Why "materials times three" goes wrong
Most makers learn a rule of thumb: double or triple the materials. The rule fails in two directions. A product with cheap materials and a lot of handwork ends up priced below what an hour of your time is worth. A product with expensive materials gets marked up far more than the work justifies, and sits unsold. Etsy's fees, which are a percentage of the price, make both problems worse. Price from all of your costs instead, and the right number follows.
Step 1: cost of materials per item
Work out what one item uses, not what the supplies cost to buy. A pound of wax that makes four candles is a quarter pound per candle. For an 8 oz soy candle:
| Soy wax, 7 oz | $1.85 |
| Fragrance oil, 0.6 oz | $1.40 |
| Jar, lid, wick and label | $2.15 |
| Materials per candle | $5.40 |
|---|
Step 2: your time, at a real wage
Time one batch from start to finish, including set-up and clean-up, and divide by the number of items. If a batch of 12 candles takes three hours, that is 15 minutes each. At $20 an hour, your time is $5.00 per candle. If you leave your time out, you are not pricing a business; you are paying customers to take your work.
Step 3: overhead and packaging
Overhead is everything that keeps the shop running but is not part of one item: equipment, your phone, Etsy listing renewals, photos, a share of rent. Divide a month of overhead by the items you sell in a month; here it is $0.60 per candle. Packaging, a box and padding, is $1.20. The shipping label you pay is $4.50.
| Materials | $5.40 |
| Your time, 15 min at $20/hr | $5.00 |
| Overhead | $0.60 |
| Packaging | $1.20 |
| Shipping label | $4.50 |
| Cost per sale before Etsy fees | $16.70 |
|---|
Step 4: add Etsy's fees the right way
A US Etsy shop pays a $0.20 listing fee, 6.5% of the item price plus shipping, and payment processing of 3% plus $0.25 on the order total including sales tax. Because most of that is a percentage of the price, you cannot add it on top of cost. Put it in the formula instead:
With $16.70 of costs, $0.45 of fixed fees, about 9.7% of percentage fees (6.5% + 3% on the total with 7% tax) and a 30% target margin: $17.15 ÷ 0.603 = $28.45 for the item plus $5 shipping. That is a $23.45 item, rounded up to $23.99.
| Item price | Etsy fees | Profit | Margin |
|---|---|---|---|
| $19.99 | $2.88 | $5.41 | 22% |
| $23.99 | $3.26 | $9.03 | 31% |
| $23.99, Offsite Ads order | $7.61 | $4.68 | 16% |
The break-even price, where profit is zero, is about $14. Below that, every sale loses money even though it feels like income. The free Etsy fee calculator does this math for any price, including Offsite Ads.
Step 5: check it against the market
Look at what similar items sell for. If your formula price is well above them, the fix is usually cost, not price: buy materials in bulk, make larger batches so set-up time is shared, or bundle items so the fixed fees and shipping are paid once. If your price is well below the market, you have room to raise it; a lower price is not automatically more sales on Etsy.
Wholesale
If you sell to shops, the wholesale price must also cover your costs and margin, because the shop will double it for retail. Price wholesale from the same costs without Etsy fees, then check that double that number is a retail price you would be comfortable seeing on a shelf next to your own listing.
Frequently asked questions
What is the formula for pricing handmade items?
Add materials per item, your time at an hourly wage, overhead per item and packaging. Then price + shipping = (costs + fixed fees) ÷ (1 − percentage fees − target margin), so Etsy's fees and your margin come out of the price rather than out of your pocket.
Should I include my time in the price?
Yes. Pay yourself an hourly wage in the cost, then add a margin on top. The margin is the business's profit; the wage is what your work is worth. Leaving time out is the most common reason handmade shops are busy but not profitable.
How much do Etsy fees take from a handmade sale?
For a US shop, about 10% to 13% of the item price plus shipping on a typical $20 to $40 order, and more on very cheap items because the $0.20 listing fee and $0.25 processing fee are fixed. Offsite Ads orders pay another 15% (12% for larger shops).
Is materials times three a good rule?
Only by coincidence. It ignores how long the item takes and what Etsy charges. Use it as a sanity check, not a price.
