From Hobby to Side Hustle: How to Price Handmade Goods Without Undervaluing Your Work

Turning a creative hobby into a sustainable side hustle requires more than just craft skills and social media savvy. The hardest part for many makers is pricing: set the price too low and you risk burnout; price too high and you may not sell. This guide offers a clear, step-by-step formula to price handmade goods so you cover material and overhead costs, compensate your time fairly, and position your products in the market.

Why pricing matters

Beyond immediate income, pricing sends signals about quality, brand position, and value perception. A consistent pricing strategy helps you avoid undercutting your brand while providing room for promotion and wholesale if your enterprise grows.

Three-part pricing formula

Use this formula as a starting point: Total Cost + Labor + Margin = Retail Price.

1. Total Cost: Add up direct materials, packaging, shipping supplies, and a proportional share of indirect costs like tools, rent, electricity, and software subscriptions. For indirect costs, estimate annual totals and divide by the number of units you expect to sell in a year.
2. Labor: Decide on an hourly rate you want to pay yourself. Multiply by the time spent per unit, including prep, production, finishing, photography, and administrative tasks. If you’re new, start with a realistic hourly figure and adjust as you grow.
3. Margin: Add a profit margin that accounts for branding, customer service, marketing, and future investments. Many artisans use a 20–50% margin depending on perceived value and competition.

Example calculation

Imagine you make hand-poured candles. Material cost per candle is $4, packaging $1, and allocated overhead per candle is $0.50. Your desired hourly wage is $20, and a candle takes 0.5 hours to produce. Labor = $10. A 30% margin on top of costs gives flexibility for discounts and wholesale considerations.

Total Cost = $4 + $1 + $0.50 = $5.50. Labor = $10. Subtotal = $15.50. Margin (30%) = $4.65. Retail Price = $20.15, rounded to $20.

Market positioning and comps

Research competitor pricing in your niche. If your calculated price is significantly higher or lower, analyze why: are your materials superior? Is your brand story stronger? Could your process be more efficient? Market comps help you choose whether to position as premium, mid-market, or budget handcrafted goods.

Wholesale and retailer pricing

Retailers often expect a 2x–2.5x markup on wholesale. If you plan to sell wholesale, factor that backward in your calculations. For example, if the retail price is $20 and a retailer expects a 2x margin, your wholesale price should be around $10–$12, which must still cover your costs and labor.

Adjusting for scale and time

With scale, your labor per unit may decrease due to efficiencies. Recalculate periodically. Also, account for seasonality: set aside a portion of profits during busy months to cover quieter periods.

Psychological pricing and packaging

Small packaging upgrades can justify higher price points. Similarly, pricing endings like $19 or $29 may impact perceived value. But don’t over-rely on psychology; the product must deliver consistent quality to maintain repeat customers.

Common mistakes to avoid

• Ignoring overhead costs and only counting materials.
• Undervaluing labor to appear competitive.
• Not tracking time, which leads to inaccurate labor costs.

Final checklist before you set prices

• Itemized material and packaging costs
• Allocated overhead per unit
• Recorded time per unit and your target hourly rate
• Desired margin for growth and promotions
• Competitive market research

Pricing is not set in stone. Use this framework, track sales, and be willing to iterate. As your reputation grows, so does the ability to command healthier margins. The most sustainable price is one that pays you fairly while delivering value customers are willing to pay for.