The price that feels reasonable isn't always the one that works
Materials cost twelve dollars. You charge twenty-five. That sounds like a decent little business until you remember the hour you spent making it.
Pricing is easier when you separate the maths from the feeling of asking someone to pay.
Start with the maths.
## A simple pricing formula
Most handmade pricing comes down to four parts:
- **Materials and packaging** for one item
- **A share of overheads**, like tools, equipment and shared supplies
- **Your time**, at an hourly figure you choose
- **Profit**, which is what's left for the business after you've paid yourself for your time
Add the first three together and you have your cost. Add profit on top and you have your price. Then check that payment fees are covered too.
The rest of this guide walks through each part.
## Count everything one order uses
Include materials, packaging and payment fees. Add a sensible allowance for supplies you use across several orders, wastage and business overheads.
Don't count a whole new tool against one item if you'll use it for months. Work out how to spread that cost across the work it supports.
Keep your actual costs somewhere you can update them. The price of supplies you remember from last year may no longer be the price you pay.
## Time the whole job
Making is only part of it. Shopping, setting up, answering routine questions, packing and cleaning up take time too.
For a batch, add up the total working time and divide it by the number of sellable items. Use working time rather than counting the same unattended drying hour against every item.
Then choose what you need to allow for that time. This is a planning figure for your own labour, not a claim about award rates or take-home pay.
## Try a worked example
These figures are illustrative, in Australian dollars.
Say a batch of ten gift items uses $100 in materials and $30 in packaging. You allow $20 for shared supplies and overheads. The batch takes four working hours, and you allow $30 an hour for your labour.
That's $270 altogether, or $27 per item, before payment fees and any profit above the labour allowance.
At a selling price of $35, the difference is $8 per item before those fees. Check whether that remaining amount is enough for your business. If it isn't, change the price or the process.
This is a cost estimate, not a recommended market price. Check any GST obligations separately and make customer-facing prices clear about the total payable.
## Pricing a service rather than a product
If you sell your time directly, like a bike service, a lash appointment or tutoring, the maths is a little different. There are fewer materials, so time does most of the work.
Count the whole appointment, not just the hands-on part. Setting up, cleaning down, travel if you go to the customer, and the messages before and after.
A few things are worth building in:
- **A minimum booking**, so short jobs still cover your setup time
- **Parts or products charged separately**, with a small margin for sourcing them
- **A travel fee**, if you go to the customer
Service prices often feel harder to say out loud, because there's nothing to hold. That's normal. You're charging for skill and time, and both are real.
## Compare like with like
Look at similar products for a similar customer. Compare size, finish, customisation and collection or delivery arrangements.
You don't automatically need to be cheaper because you work from home. Equally, a cost calculation doesn't prove someone will buy at that price.
If the market price won't cover your costs, consider a simpler design, a better batch size or a different offer. Selling more of an unworkable product won't fix the calculation.
## Common pricing mistakes
A few traps catch almost everyone at the start:
- **Pricing on materials alone.** Your time is the biggest cost in most handmade work.
- **Forgetting payment fees.** A small percentage on every order adds up quickly.
- **Charging friends less forever.** A first-order thank you is fine. A permanent discount isn't sustainable.
- **Starting low to "build up later".** Raising prices is harder than starting at the right level.
- **Making every order custom.** Custom work takes longer. Price it separately, or limit it.
## When to raise your prices
Some signs it's time:
- You sell out regularly, sometimes within days
- People are happy to wait for a spot
- Your material costs have gone up
- You're feeling tired or resentful about the work
You don't need to apologise for it. A short, plain note works: "From 1 March, my prices are changing to reflect the cost of materials. Orders already placed won't change."
## Make changes clearly
Honour prices already agreed with customers. For future orders, update the order page and explain what each option includes.
Picklo lets you display your offers and prices and take payment upfront. That removes the need to negotiate the basic price at every collection.
See [business.gov.au's pricing guidance](https://business.gov.au/products-and-services/choose-a-pricing-strategy) for a broader look at pricing approaches.
For a specific example, the [home cake business guide](/blog/home-cake-business-australia) discusses why time matters so much for custom work.
## Common questions
**What hourly rate should I use for my time?**
There's no single right answer. Choose a figure that would make the work feel worth doing if you were paying someone else to do it. Then check whether the final price still suits your customers.
**Do I need to include GST in my prices?**
Only if you're registered for GST. You must register once your business turnover reaches $75,000 a year. If you are registered, the price customers see should include GST.
**Should I charge friends and family less?**
That's your call, but keep it separate from your public price. A small thank you for early support is fine. A permanent discount usually becomes a problem.
**How do I know if my price is too high?**
If people ask questions but don't order, look at the whole offer first: photos, description, dates and how easy it is to buy. Price is only one part of the decision.
A price you can keep charging is a better starting point than one you hope to recover from later.
