How Much to Pay Yourself
Choose an hourly rate you would accept for the work, divide the time a batch takes by how many it makes, and add that amount to every unit. Your pay is a cost of making the product; profit comes on top.
Choosing your hourly rate
Ask what you would have to pay someone else to make it as well as you do, or what you would earn for similar skilled work nearby. Start there; you can raise it as you get faster and busier.
In our candle example the rate is $18 an hour.
Your time per unit
Time the whole batch, from setting up to cleaning down. Ninety minutes for 12 candles is 7.5 minutes a candle. At $18 an hour that is $2.25 per candle, added to the cost before any profit.
- Include setup, waiting you can't use, finishing and packing.
- Time a real batch with a timer; memory always guesses low.
- Re-time it when you get faster, and keep the rate the same.
Pay is not profit
Your hourly pay covers the time you spend making. Profit is what the business keeps after paying you, for slow months, new tools and growing. If you count your pay as profit, the business has nothing left over.
Questions
Should I count time spent on photos, messages and admin?
That time is real work too. Either add a few minutes per item to your making time, or set your hourly rate a little higher to cover it.
What if paying myself makes the product too expensive?
First check the other costs: buying materials in larger packs or making bigger batches often lowers the cost per unit. If the price is still more than customers will pay, the product may not be worth making at that price, which is worth knowing.
Do I include packing an order in my time?
Yes. Any time spent getting an order ready for a customer belongs in the time per unit.
Keep reading
- How to Price Handmade ProductsThe full method for pricing handmade products: materials per unit, packaging, your time, fixed costs, marketplace fees and profit, with a worked example.
- Fixed Costs per ProductSpread monthly costs like internet, electricity and equipment across the items you expect to sell, so every sale pays its share of the bills.
- Markup vs MarginA 30% markup is not a 30% margin. See the difference in dollars with a real example, and which one to use when you price what you make.