Your family and friends insist that what you make is the best they've seen. Perhaps strangers have even stopped you on the street to compliment one of your creations. That's it. You've decided it's time to start selling those beautiful items. What started out as a hobby now holds appeal as its own business.

     One of the biggest struggles you will have once you decide to sell your work, is how to price it. You are putting a monetary value on something that came from within you. It is easy to allow emotions and self-confidence, or lack of it, to dictate your pricing structure. To be truly successful, you will need to separate yourself from your work, and learn to price objectively.

     There are many formulas suggested for pricing handmade work. A quick query on your favorite search engine will get those for you in milliseconds. However, all of them have in common some basic ideas you must consider, no matter what magic formula you decide will work for you.

     First, you need to look at the raw costs of your product. This includes every component and material you use to make your item. Many of us buy our supplies in bulk, so you will have to figure out the cost per unit used. For example, a bracelet uses 9 inches of jewelry wire. You bought 20 inches for $5. Divide the total price by the unit to get the cost per unit; $5 / 20 = $.25 per inch for this example. Once you know the cost per unit, you can just multiply that cost by the amount utilized.

     You need to do this for everything that goes into your product. Once you add up the cost of the materials, you have your raw cost—and you never use this raw cost as the price of your product, e-v-e-r! Doing so will send your business on the road to financial failure, plus you will be working for free.

     That brings is to the next cost, your labor. You need to establish an hourly wage for yourself. After all, you really don't expect to work for free, do you? Choose an amount you are comfortable paying yourself, and then add a little more! People always forget that they need to pay taxes and such out of their hourly wage, as you don't have an employer taking them out of your check for you. Once you have your hourly wage established, it will be easy to figure out the labor cost for a piece. Simply multiply the time, in hours, it takes you to finish an item, by your hourly wage.

     One factor a lot of handmade artists forget about is overhead costs. Even if you are working at home, you will have costs such as utilities, pens, shipping materials, etc. Try to keep records for these items separate from those of your home expenses. This will make it easier for you to track how much these incidentals of business are costing you, which will help you to budget accordingly. Most people charge a small percentage of their raw costs, or add a small dollar amount to each piece to cover these costs.

     Finally, you should also expect to make a profit on your products. As with overhead, you can charge a percentage or add a dollar amount to each item. Don't be tempted to forgo profits in order to keep prices down. Your business will need profit to grow, and to provide a cushion to help pay for unexpected expenses.

     Now you are ready to figure out your wholesale price. Add the four items together: Materials + Labor + Overhead + Profit, or plus the different costs into the pricing formula you have chosen. The formula should be one that gives you both a wholesale price, and a retail price. Even if you don't plan to do wholesale business, you may want to have occasional sales or offer discounts; you will need to make certain your retail price is sufficient to allow for these.

     It is common for artists to experience sticker shock the first time they figure out their retail price. Unfortunately, we are living in a world where cheaper, imported crafted items are available at local drug stores. For the sake of your business, resist the urge to undervalue your work in order to try to compete with these imports. You want customers to realize that there is something special about buying handmade, and supporting local artists. If you don't show value through pricing, your potential customers won't see much to value either.