Guide
How to price a handmade product without losing money
Most small-batch makers price by looking at what the seller next to them charges. That works until an ingredient price moves, an order gets bigger, or a stockist asks for wholesale rates. This guide walks through the way costing actually works — the same method CraftCost automates.
Step 1 — Find your true cost of goods
Your cost of goods sold (COGS) is everything consumed to produce one finished, sellable unit. For a craft product that usually means four buckets:
- Base material — wax, soap base, carrier oil, incense blank, gel.
- Additives — fragrance oil, essential oil, dye, mica, clay, additives, wicks.
- Packaging — jar or tin, lid, box, label, dust cover, shrink wrap, insert card.
- Labour and overhead — your time, electricity, rent share, breakages, wastage.
Cost each of these at the price you actually paid, then convert it to a per-batch quantity. A 5 kg bag of soy wax bought for ₹1,150 is ₹0.23 per gram; a batch using 1,800 g of that wax carries ₹414 of wax cost, no matter what the retail price of wax is today.
Step 2 — Handle GST the right way
Indian makers get tripped up here constantly. There are two clean approaches and one messy one to avoid:
- Not GST registered: the tax you paid on raw material is a sunk cost. Use the GST-inclusive purchase price everywhere in your costing, and do not add GST on top of your selling price.
- GST registered and claiming input credit: cost every input at its price excluding GST, and treat output GST as a separate line added at the point of sale.
- Avoid: mixing the two — costing some inputs inclusive and some exclusive. This is where phantom profit appears.
CraftCost stores both the ex-GST price and the GST percentage for every ingredient, so you can flip between the two views without re-entering anything.
Step 3 — Work per batch, then divide
Never cost a single unit directly. Cost the whole batch, then divide by the number of good units it yields. Batch thinking captures wastage naturally: if a 40-unit pour reliably gives you 38 sellable candles, divide by 38, not 40. That two-unit gap is roughly a 5% cost increase you would otherwise never see.
Worked example — a 200 g soy candle
- Wax: 160 g at ₹0.23/g = ₹36.80
- Fragrance at 8% load: 12.8 g at ₹3.10/g = ₹39.68
- Wick and sticker: ₹6.00
- Amber jar with lid: ₹78.00
- Label and box: ₹22.00
- Labour: 6 minutes at ₹250/hr = ₹25.00
- Overhead allocation: ₹8.00
Total cost per unit: ₹215.48. At a 55% margin the selling price is 215.48 ÷ (1 − 0.55) = ₹478.84, which you would round to ₹479 or ₹499. Price it at ₹399 "because that felt right" and your margin quietly drops to 46%.
Step 4 — Choose margin, not a round number
The formula is simple: selling price = cost ÷ (1 − margin). Run the same cost through several margins before you commit, because different channels need different floors. A product that works at 60% direct-to-customer may be unsellable at wholesale if your cost is too high — and that is a signal to redesign the product, not to accept a thin margin.
CraftCost shows suggested MRP at 30%, 40%, 50% and 60% side by side for every variant, so the trade-off is visible the moment you finish a recipe.
Step 5 — Re-cost when anything moves
Fragrance oil, glass and shipping all move several times a year. Saving recipes rather than spreadsheets means you can update one ingredient price and instantly see which of your products fell below their margin floor. That is the whole reason to keep a recipe library.
Frequently asked questions
Should I price on margin or markup?
Margin is calculated on the selling price, markup on the cost. A 50% margin means cost is half the selling price (cost ÷ 0.5); a 50% markup only adds half the cost on top (cost × 1.5). CraftCost uses margin-on-selling-price because that is how retail, marketplaces and wholesalers talk about it.
Do I include GST in my ingredient cost?
If you are not GST registered you cannot claim input credit, so the GST you pay on raw material is a real cost and must sit inside your COGS. If you are registered and claiming input tax credit, cost your ingredients excluding GST and add output GST on top of your selling price.
How much should I charge for my own labour?
Pick an hourly rate you would pay someone else to do the work, multiply by the hours a batch takes, then divide across the batch. Leaving labour out is the single most common reason a maker's 'profitable' product is actually losing money.
What margin do craft makers usually target?
Direct-to-customer sales commonly run at 55–70% margin, marketplace listings at 45–60% after fees, and wholesale at 30–40%. If you plan to sell both wholesale and retail, set your retail price from the wholesale floor upwards, not the other way round.