The importance of product costing in handicraft business and how your ERP software can help you achieve it with ease.

This article was published on: 11/02/21 10:19 PM

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“Price is what you pay. Value is what you get. – Warren Buffet”


Handmade with love. Can that be valued with money? 


It is priceless. 


However, crafts curated by skilled craftsmen have to be priced adequately as it brings home their bread and butter. Hence, it is not always easy determining how much to charge for your crafts. Every craftsman should realize the costs of their crafts, shipping and handling, and the time necessary to create the craft. Pricing is an important aspect of a home-based craft business. Charging too much won’t help as no one will buy. Charge too little, and you will end up losing out on the real value.


In this article, we will discuss aspects and a number of pricing strategies that may help you determine how much to sell your handicrafts for.


How to determine how much is appropriate to Charge?


A certain amount of research and survey is advisable to find out the market price of similar products being made. Online stores are also an important competition for handicraft business. Sites like eBay and Etsy are selling a wide variety of handicraft items on a discounted price, which is a threat to the retail market. You can always change or adjust your prices according to the times, but try to set a price and stick to it for several months at a time. You can always lower your prices and offer sales as an added incentive for potential clients to buy your product, or you may even decide to offer special deals for credit card purchases, bulk orders, or as a promotion.

To begin with, it is essential to determine what expenses your prices should cover. These include the cost you pay for materials and supplies, your time, and the amount of money you must necessarily spend on marketing or advertising. The most important of these is overhead costs.

Your prices should be able to cover the costs of, at the minimum, the amount of money you have put in your business; your telephone bills, a portion of the rent for your home or garage, insurance, supplies, and other expenses need to be considered when determining a price for your crafts.


Your pricing should also take into consideration the direct costs of operating your business. For example, the price you have to pay for fabric for your quilts, or wood for birdhouses or cabinets, are considered direct costs.


Lastly and most importantly determining the profit margin is very crucial, as without a profit no business is a success. 


Determining your final prices may be a trial and error endeavour. It takes careful consideration to determine the cost of your crafts. Your pricing will not only determine how much profit you can make but may also be used as a barometer or guideline to the future success of your business.

The best way to determine potential prices for your crafts is to compare what others are charging for similar crafts. You can do this by visiting physically, as well as online stores. Take the time to understand your competition, what they are selling, and how well they are doing. Find home-based craft business forum boards, or discussion groups on the Internet, and find out what others are charging for their crafts and how successful they are with those prices.

It goes without saying that in order to generate sales, you will need to price your crafts a little under what your competition is charging for some items; and if you are striving to create a brand name or premium craft, you will need to charge a little more than your competitors, but be prepared to explain why. The best part of creating art is being unique. If you can create something unique you can easily charge double your cost without being questioned.

A variety of online stores that sell a wide variety of crafts may be found at:

eBay, Etsy, Amazon, Google and Craigslist

Spend a day, or a week, browsing online stores, and try to find items that incorporate at least the number of materials and time spent that your craft does. Look to see how detailed other competitors’ crafts or products are, and what customers are willing to pay for such crafts. Find a middle ground. Ask yourself whether or not you would pay that much for your craft. If you would not, it is doubtful that your customers will, either.

manage handicraft with erp software

Strategising pricing 


A pricing strategy is a fancy name for determining how desirable your crafts are, and then fixing a price for your craft. For example, a pricing strategy may depend on supply and demand. This basically means how much of a supply there is for your type of craft, and how many people are demanding it.


The skill and time it takes to create a craft may increase its demand. For example, handmade twig furniture, or hand-blown or stained glass, may be in higher demand than stuffed Teddy bears. Every year, a certain number of toys, products, or services are offered to consumers that seem to exceed supply. This creates demand. This is especially apparent at Christmas time, when you are looking for that certain popular toy that is all the rage. The same concept of supply and demand may help you determine the price for your crafts.


You may also decide to offer sales to generate extra business, which are often known as bargain basement sale-pricing strategies. However, keep in mind that with this type of pricing strategy, you may barely break even, or may even lose money.


If you have a unique and highly marketable craft that is in demand in your area or region, you may try premium pricing, which means setting your crafts above the price offered by your competition. However, when doing so, make sure your crafts are of extremely high quality, are not offered widely in your area, and cater to individual tastes or design.


Costing and Pricing is made simple with the benefits of Expand ERP


Most businesses do well at figuring their cost of goods for simple products. But, once a product becomes more complex in terms of its raw material inputs, supply changes, or commodity price fluctuations, costing can be a challenge. If you cannot understand your products’ true costs, then you cannot price them competitively either. That leads to eroded profit margins or lost business.


  1. Expand ERP system does an excellent job of tracking all costs related to your products. With an accurate understanding of cost, objective understanding of margins will result – even in the face of fast-changing and ever growing market conditions. 
  2. Expand ERP software can bring together all the components of a product’s cost into a single unified view. Modifications and analysis can be done even for the most complex product. Cost can be defined  for both manufactured  items and purchase (buy) items.
  3. If an item is already in stock, you will understand its cost based on the stock valuation method you selected in your ERP (I.e. FIFO, LIFO, etc.). In fast-changing market conditions, you can change your stock costing at the click of a button so that you don’t validate your stock in an unrealistic manner.
  4. For component parts (assemblies, sub-assemblies, raw materials) of a finished product, you need  to understand your costs for each. Using a best fit  ERP system, you will be able to break down views of your final product into its component parts, each of which shares its cost data automatically when rolled up to the cost of the material master for any finished product in which it is used.
  5. It is equally important to see all your cost data up-to-date market realities reflect in those costs. Again, an ERP system lets you do that with a single data update. For example, a feature called Material Revaluation in one package, enables users to make changes to existing stock prices. So, when the market prices of your material inputs change dramatically, you simply adjust the cost, and the accounting changes are automatic.Expand ERP software makes such updating easy and time-saving.
  6. Today’s ERP systems let you report on all aspects of product cost as well as profitability. ERP integrates across the business to provide views of a product’s sale price, materials costs, indirect costs, and ultimately, profit margins. For quick checks on your business health at a higher level, Expand ERP system can roll up cost and sales price data to demonstrate how profit is changing over time. You can even gain insights into your profitability on a customer-by-customer basis.


One of our renowned clients in the handicraft industry, Elementary by Dileep Essentials Ltd. is a first-hand example of how moving to our ERP has been the best decision of their business success. Today Elementary products are sold globally on Amazon, Myntra etc online stores along with their 18 retail; outlets pan India, while Expand ERP software is happily managing their daily operational tasks and challenges with ease and finesse.


The most attractive feature of Expand ERP regarding the costing and pricing capabilities is that we provide easy-to-use solutions with intuitive user interfaces. Setting up your best fit ERP to report on product costs, pricing, and profitability has never been easier. Adopt Expand ERP -India’s best-fit cloud ERP software for mid-sized manufacturers in export and import industries and manage your handicrafts business seamlessly.


For more information contact us at +91 9007026542

2 Replies to “The importance of product costing in handicraft business and how your ERP software can help you achieve it with ease.”

  1. I really appreciate this post. I have been looking everywhere for this! Thank goodness I found it on Bing. You have made my day! Thank you again!

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