How Much Profit Should You Make on a Handmade Product?
Without profit, you may have created a job for yourself, but you haven’t created a financially secure business.
You have added up the materials, checked what similar products are selling for and chosen a price that feels reasonable.
But after making the product, packaging it, paying your selling fees and spending time promoting it, how much money are you actually left with?
Many handmade sellers confuse sales with profit. Receiving £40 for a product does not mean you have made £40. It only means your sales revenue was £40. Your profit is what remains after all the costs involved in making and selling that product have been deducted.
So, how much profit should you make on a handmade product?
There isn’t one percentage that will suit every product or business, but a useful starting target is a profit margin of approximately 20% to 30%. Some products may achieve more, while others may have a smaller margin. What matters is that your price covers every cost—including your time—and leaves enough profit to help your business grow.
Let’s look at what this really means and how you can decide whether your handmade products are profitable enough.
What is profit on a handmade product?
Profit is the money left after you have covered the full cost of producing and selling your product.
Your costs could include:
Materials and components
Packaging
Your labour
Selling and payment fees
Postage costs that you pay
Equipment and tools
Advertising
Website expenses
Insurance
Electricity and other overheads
An allowance for waste, breakages and mistakes
If you sell a product for £30 and it costs you £22 in total to make and sell it, your profit is £8.
The basic calculation is:
Selling price – total costs = profit
In this example:
£30 – £22 = £8 profit
That £8 is not your wage. Your payment for the time spent making the product should already be included in the £22 cost.
This is an important difference. If the £8 is all you receive for two hours of work, you haven’t made £8 profit—you have paid yourself £4 an hour and made no separate profit.
Your wages and profit are not the same thing
One of the most common pricing mistakes handmade sellers make is treating whatever remains after paying for materials as their wage and profit combined.
Your labour is a cost to the business. Profit is the financial reward for owning and building that business.
Imagine that you employed someone to make your products. You would have to pay them for every hour they worked. You should treat your own making time in the same way, even if you don’t physically transfer that wage to yourself after every sale.
Your price should therefore cover:
Materials + labour + expenses and overheads + profit
Your labour pays you for the work you do. Profit gives the business money to develop, replace equipment, survive quieter periods and take advantage of new opportunities.
Without profit, you may have created a job for yourself, but you haven’t created a financially secure business.
What is a good profit margin for handmade products?
As a straightforward starting point, aim to build a 20% to 30% profit margin into your handmade product prices.
That does not mean every business must achieve exactly this figure. The right margin will depend on factors such as:
The type of product you make
The amount of competition
Whether the item is made to order
How time-consuming it is to produce
The price customers are willing to pay
Whether you sell directly or through retailers
The amount you spend attracting each customer
How often customers return
A distinctive premium product may support a margin higher than 30%. A competitive product sold in large quantities might operate with a smaller percentage, although it would need enough sales to make that worthwhile.
The danger comes when the margin is so small that one discount, damaged parcel, advertising cost or material price increase wipes out the profit completely.
Your target should give you some breathing room—not leave your business balanced on a few pence.
Profit margin and markup are not the same
Profit margin and markup are often confused, but they are calculated differently.
Markup is the amount added to your cost.
Profit margin is the percentage of the final selling price that is profit.
Suppose your product costs £20 in total and you add a 25% markup:
£20 + 25% = £25 selling price
Your profit is £5. However, that £5 is only 20% of the £25 selling price, so your profit margin is 20%, not 25%.
To calculate your profit margin, use:
Profit ÷ selling price × 100 = profit margin
In this example:
£5 ÷ £25 × 100 = 20% profit margin
If you want a specific profit margin, you can use:
Total cost ÷ (1 – desired profit margin) = selling price
For a product costing £20 with a desired 30% margin:
£20 ÷ 0.70 = £28.57
You might then set the selling price at £28.95 or £29, depending on the product and your market.
Simply adding 30% to the cost would not give you a 30% profit margin.
A handmade product pricing example
Let’s imagine you make a handmade bag.
