Starting a Sewing Business – Pricing for Profit

Pricing can be overwhelming when starting to sell your products.

An easy place to start, when you have no idea what your monthly costs will be, is the basic formula: Production Costs x 2 = Wholesale Price x 2 = Retail Price.

However, that isn’t an ideal pricing formula to use long-term because it ignores your actual costs and may either underprice your work and leave you without a profit, or overprice it and push away customers.

Your prices need to work for your costs, your business model, and your goals.

Here’s a simple way to think about it.

 

A Simple 3-Step Pricing Framework

Instead of guessing or multiplying randomly, build your price in layers:

1. Cover your costs
2. Add profit
3. Add markup

 

Step 1: Cover Your Costs

Your prices must cover all costs associated with running your sewing business — not just materials.

There are two main categories:

1. Production Costs (per item)

• • • • Materials
      • Packaging
      • Your wage for making the item

2. Overhead Costs

Expenses that aren’t tied to one product:

• • • • Craft show fees
      • Website fees
      • Marketing
      • Business license
      • Equipment
      • Shipping supplies
      • Your wage for admin, marketing, and selling
      • Etc.

If you don’t know your overhead costs yet, you can estimate for now and begin tracking exactly how much you spend on your business each month.

Then take your monthly overhead and divide it by how many items you can realistically produce per month.

Production cost per item + Overhead cost per item = Total Cost per item

If you skip this step, you risk underpricing — even if your materials are covered.

*Overhead costs don’t need to be distributed evenly among each product. Higher-priced products may absorb a higher percentage of your overhead costs than lower-priced products.

 

Step 2: Add Profit

Profit is not your wage.

Profit is what’s left after paying yourself and covering all expenses.

Without profit:

• You can’t grow
• You can’t reinvest
• You can’t build long-term sustainability

To work profit margins into your prices, follow these steps:

1. 1. Determine what you would like your profit margins to be (e.g. 5%, 10%, 20%)
   2. Turn that percent into decimal form, by moving the decimal two points to the left (e.g. 5% -> 0.05, 10% -> 0.1, 20% -> 0.20)
   3. Subtract that number from 1 (e.g. 1 – 0.05 = 0.95, 1 – 0.1 = 0.9)
   4. Divide your cost per product (production costs + overhead costs) by that number.
   5. The number you’re left with is your price with profits built in.

 

Price with profit = Cost ÷ (1 – desired profit margin)

Example:
If your cost per item is $20 and you want a 20% profit margin:

1 – 0.2 = 0.8

$20 ÷ 0.8 = $25

That gives you $5 profit per item (20%).

It’s also important to add in profit now, so that if you do sell your products at wholesale prices, you’re still profiting.

 

Step 3: Add Markup

Markup creates flexibility. This layer helps you:

• Sell wholesale (typically 50% off retail)
• Offer customer discounts
• Cover unexpected fees
• Handle occasional returns or repairs
• Etc.

If you want to sell wholesale, your retail price should be double your base price (100% markup).

If you only sell direct-to-consumer, your markup may be lower — but you still need room for fees and promotions.

Base Price + Markup = Retail Price

For example:

Price with profit = $25

Markup = 100%

25 x 100% = 25 (markup)

$25 (Price with profit) + $25 (Markup) = $50

 

If Your Prices Feel Too High

If your numbers result in prices customers won’t pay, you have options:

Lower Costs

• • • • Increase production efficiency
      • Buy materials in bulk/at wholesale prices
      • Simplify design details

Increase Perceived Value

• • • • Improve branding
      • Improve photography
      • Communicate quality clearly

Adjust Your Business Model

• • • • Skip wholesale
      • Change sales channels
      • Refine your target market

Sometimes the issue isn’t pricing — it’s positioning.

 

Action Steps

• Track all your expenses
• Calculate prices for each product using this 3-step process
• Test, track, and adjust – continually check in on your prices to ensure you’re staying competitive and profiting as your business and its expenses change.

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