How To Price Handmade Scrunchies To Sell

If you’re starting a business to sell handmade scrunchies, it’s important to price them right. 

Not only do you need to ensure they’re a price your target market is willing to pay, but you also must profit from your sales…or you don’t have a business.

I’m not a fan of the popular pricing strategy: Production Costs x 2 = Wholesale Price -> Wholesale Price x 2 = Retail Price. And this article will show why. 

It’s a very general pricing formula that can often overprice products or underprice them, leaving the seller with little to no profits. 

There are many different ways to price and different formulas and calculations to follow.

The following is the pricing strategy that works the best for me.

 

Pricing scrunchies overview

Here’s a quick overview of the formula I follow to price handmade goods.

• Step 1 – Add up production costs (materials + wages for production time)
• Step 2 – Add overhead expenses & wages (money and time spent on items and tasks outside of production)
• Step 3 – Add profit margins (Production costs + Overhead costs + 5% – 20% markup for profit = Base Price)
• Step 4 – Add markup (Base Price + 60% – 100% markup (to cover sales channel fees, offer free shipping, offer discounts, etc.) = Retail Price
• Step 5 – Test your price (run your numbers to ensure you’re profiting no matter which sales platform you sell through (e.g. Etsy, craft shows, selling wholesale))
• Step 6 – Adjust (increase your price as needed or as your business grows)

For more details and example numbers, you can read through each step below.

 

Step 1 – Add up Production Costs

Determine how much it costs, in materials and wages, to make one scrunchie.

To build a profitable business, It’s important to shop for materials at wholesale prices and get your production time down. 

Material Costs

List anything you need to create a scrunchie and prepare it to sell. If you plan to sell each scrunchie in a box, you would add the cost of the box to your total. 

Here is some example pricing for scrunchie materials:

• Fabric = $5/yard (e.g. this satin; the more you buy the more you save)
• Elastic = $0.12/yard
• Thread = $1 for 200 yards
• Tags = $25.99 for 400 pieces

Now determine how many scrunchies you can create with your materials to determine the material costs for each scrunchie.

>> I can make 14 scrunchies out of 1 yard of fabric

>> I can make 5 scrunchies out of 1 yard of elastic

Thread is a little harder to calculate cost per scrunchie. If my spool of thread is 200 yards, that’s about 7200 inches. If each scrunchie is 25” long and 5” wide, I need approximately 60” of thread for the top and bottom. 7200 divided by 60 = 120 scrunchies. I’d knock that number down to account for waste and give a bit of wiggle room. 

>> I can make 100 scrunchies with my spool of thread. 

>> I can tag 400 scrunchies with my package of tags.

So my costs per scrunchies are:

• Fabric = $0.36/scrunchie
• Elastic = $0.02/scrunchie
• Thread = $0.01/scrunchie
• Tags = $0.06/scrunchie

Material costs per scrunchie = $0.45

 

Production Wages

You don’t have a business if you’re not charging for the hours you work on it. What you do have, is an operation where you’re spending money on materials and then earning that money back with each sale.

Let’s say I would like to be paid minimum wage to start, which is $15/hour (in my location and at the time of writing this article).

You can set your hourly wage to whatever you like and increase it as you become more skilled. However, try not to go lower than minimum wage.

My production hours will include the time it takes me to cut the material, sew the material, and tag each scrunchie, so it’s ready to be sold.

The more I batch my work, the quicker I’m able to make my scrunchies. I found the burrito method the fastest when sewing scrunchies (it seemed much slower until I timed myself).

I was able to get my time down to about 5 minutes per scrunchie. 

• 5 minutes per scrunchie = 12 scrunchies per hour
• $15/hour (divided by 12) = $1.25/scrunchie for my wage

Wages per scrunchie = $1.25

 

Total Production Costs

$1.25 (wages) + $0.45 (material costs) = $1.70

Production Costs per scrunchie = $1.70

 

Step 2 – Add Overhead Expenses & Wages

Think of your overhead expenses/wages as anything you spend time or money on for your business, outside of production. 

In my pricing formula, I don’t include sales channel fees at this point (e.g. Etsy fees, craft show fees, etc.).

Overhead Wages

I need to know how many scrunchies I can make in a month to determine how much overhead cost to add to each scrunchie. 

