Pricing is where many new shops go wrong, and usually in the same direction: too low. It feels safer to be cheap. But a price that doesn't cover your real costs means every sale makes your business a little weaker, and it's much harder to raise prices later than to start in the right place.
Here's a simple way to price your products with confidence instead of guesswork.
Step 1: Work out what one product really costs
Start with everything it takes to make and send a single item. Most people remember materials and forget the rest.
- Materials: everything that goes into the product itself
- Packaging: boxes, tissue, tape, labels, thank-you cards
- Your time: how long it takes to make, pack and photograph, multiplied by an hourly rate you'd be happy to earn
- Payment fees: card and wallet payments usually cost a percentage of the sale plus a small fixed fee per order
- A share of your overheads: your platform plan, equipment, software, insurance and anything else you pay regardless of how much you sell
Paying yourself for your time is the step most often skipped, and it's the one that matters most. If your price only works because your time is free, the business only works until you're too busy to keep going.
Step 2: An example
Say you make hand-poured candles.
| Cost | Per candle |
|---|---|
| Wax, wick, fragrance and jar | £6.20 |
| Box, tissue and label | £1.30 |
| Your time: 20 minutes at £15 an hour | £5.00 |
| Total cost before fees | £12.50 |
Payment fees depend on your price, so you'll add those once you have one in mind.
Step 3: Choose a margin, not a markup
These two words get mixed up all the time, and the difference changes your price.
- Markup is profit as a percentage of your cost.
- Margin is profit as a percentage of your price.
If something costs you £10 and you sell it for £20, your markup is 100% but your margin is 50%. Margin is the more useful number, because it tells you how much of every pound a customer pays you actually keep.
To find a price from a target margin, use this:
Price = total cost ÷ (1 − target margin)
For the candle, with a target margin of 55%:
£12.50 ÷ 0.45 = £27.78
Adding payment fees of roughly 70p takes the total cost to around £13.20, and £13.20 ÷ 0.45 gives £29.33. Round to a sensible price of £29, and check: after costs and fees of around £13.21, you keep about £15.79, a margin of roughly 54%.
There's no single right margin. Handmade and small-batch products often need a healthy one, because volumes are low and your time is a large part of the cost. If you plan to sell wholesale to shops later, you'll need even more room, as retailers usually expect to buy at a substantial discount to your retail price.
Step 4: Decide how to handle delivery
Delivery can quietly eat your profit. You have three common options:
- Charge delivery separately. It's simple and keeps your product prices lower, but high delivery charges at checkout can put people off.
- Build delivery into the price and offer free delivery. Customers like it, but make sure your margin still works once the postage is included.
- Free delivery over a threshold, such as orders over £40. It's a good way to encourage people to add a second item.
Whichever you choose, use real postage costs for your actual parcel sizes rather than an estimate.
Step 5: Remember VAT
If your business is VAT registered, the price your customer pays includes VAT, and that part isn't yours. At the standard rate of 20%, a £29 price contains about £4.83 of VAT, leaving £24.17 for your business.
Many small shops start below the VAT registration threshold, but it's worth knowing where you stand before you set prices you'll need to keep. Check the current threshold and rules on GOV.UK, and speak to an accountant if you're unsure.
Step 6: Check against the market
Your costs give you a floor. The market tells you whether customers will pay it.
- Look at similar products, not the cheapest ones. Compare with shops that match your quality and style.
- Don't try to be the cheapest. A small shop rarely wins on price against bigger sellers. Win on quality, story, service and care instead.
- If your price is higher than others, show why. Better materials, handmade details, longer-lasting products and great photos all justify a higher price. Say so clearly in your descriptions.
- If customers say "yes" instantly every time, your price may be too low.
Step 7: Review your prices regularly
Costs change. Materials go up, postage goes up, and your skills improve. Put a reminder in your calendar to review your prices every six months.
When you do raise prices, keep it simple: give regular customers a short heads-up, and remember that most people expect prices to change over time.
Your pricing checklist
- List every cost, including your time and packaging
- Add payment fees and a share of your overheads
- Choose a target margin and use the formula
- Decide how you'll handle delivery
- Account for VAT if you're registered
- Compare with similar shops, not the cheapest
- Review every six months
A confident, well-worked-out price is good for you and your customers. It means you can keep making the things they love.
Want to see what your shop's software and fees really add up to? Try our free cost calculator.
