Pricing Your Handmade Products
A beginner’s Guide
Setting the right price for your products can feel like one of the toughest challenges when you're starting your small business, and trust me, the pressure is real! Pricing plays such an important role in your success, affecting everything from your profits to how customers respond to what you offer.
When you're just getting started, it can feel overwhelming trying to figure out where to even begin. There are so many unknowns!
To make things a little easier, I've put together a simple beginner’s guide to help you price your handmade products with confidence. I hope it gives you the best start on your small business journey!
Remember you need to make a profit!
I know this might sound a little obvious, but it’s surprisingly easy to lose sight of your profits when you're caught up in the excitement of making a sale.
You might notice others pricing their products low and feel tempted to follow. Or you might be so eager to delight your wonderful customers that you start adding little extras you haven’t budgeted for.
Sometimes, it simply comes down to not feeling confident enough to charge what your products are truly worth.
But here’s the thing: your pricing strategy is absolutely essential. Profit isn’t just about making money — it’s what will help your business survive, thrive, and grow into everything you dream it can be.
How to price your products when you're starting out
I totally get it, figuring out how to price your products can feel really overwhelming. Most of the advice out there seems geared toward businesses that are already up and running, not those just starting out.
When you're starting out, it’s tough to set prices without knowing exactly what your expenses will be, how many hours you’ll work, or what your monthly sales might look like.
The truth is, every business is unique, and there’s no one-size-fits-all formula when it comes to pricing. Your perfect pricing strategy will reveal itself more clearly as your business grows and evolves.
Think of pricing as a journey, not a one-time decision. You'll tweak, adjust, and fine-tune things along the way, and that's perfectly normal.
It’s a bit like being a parent to your brand-new business. You might not have all the answers yet, and that’s okay! As your business grows, you’ll learn exactly what it needs to truly thrive.
Mark up pricing strategy
The good news is, there’s a simple pricing method that's perfect for when you’re just starting out — it’s called markup pricing.
Markup pricing helps ensure that your sales are covering both your production and overhead costs, while also making sure you’re earning a profit.
When you’re in the early stages of your business, you won’t have all the pieces of the puzzle just yet, and that’s completely normal. Markup pricing takes some of the pressure off, giving you a little breathing space to learn and grow.
As you get more experience, you’ll start to see how customers respond to your products. You’ll discover which items are the most popular and what people are happy to pay — all of which will help you fine-tune your pricing over time.
What are your Costs?
No matter which pricing strategy you choose, it’s so important to know exactly how much it costs to make each product. Until you have a clear understanding of your costs, it’s almost impossible to set prices that will actually bring you a profit.
To work out your costs:
List absolutely everything you spend money on creating each product right up to the point of sale. Include:
All materials (do not leave anything at all out…and I mean anything!)
Packaging
gift wrapping
Are you offering 'free' postage? This needs to be added to the cost of the product -nothing should be free.
Anything else you spend money on to create your product
Work out the total cost of all materials:
Cloud Mobile by Flurraby
You need to work out how much each individual item costs.
For example, If you make this cloud nursery mobile your list would look something like this:
1 Beech Ring - £1.80
6 Felt Balls - £1.44
String - 1p
Cotton 2p
14 Felt Clouds - £1.26
Stuffing - £1
Packaging: £1.50
Total Cost of Materials: £5.53
It can be tricky to figure out the cost of some items. Let's look at the felt clouds from the cloud nursery mobile.
The felt used to make the clouds is sold by the metre. A metre costs £15.
To work out the cost of a single cloud you have to work out how many clouds you get from that metre.
To find the cost of a single cloud, divide the cost of the metre of felt by the number of clouds you can make per metre.
You can get 96 clouds from a metre of felt so:
£15 ÷ 96 = 0.09. Each cloud costs 9p
String can be a tricky to cost. If you purchase it online, stores usually give you the price per metre (amazon definitely does).
Working out some of your costs can be time consuming but remember that without knowing your costs you can't know your profits. It's 100% worth the effort.
Factor in your time
You’ve probably heard the saying, “time is money” — and it’s absolutely true. Your time is valuable, and you deserve to be paid fairly for the work you put into your business.
One important step is deciding how much you want to earn per hour.
To figure this out, set an hourly rate you'd like to make from your business, then divide that rate by the number of products you can create in that time.
And here’s a little tip: don’t just guess! Actually time yourself while making each product. Knowing your real numbers is the key to understanding your profits.