So we’ll start by looking at our overhead hours in a month, to determine how many hours will be dedicated to production tasks versus overhead tasks. 

Outside of production tasks, you may spend time on tasks such as:

• Taking photos of your scrunchies
• Uploading and editing photos
• Creating Etsy listings
• Replying to messages
• Packing orders
• Driving to and from the post office
• Etc.

If you don’t have past hours to work with, an easier way to calculate your wages is to consider how many hours you have available to work on your scrunchie business in a week.

For example, if you work a full time job, you may have an hour each weeknight and 8 hours over the weekend to work on your business. 

That’s an average of 13 hours/week and 52 hours/month

If you spend all your time creating scrunchies, you won’t have any time to sell them. 

You need to put time into marketing to make sales, and then you need time to package and ship each order. 

So a good place to start is allotting half of your working hours to marketing and selling and the other half to production. You can gather more accurate numbers as you begin to track your hours and determine the ratio of hours you spend on production versus marketing/selling/admin work.

If I have 52 hours to work on my business in a month:

>> 26 hours will be spent making scrunchies (these wages are already factored into my production costs)

>> 26 hours will be spent on marketing, selling, and admin tasks

26 marketing and selling hours x $15 (hourly wage) = $390

• Production hours = 26
• Scrunchies made per hour = 12
• Total scrunchies made in a month = 312

Now I can distribute my overhead wages among those 312 scrunchies.

$390 (overhead wages) divided by 312 = $1.25

My overhead wages per scrunchie are $1.25.

$1.25 would be added to the price of my scrunchie, to cover my wages for hours worked on my business outside of production.

 

Overhead Expenses

Overhead expenses can be a little harder to calculate, especially as a new business. 

My suggestion is to open a business account and use that account to pay for EVERYTHING business related. Then, you can easily see how much you’re spending on your business each month.

Of course, several expenses won’t be that simple. For example, buying items for my craft show display may cost me $160 one month, but I’ll use those items over and over throughout the year. 

IMPORTANT NOTE

Although sales channel fees (e.g. Etsy fees, craft show fees, selling wholesale, etc.) would be considered overhead expenses, I’m not going to factor them into the price yet, because there isn’t a fixed cost.

Sales channel expenses will vary greatly depending on the sales channel you’re selling through, what your prices are, and how much you sell through the channel. So we’ll cover these expenses in the markup step.

If you have a website, and you know how much you pay for that website domain and hosting, you can factor that price into your yearly overhead expenses. That price does not change throughout the year and you’re paying it no matter what.

I’m also not including shipping fees or sales tax because those should be passed onto the customer. If you want to offer free shipping, you will add markup accordingly, which is explained in step 4.

 

Yearly overhead expenses

For bigger expenses that are a one and done, I divide them by 12, so each month I’m covering a portion of it.

Some of the bigger business expenses you may need to account for are:

• Business license and permits
• Sewing machine, tools, and repairs
• Photography props
• Display props and fixtures for craft shows
• Photo editing software
• Membership fees (e.g. membership for fabric supplier to get discounts)
• Paying an accountant to do your taxes (or paying for Quickbooks)
• Etc.

These costs will vary depending on your location, your business model, as well as your circumstances (e.g. perhaps you already own a sewing machine, or perhaps you don’t plan to sell at craft shows).

Let’s say my business has $500 in yearly overhead expenses. 

Yearly overhead expenses = $42/month 

Yearly overhead expenses divided among 312 scrunchies = $0.13/scrunchie

 

Monthly overhead expenses

Now consider reoccurring expenses you must pay each month.

Your monthly overhead expenses might include:

• Shipping materials
• Marketing materials (e.g. business cards)
• Office supplies
• Gas or mileage
• Paid ads
• A portion of your rent/electricity/etc. (for your sewing room)
• Website domain and hosting
• Etc.

Let’s say my monthly overhead expenses include:

• Padded envelope & marketing material = $0.30/scrunchie
• Office supplies = $10/month (divided among 312 scrunchies = $0.03/scrunchie)
• Mileage = $28/month (divided among 312 scrunchies = $0.09/scrunchie)

Monthly overhead expenses = $0.42/scrunchie

 

Total Expenses & Wages

• $1.70 production costs
• $1.25 hourly wages (outside of production wages)
• $0.13 yearly overhead expenses
• $0.42 monthly overhead expenses

My cost per scrunchie is $3.50.

