you sell handmade crafts.
When I figured this number out for myself, I thought about it in terms of what my hourly rate would be if I got a part time job. If I could go waitress and make $15 an hour (and I’m crafting purely to make money), it would make sense to a) charge $15 an hour for my crochet time or b) go get a part-time waitressing job and make $15 an hour.
You don’t have to base it on a part-time job. If you want to sell handmade crafts to replace your full-time income, you could base your hourly rate on that figure.
Only you know what you feel like a fair rate is – it’s not something another person can decide for you.
After you figure out your hourly rate, then add your materials cost. (We’ll get to materials in a minute.)
Bonus level calculation: Maybe you’re extra busy around the holidays and decide your time is more valuable during your busy period. That’s cool, increase your hourly rate!
Second bonus level calculation: Maybe you don’t really want to make a particular item that your customers are asking for (I’m looking at you, mermaid tail blanket!). There’s a certain kind of amigurumi I don’t enjoy making at all, but the end result is amazing. People always ask me to sell them. Because I don’t enjoy making them, I place a premium on my time if I agree to sell one. So maybe instead of $10 an hour, I value my time at $15 an hour or even $20. Many people won’t pay $100 for an amigurumi, but some will. And when they do, I’ll feel like that effort was worth it.
Know what your time is worth to you, and allow that value to be upwardly flexible. It’s your business – give yourself a raise whenever you want.
What people will pay doesn’t matter
Have you seen comments along the lines of: “people won’t pay $60 for a pair of hand-knitted socks?” Or, “In my area, people won’t pay more than $10 for a crocheted hat.”
If you believe that what people will pay matters, you’re absolutely correct. That will come through in your sales copy and it’ll sound like you’re apologizing for your prices. When people offer you 50% of what you’re asking, you’ll run scared into that sale and take less money for fear of losing a customer.
I’ve seen this happen over and over again, especially in the Facebook buy and sell groups. Makers try to sell handmade items in line with what other people are doing to be competitive, and end up pricing things that take hours of work for $10 or $15.
NO no nonononnnoooooo! Don’t do that! Don’t undervalue your work and your time like that.
It really doesn’t help when a potential customer offers you less than you’ve asked. When you turn their offer down, they then may launch into a barrage of insults along the lines of “What makes you think your work is so special? Everyone else sells these hats for $10.” Whew. I’ve heard horror stories.
What we make with our hands matters. No one has a right to make you feel as though the years you’ve put into developing your skills means nothing. Not friends and family. Not strangers on Facebook. No one.
Those words are so hurtful and discouraging. But, if you re-frame it a little, you can turn it around and feel better.
Let’s put it in perspective. Picture that person seeking a discount going into Bloomingdale’s and demanding that the manager sell them a $5,000 handbag for $15 because that’s what handbags cost at Walmart. When they’re told no, they start hopping up and down, waving their arms around, yelling and getting all red-faced. They’re insisting the manager give them a discount, and the manager is trying to stay calm but holy moses the customer is asking for something completely unreasonable.
The customer looks kind of silly, right? The manager isn’t going to give them that handbag for $15. If customers behaved in Bloomies like they do on Facebook, they’d get escorted from the store by security. (Not that I know from firsthand experience, Bloomies is SO not where I shop. I just watched Splash and I blame the mermaid for this random store choice.)
So pay those people no mind and don’t let them bully you and make you sell handmade crafts for less than they’re worth. Put yourself in charge of the transaction and show them the door.
You’re the one that did the work. You get to set the price.
Keep your material costs as low as possible, or as high as possible
It goes without saying that makers should source their materials as cheaply as possible without sacrificing quality. There are always sales, so when you see materials you use for cheap stock up if you can. Use your coupons and rebate apps! (I do a weekly yarn sale roundup. If you are a yarny seller you need to be on this email list!)
If you want to charge higher prices than the average for your market, spend a little more on your materials.
Instead of offering gloves or hats crocheted with acrylic yarn, make them with wool instead. You can then talk about the difference between wool and acrylic and share all the reasons why wool is better for cold weather wear. There are plenty of affordable wool options in the craft stores (I love Patons) and they’re often on sale for the same price as acrylic yarns.
