How to Price Your Products for Profit
(Not Just to Cover Costs)
Most sellers know how to price their products for profit in theory, but the actual math usually leaves something out. Cost of materials gets counted. Time spent almost never does, and platform fees get forgotten until the payout arrives smaller than expected. A price that looks profitable on paper isn't, once every real cost is actually included.
Here's how to price something so the profit is real, not assumed.
Start with the cost of materials, exactly. Not a rough guess, the actual cost per item, including packaging if you ship it. Underestimating materials cost is the single most common way a "profitable" price turns out not to be.
Put a real number on your time. An hour of your labor is worth something, even if you're not paying yourself an hourly wage directly. Pick a reasonable hourly rate for the work involved, multiply by hours spent per item, and treat that as a real cost, not a number to skip because you're not writing yourself a paycheck for it.
Add materials and labor together for your total cost. This is the actual cost of making or providing whatever you're selling, before a single dollar of profit or a single cent of platform fee.
Account for the platform's fee percentage before you finalize a price, not after. A price that looks profitable before Etsy's or eBay's cut isn't the price that actually lands in your account. Calculate what percentage the platform takes, and build it into the price itself, rather than discovering the gap at payout.
Decide on a target profit margin, and build it into the formula. A price that only covers cost isn't a business, it's a break-even hobby. Pick a margin, 20%, 30%, whatever fits your market, and calculate the price so that margin survives both your costs and the platform's fee.
The formula, put together, looks like this: total cost divided by (1 minus platform fee percentage minus target margin percentage). If materials and labor total $46, the platform takes 6.5%, and the target margin is 30%, the price needed is $46 divided by 0.635, or about $72. Sell below that and the "30% margin" quietly shrinks or disappears entirely once the fee comes out.
Recalculate whenever a fee changes. Platforms adjust their fee percentages periodically, and a formula-based price catches that automatically. A price picked once, years ago, usually hasn't kept up with fee increases since.
Don't round down out of guilt. A calculated price sometimes feels higher than expected, and the instinct is to shave it down to something that feels more comfortable. That instinct is usually what turns a real profit into a break-even sale. Trust the math, not the discomfort.
Re-run this per product, not once for the whole shop. Materials, time, and fees vary item to item. A single price formula applied to everything usually overprices the simple items and underprices the complex ones.
Our Freelancer & Reseller Bookkeeping Tool includes a built-in Pricing Calculator that runs exactly this formula, so you're never guessing at what to actually charge.
Shop the Bookkeeping Tool on Etsy
Here's how to price something so the profit is real, not assumed.
Start with the cost of materials, exactly. Not a rough guess, the actual cost per item, including packaging if you ship it. Underestimating materials cost is the single most common way a "profitable" price turns out not to be.
Put a real number on your time. An hour of your labor is worth something, even if you're not paying yourself an hourly wage directly. Pick a reasonable hourly rate for the work involved, multiply by hours spent per item, and treat that as a real cost, not a number to skip because you're not writing yourself a paycheck for it.
Add materials and labor together for your total cost. This is the actual cost of making or providing whatever you're selling, before a single dollar of profit or a single cent of platform fee.
Account for the platform's fee percentage before you finalize a price, not after. A price that looks profitable before Etsy's or eBay's cut isn't the price that actually lands in your account. Calculate what percentage the platform takes, and build it into the price itself, rather than discovering the gap at payout.
Decide on a target profit margin, and build it into the formula. A price that only covers cost isn't a business, it's a break-even hobby. Pick a margin, 20%, 30%, whatever fits your market, and calculate the price so that margin survives both your costs and the platform's fee.
The formula, put together, looks like this: total cost divided by (1 minus platform fee percentage minus target margin percentage). If materials and labor total $46, the platform takes 6.5%, and the target margin is 30%, the price needed is $46 divided by 0.635, or about $72. Sell below that and the "30% margin" quietly shrinks or disappears entirely once the fee comes out.
Recalculate whenever a fee changes. Platforms adjust their fee percentages periodically, and a formula-based price catches that automatically. A price picked once, years ago, usually hasn't kept up with fee increases since.
Don't round down out of guilt. A calculated price sometimes feels higher than expected, and the instinct is to shave it down to something that feels more comfortable. That instinct is usually what turns a real profit into a break-even sale. Trust the math, not the discomfort.
Re-run this per product, not once for the whole shop. Materials, time, and fees vary item to item. A single price formula applied to everything usually overprices the simple items and underprices the complex ones.
Our Freelancer & Reseller Bookkeeping Tool includes a built-in Pricing Calculator that runs exactly this formula, so you're never guessing at what to actually charge.