*This does NOT include sales channel fees, shipping fees, or taxes.

 

Basic Pricing Formula Flaw

Let me show why I’m not a fan of simply multiplying costs by 2 to get a wholesale price. 

In my example, my production costs are: $1.70 while my total expenses per scrunchie are $3.50.

Let’s run that through the popular pricing formula:

• Production Costs x 2 = Wholesale Price
• Wholesale Price x 2 = Retail Price

Production Cost $1.70 x 2 = $3.40

Multiplying your production costs by 2 is supposed to add enough markup to cover your overhead costs and leave you with profit, when selling wholesale. 

In my example, my costs, including overhead are $3.50 and I haven’t added profit yet. 

I would be losing money if I sold my scrunchies to retailers for $3.40.

When I multiply that price by 2 again, I do have enough markup to cover other sales channel fees and be left with profits. But it’s important to always profit, even when selling wholesale.

 

Step 3 – Add Profit

Now we want to add a profit margin to our price. 

This ensures we’re not simply making the money (and time) we spent back when we sell our scrunchie at its lowest price (wholesale; 50% off). 

The price you have after you’ve added profits will be your base price (the lowest price you should sell your scrunchies at to cover costs and profit).

You can choose how much of a profit margin you’d like. 

A good profit margin range to be in is 5% – 20%. 

If you’re planning to sell high volumes of scrunchies each month, you may choose a lower profit margin (5%). This will lower your prices and perhaps help you sell more. 

If you don’t think you’ll be able to sell as many scrunchies in a month because you’re building a luxury brand and will have higher than average prices, then you may want to add a 20% (or higher) profit margin to your prices. 

To determine your wholesale price with profit margins built in, follow these steps:

1. Determine what you would like your profit margins to be (e.g. 5%, 10%, 20%, or another percent)
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 costs per product (production costs + overhead costs) by that number.
5. The number you’re left with is your price with profits built in.

For example, let’s say I want a 5% profit margin:

1. 5% profit margin
2. 5% -> 0.05
3. 1 – 0.05 = 0.95
4. $3.50 (costs) divided by 0.95 = $3.68
5. Base price = $3.68

My scrunchies with a 5% profit margin are now $3.68

This is the lowest price I should ever sell my scrunchies at as it ensures I’m covering all my costs and profiting.

 

Step 4 – Add Markup

In most cases, you should plan for a 100% markup, so you’re doubling your base price to get your retail price. Retailers will expect your wholesale price to be half of your retail price, which is why you’ll need at least 100% markup on your base price, if you plan to sell your products through retailers.

However, this is your business and not every product or business model is fit for selling wholesale.

You may choose to add more markup to your base price, or less (if you don’t plan to ever sell wholesale).

Markup will ensure you’re covering your sales channel fees (e.g. Etsy fees, craft show fees, home shopping party expenses, etc.) and that you’re able to offer discounts to consumers, without losing money. Your markup will also give you a little buffer for unexpected expenses, and it may allow you to have higher profit margins (than you originally set in your base price), depending on the sales channel and its fees.

The reason I like to factor in sales channel fees at this point is because they vary depending on the sales channel. 

If you sell 100 of your scrunchies through retailers, those 100 scrunchies won’t incur Etsy or craft show fees, so those fees shouldn’t be included in the price retailers must pay. 

Marking up your scrunchies by 60% – 100% is usually a good range to be in. As mentioned, 100% markup is the minimum if you plan to sell wholesale.

Here’s how to add markup to your price:

1. Determine your markup percentage.
2. Multiply your wholesale price by that percent.
3. Add that number to your wholesale price.
4. Your total is your retail price.

For example, if I plan to sell wholesale to retailers, I would add a 100% markup. 

1. 100% markup
2. $3.68 x 100% = $3.68
3. $3.68 + $3.68 = $7.36
4. Retail price = $7.36

But let’s say I never plan to sell through retailers and my business model focuses on direct to consumers. I may decide to add less of a markup so my price is more appealing to my target market and I can sell higher volumes.