Your costs are:
Fabric and components: £11.50
Packaging: £1.50
Labour: two hours at £12 per hour = £24
Selling and payment fees: £4
Allowance for overheads: £3
Your total cost is:
£11.50 + £1.50 + £24 + £4 + £3 = £44
If you sell the bag for £45, you may initially feel that you have covered your costs. However, you would only make £1 profit.
Your profit margin would be:
£1 ÷ £45 × 100 = 2.2%
That gives you almost no protection against an unexpected expense.
If you wanted a 25% profit margin, the calculation would be:
£44 ÷ 0.75 = £58.67
You could consider a selling price of approximately £59, provided the product, presentation and target market support that price.
At £59, the product would generate £15 profit after covering the costs—including your £24 labour payment.
This example shows why you cannot choose your price by looking at materials alone.
What if customers won’t pay the price you need?
Calculating the correct price does not automatically mean customers will pay it.
If the price required to make a worthwhile profit is much higher than your target customer will accept, you have a business problem to solve. Reducing your wage to almost nothing is not a sustainable answer.
Instead, look at whether you could:
Source materials more efficiently
Reduce waste
Make the product in batches
Simplify a time-consuming process
Offer fewer options
Improve your photography and packaging
Communicate the quality and benefits more clearly
Create a more distinctive design
Target a customer who values handmade quality
Introduce a premium version
Stop selling an unprofitable product
You may discover that a popular product is not actually worth making. It is better to learn that from your figures than to stay busy fulfilling orders that make little or no money.
A full order book is not always evidence of a successful business. If your prices are too low, it can simply mean customers are receiving an excellent deal at your expense.
Should every product have the same profit margin?
Not necessarily.
You may decide to accept a slightly smaller margin on a simple introductory product that brings new customers into your business. You might make a higher margin on personalised products, gift sets, add-ons or premium collections.
However, each product should have a clear purpose.
Do not keep a poorly performing product simply because it sells. Ask whether it:
Produces a worthwhile profit
Introduces customers to more profitable products
Encourages repeat orders
Can be made quickly or in batches
Strengthens your overall product range
If it does none of these things, it may be taking time and attention away from better opportunities.
Review profit in pounds as well as percentages. A 40% margin may sound impressive, but if it gives you only £1 profit per item and each order takes considerable time to manage, you would need a very large number of sales.
Why your business needs to make a profit
Profit is not something to feel guilty about. It is what allows your handmade business to continue.
You may need profit to:
Replace worn or broken equipment
Develop new products
Purchase materials in larger quantities
Pay for advertising
Improve your website or photography
Cover quieter months
Attend markets and events
Invest in training
Build an emergency fund
Without profit, every unexpected cost has to come from your wages or personal money.
Customers are not only paying for the raw materials in an item. They are paying for your skill, experience, design, reliability, customer service and the care involved in creating something by hand.
Making a profit does not mean overcharging. It means setting a price that allows you to deliver a good product without personally subsidising every order.
Review your profit regularly
Your prices should not be calculated once and then forgotten.
Material prices rise. Selling platforms change their fees. Packaging becomes more expensive, and products may take longer to make than you originally estimated.
Review your figures regularly and whenever:
A supplier increases its prices
You change your packaging
Selling fees change
You begin paying for advertising
You introduce free delivery
A product takes longer than expected
Your skills and product quality improve
You have not reviewed your prices for six to twelve months
Keep a record of how long products genuinely take to make. Many sellers underestimate their labour because they count only the main making stage and forget preparation, finishing, personalisation and cleaning up.
Small missing costs can become a large amount of lost profit across dozens of sales.
So, how much profit should you make?
A sensible starting target for many handmade sellers is a 20% to 30% profit margin after materials, labour, fees and overheads have been covered.
Use that as a guide, not an unbreakable rule. Your products may need a different margin depending on your costs, customers and business model.
The most important point is that profit must be intentionally included in your price. It should not be whatever happens to remain at the end.
Know what each product costs. Pay yourself for your time. Add a genuine profit and then check whether the final price is realistic for the customer you want to reach.
If the figures don’t work, change the product, process or positioning—not the value of your time.
Are pricing mistakes reducing your handmade profit?
Download my free guide, 10 Mistakes Handmade Sellers Make When Pricing, and discover where your time, money and profit could be disappearing.
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