Or, instead of offering basic hand knitted wool gloves made with Patons, spend a little more and use Cascade 220 or a hand dyed yarn. It doesn’t add much to your material costs, but it does add a LOT of value to your item.
If you’re lucky enough to live by a farm or know a local spinner, use their yarn in a simple pattern and charge a premium for your time. Many people will pay more if you highlight “handmade with locally sourced items” in your sales copy.
You really can do a lot to play around with reaching different markets just by looking at your materials. If there’s something that adds value to your project, highlight it to set yourself apart from the other sellers. In this way, you can charge more than the average prices in your market.
There are lots of inexpensive ways to add value to your items, like the cute little leather and wood tags that are popping up everywhere. That’s getting way outside the scope of this post, but I’ll talk about that some other time.
When you’re adding up your material costs, remember to add in everything you needed to purchase to make the thing – patterns, a specific size of crochet hook or knitting needles, polyfill, safety eyes, etc. I also add Etsy fees to this category (both the listing fee and the sales transaction fee). You can also add your costs for shipping materials if you’re using them, or mileage if you’re delivering. I don’t pass on costs like advertising, electricity, internet connectivity, office space, etc. to customers, but you could.
If making money is your goal, some things may be too expensive to make
Remember what I said about paying no mind to what people will pay?
Ignore that for a second and let’s talk about knitted socks.
Those things take me at least 30 hours a pair, if I even finish the second one. I’m a sloooooooooow knitter. I’d have to charge at least $475 for a pair of socks ($450 hourly rate, $15 for yarn).
There’s a market for $475 socks somewhere. However, I’m not my target market and I don’t have connections to that market. If you do amazing work and want to spend the time seeking out avenues to sell your socks for $475, you can definitely make that happen.
But for most of us, we’re selling hats and scarves and amigurumi and blankets. Most likely, we’re selling at craft fairs, on Facebook or Etsy, or directly to our friends and family.
We can’t price our items without considering the average selling price in those markets, but we’re not beholden to those prices.
So, when we’re making things to sell, we need to make sure that what we’re selling is a) something people want and b) something we can make that is reasonable for that market. If you know you live in an area where people sell hats for around $20, think about whether you can make a hat that pays you a fair hourly rate that fits within that price range. Maybe you need to practice and learn to work more quickly, or maybe you need to source less expensive (or more expensive) materials. Or maybe instead of Troll hats that take a bazillion hours to make, you instead sell a hat that is less time consuming.
You don’t have to sell your hat for $20. But if it takes you ten hours to make a hat, at $8 an hour plus materials, you’re selling an $80+ hat. Go for it — make sure you have some good sales copy that explains why your hat costs $60 more than everyone else’s hats. 😉
I truly believe there’s a market for every price range. You just need to be honest with yourself about whether you can make things that can reasonably be sold in your market, or otherwise be willing to put the work into finding a market that supports what you want to make.
Let’s tie this all together and sell handmade crafts for what they’re worth
Equation cheat sheet: Your hourly rate x number of hours it took you to make + materials cost = price of your item
Makers deserve a fair wage for the time and talent they put into crafting things by hand.
Racing to the bottom of the price range for the sake of making sales doesn’t help anyone. It depresses the market prices and hurts all of the makers around you. Conversely, if we all agree to give ourselves a raise, we’ll be supporting the value the makers around us place on their time. A rising tide lifts all ships. 🙂
Your time, effort, and talent should be the most important factor in the handmade pricing equation. You’ll feel good about your sales and feel fairly compensated. You won’t have that awful “I did all that work and only got $9” feeling that results when you use the materials x 3 equation and your three-hour hat only used $3 worth of yarn.
If you’re feeling resistance to this idea, that’s ok. You can price your handmade items however you’d like – this isn’t a rule or the one right way to do it, it’s just the way I think makes the most sense.
There is so much competition now that there are lots of different avenues to sell handmade items online. If we continue down this path of undercutting each other for sales, we’ll soon have prices so low that it’s no longer worth selling our handmade items. And in some markets, we’re already there.
I hope after reading this you feel more empowered to charge fair prices when you sell handmade items.
It this article helped you, please share it with your maker friends and encourage them to give themselves a raise!