Let’s Talk Overhead: What It Is, Why It Matters, and How to Calculate It for Your Craft Business
When I first started pricing my handmade products, I focused on the obvious costs. I added up the materials. I calculated the time it took to make the item. I chose a price that felt fair based on those numbers.
But even when sales started coming in, something still felt off. The business was busy, yet the profit was smaller than expected. That was when I realized I had been missing an important piece of the pricing puzzle.
Materials and labor are only part of the cost of running a handmade business. The rest lives in what we call overhead.
Overhead includes all the expenses that keep the business running behind the scenes. These are the costs that exist whether I produce one product or one hundred. They may not belong to a single item, but they still have to be paid for.
Examples of overhead show up everywhere in a creative business. Website platforms or shop fees are one example. Subscription tools like design software or email services are another. Packaging materials, labels, tissue paper, and boxes also fall into this category. Vendor fees for markets, marketing costs, advertising, office supplies, and even certain portions of workspace expenses can all be considered overhead.
Education and professional development also count. Courses, workshops, or business tools that help improve the business are part of the cost of running it. Taxes, software, equipment, and other operational tools belong in this category as well.
These expenses may seem small when viewed individually, but together they create a significant monthly cost. If I do not account for them in my pricing, the business cannot truly support itself. Instead, I end up covering those costs personally.
This is why overhead must be included when calculating product prices.
A simple way to approach this is by estimating the total monthly overhead for the business. I start by listing all the recurring expenses that support my work. This might include shop platform fees, packaging supplies, subscriptions, marketing costs, vendor fees, studio expenses, and any other regular business costs.
Once I know the total monthly overhead, the next step is estimating how many products I typically sell during that same month. Dividing the overhead total by the number of products sold helps determine how much of that overhead should be assigned to each item.
For example, if the total monthly overhead is three hundred dollars and I sell around fifty products each month, dividing three hundred by fifty shows that each product should carry about six dollars of overhead cost. That six dollars should be included in the product’s price along with materials and labor.
This creates a more accurate pricing formula. Instead of calculating price based only on materials and time, the formula includes materials, labor, overhead per product, and the desired profit margin. Each piece works together to create a price that supports the full operation of the business.
It is also helpful to review overhead regularly. As the business grows, expenses can change. Platform fees may increase, new tools may be added, or production volume may shift. Checking these numbers every few months helps ensure that pricing continues to reflect the real cost of running the business.
Running a handmade business means managing creativity and strategy at the same time. Pricing products properly is part of honoring both. When overhead is included in the equation, the business becomes more stable, more sustainable, and better positioned to grow.