Once you’ve done that, you can work out the cost of your time for each product using this simple formula: Hourly rate ÷ number of products (per hour)
Using the Cloud nursery mobile as an example: If you make one mobile in an hour and you want to pay yourself £15 per hour, the cost of your time for each mobile is £15.
If you can make two mobiles in an hour you would divide your hourly rate by 2 (15÷2). The cost of your time would be £7.50.
If you can make four mobiles per hour (if only!), you would divide your hourly rate by four (15÷4), the cost of your time would be £3.75. And so on...
Work out your production costs
To work out the total cost of producing your product, you need to add together the cost of creating the item and the cost of your time:
Cost of creating the item + the cost of time = production cost
So, If the cloud mobile takes an hour to make, the production cost of the cloud mobile would be:
£5.53 (materials) + £15 (time) = production cost - £20.53
Overheads
Overheads are all the extra costs, beyond making your products, that you have to spend time and money on, no matter what. Things like website fees, marketing costs, and selling fees all fall into this category.
To include overheads in your pricing strategy, you first need a good sense of how much you’re spending on these things each month.
Ultimately, the goal is for your sales to not only cover your production costs but also take care of your overheads.
Of course, when you're just starting out, this can feel a bit tricky. You might not fully know what these expenses will be yet or how many sales you'll need to cover them.
That’s why, in the beginning, the simplest way is to factor your overhead costs into your profit margin when setting your prices. It keeps things flexible while you learn and grow.
Set your profit margin
Now that you know how much it costs to make your product, it’s time to add profit into your pricing.
Your profit margin is the amount of money you earn from each sale after covering your production costs.
The great thing is, your profit margin is completely up to you! For handmade products, it’s common to aim for a margin between 100% and 150%.
But as you're deciding, there are a couple of important things to keep in mind:
You’re still getting to grips with your overhead costs, so your pricing needs to cover more than just the cost of making the product.
You also need to stay realistic about what your customers will be willing and happy to pay.
For example, if you're selling a Cloud Nursery Mobile, it wouldn’t make sense to price it at £100 if similar styles and quality are being sold for much less.
A little research goes a long way — take some time to look at what others are charging for similar products to help guide you.
Work out the price of your product
To find the final price of your product add a profit margin to your production costs.
When it comes to selling your cloud nursery mobile you know your production cost is £20.53. You might want to work out a few profit margins before you set the final price:
50% profit margin: £20.53 + 50% = £30.80
100% profit margin: £20.53 +100% = £41.06
150% profit margin: £20.53 + 150% = £51.33
Remember that you don't yet know your overheads and you also have to consider what your customers will be willing to pay.
If set your price at £50 you can always lower the price or offer a discount to get a clearer idea of what your customers are willing to pay.
Other things to consider
You might notice others selling similar products at very low prices — but don’t feel pressured to do the same.
Of course, you want to stay competitive, but you also need to make a profit and keep your business healthy. Underselling yourself could put you out of business before you’ve even had the chance to truly get started.
Remember, it’s much easier to lower your prices later than it is to raise them. Offering a discount to stay competitive is very different from underselling your worth.
It’s important to accept that pricing is a bit of trial and error. It’s completely normal not to get it perfect the first time, and that’s okay!
Your customers will be your best teachers when it comes to pricing. You’ll quickly start to see what they’re willing to pay.
As long as your prices cover your costs and give you a profit, you can adjust and fine-tune along the way. Over time, understanding your customers will help you shape the perfect pricing strategy for your business.
You might want to experiment — try listing a few higher-priced items and see how they perform. You can also test lower prices by offering discounts instead of lowering your base price.
You may be surprised — customers might be willing to pay more than you expect! I’ve seen many nursery mobiles sell for over £100, so don’t be afraid to test your pricing.
Most importantly, never undersell yourself. Your business deserves the chance to grow and succeed.
If you find you need to adjust your prices downward for certain items, try balancing it out by offering some higher-priced pieces too. Creating bundles or special offers can also help boost your overall sales.
I know it can feel overwhelming when you’re starting out, but please remember: pricing isn’t a one-time decision. You’ll learn, adjust, and grow along the way.
Millions of small business owners succeed every single day — and you absolutely can too.
Wishing you so much success on your journey, Karen x
I really hope you found this guide helpful. If you have any questions or thoughts to share, I’d love to hear from you — feel free to leave a comment below!