How to Price Handmade Homestead Products for Profit
If you are thinking about selling handmade items for extra income or building a homestead business, one of the most important details to ensure you have a PROFITABLE business is to set the right pricing.
Physical products (especially handmade ones) sold both in person, through social media, an Etsy shop, or farm stand are often the first things for people to start offering for extra money. Not only are they FUN and enjoyable to produce -- they are the easiest to sell!
But that doesn't guarantee they are profitable. You could sell 100 bars of soap but if you aren't priced properly, you may be putting in all that hard work for not much money or return.. not a great way to invest your limited time or resources if your goal is legitimate income streams. Would you rather spend $100 to make $150 or $500?!
The first year we focused on making enough money to cover the costs of our homestead, I was full of creative ways we could offer dozens of different unique products. I looked at what others had at the farmer's market that seemed high demand and made a huge list of what I could offer from our own homestead.
I realized though that I would have to have a WAY higher price to cover my costs of production - much less profit enough to have money for our homestead expenses too. I wasn't sure if people in our rural area could afford it though. So before we went all-in on making and selling all the things -- I decided to start selling ONE item.
Itt was priced higher than what other's offered similar products for. But I couldn't afford to be losing money, nor could I afford to spend my (very limited time) for only a few dollars/hour.
And amazingly, it worked! Not only did I have zero resistance on price, I sold out nearly every time:
With that, my tips...
Things That Should NOT Determine Your Pricing:
Average cost of similar products sold at local farmers' markets/websites
What you think the local community or potential customers can afford
Things That SHOULD Determine Your Pricing:
Your Costs to Produce
Your Time Invested
This is the most BASIC breakdown for beginner pricing. I'm going to share my most recent example of a handmade product I made for some additional income in the winter months. This isn't the exact same way I calculate everything we sell on our homestead -- but for physical products, it's a good base.
Handmade Crocheted Hats Pricing Breakdown:
Costs to Produce:
- Yarn: $5-7 (typically I buy on sale for $6)
- Pom Pom: $1
- Shipping Envelope/Labels: $1
- Shipping Cost: $5-7
TOTAL: $12-$16
My Time Invested:
- Making: 40 minutes/each
- Photographing, Editing, & Listing Online: 2 hours/40 hats (approx. 3 minutes each)
- Marketing: This isn't much but maybe 10-20 minutes each batch.
- Packing/Shipping: Approx 3 minutes per hat
TOTAL: I'll round up to 1 hour per hat of labor. My goal is to make a MINIMUM of $15 - ideally $20+/hour on anything I am doing for income.
A lot of people grossly under estimate how much time they spend doing every aspect of product production (or even worse -- they don't factor in their time in their pricing AT ALL!) If you want to make money homesteading -- you have to accept that your time has value. That may mean some of the products you WANT to produce/offer might not be the best way to use your time when you actually look at the numbers.
Based on my totals above, my minimum price for selling handmade, crocheted hats PROFITABLY, is by pricing them for $32-$36/each.
I have priced my hats for the past 3+ years for $35/each.
Our oldest modeling them for me to list for sale!
There are handmade hats at local boutiques near me for $15-20/each.
There are factory made hats at Walmart and on Amazon for $5-15/each.
That doesn't matter. I'm not trying to compete with other big or small businesses.
Part of the lure of buying homemade products for people is knowing the small farm, feeling a connection to person who made it, and knowing you are supporting them and their talents. That's worth spending more money.
(And don't forget -- you can build that connection with people by doing #3 in my list of Three Things to Do To Start Making Money from a Small Homestead post from last week.)
Now, a few things I didn't include in my pricing breakdown but I could have:
Time to drive and get materials, a percentage of the upfront cost to produce (such as hooks or scissors or a printer for labors). I only get yarn when I'm already out for other reasons and my tools are so minimal/already owned I'm not worried about the replacement costs.
If you are making homemade soaps other value-added products that require several hundred dollars work of item-specific tools, I would absolutely include a portion of their value in the cost too.
(For example -- if you have $100 worth of soap making equipment that may need to be replaced every 200 items. Add $0.50 to each item for wear and tear so you have the ability to replace when needed)
Final Details
I only offer a batch of handmade hats 1-2x a year. I usually try to offer around 50 each time which means I'm making $1,000/batch for my time.
The added bonus to this is most of my "hat making time” is when I'm out and about sitting at kids activities - either church, homeschool co-op, sports practices, etc. So being able to turn time that's normally just wasted into a chance to make income is an added win!
I hope this beginner pricing guide was helpful!
If you want to buy a hat from my current batch - you can shop them on our website HERE (until they sell out!)