1. 60% markup
2. $3.68 x 60% = $2.21
3. $3.68 + $2.21 = $5.89
4. Retail price – $5.89

Let’s say shipping fees are typically $4 – $5 and I want to mark up my scrunchies by 200% so I can offer free shipping and run sales on top of that.

1. 200% markup
2. $3.68 x 200% = $7.36
3. $3.68 + $7.36 = $11.04
4. Retail price = $11.04

If I add a 200% markup to my scrunchies, my wholesale price would then be $5.53.

Choose how much you will mark your scrunchies up by and follow the steps to add that markup to your base price.

Now you have a retail price that ensures you’re covering all your production costs, overhead costs, sales channel fees, and leaves you with a profit. 

 

Step 5 – Test your Prices (through your sales channels)

Before you set your prices, list the sales channels you plan to sell through and the fees they charge. Then run your numbers to ensure you’ll be covering all your costs and profiting.

Below are several examples based on popular sales channels for handmade businesses. I’ve also shown them using different markups to give you an idea of profits. But to be clear; my markup stays the same for one style of scrunchie, no matter which platform I’m selling it through.

Here is a breakdown of my numbers:

• Production & Overhead costs = $3.50
• Base price (costs + 5% profit margin) = $3.68
• Retail price 60% markup = $5.89
• Retail price 100% markup = $7.36
• Retail price 200% markup = $11.04

 

A) Selling on Etsy

If I’m selling my scrunchies on Etsy, I will need to charge shipping fees (and I may need to charge sales tax, but I won’t factor that in for these examples). So get an idea of how much shipping will cost you based on the type of packaging you’ll use and where you’ll be shipping (e.g. domestically, internationally). You can use Etsy’s Postage Calculator to gather some estimates.

Selling a scrunchie on Etsy with a 60% markup

• $5.89 (retail price) + $4.00 shipping = $9.89
• Etsy fees = $1.39
• Costs ($3.50 + $4.00 + $1.39) = $8.89
• Profit per scrunchie = $1 (17% profit margin)

Selling a scrunchie on Etsy with a 100% markup

• $7.36 (retail price) + $4.00 shipping = $11.36
• Etsy fees = $1.53
• Costs ($3.50 + $4.00 + $1.53) = $9.03
• Profit per scrunchie = $2.33 (32%)

Selling a scrunchie on Etsy with a 200% markup and offering FREE SHIPPING

• $11.04 (retail price) FREE SHIPPING
• Etsy fees = $1.50
• Costs ($3.50 + $4.00 + $1.50) = $9.00
• Profit per scrunchie = $2.04 (18% profit margin)

Selling a scrunchie on Etsy with a 60% markup and offering a 15% discount to customers

• $5.01 (discounted price) + $4.00 shipping = $9.01
• Etsy fees = $1.31
• Costs ($3.50 + $4.00 + $1.31) = $8.81
• Profit per scrunchie = $0.20 (4% profit margin)

 

B) Selling at Craft Shows

Craft show fees and overhead expenses will vary. Most craft shows don’t take a commission on your sales, but rather, will charge a flat fee (which will vary based on the city, the organizer, the venue, your table/booth size, etc.)

If you accept credit/debit card payments, you will have transaction fees, which vary depending on the service you use (e.g. Square, PayPal, Shopify point of sale system, etc.).

You will also have additional overhead expenses such as:

• travel expenses
• parking fees
• transaction fees
• food
• etc.

As well, you may go above your allotted work hours to complete tasks such as:

• travelling to and from the event
• packing up your stock
• setting up your display
• selling at the event
• packing up from the event

Let’s look at an example for a 2-day event (8 hours each day) that charges $400 for a table. 

On top of the 13 hours of wages I’ve already accounted for in my monthly overhead wages, I’ll need an additional 16 hours that week to create stock and sell at the event. 

Scrunchies priced with a 60% markup

• Scrunchies sold at the event = 250
• Retail price = $5.89

Total Revenue = $1472.50

Costs:

• Event fee = $400
• Square processing fee = 2.65%/transaction (approx $0.16/transaction x 250 = $40)
• Shopping bags, wrapping, marketing materials = $150
• Mileage = $42
• Parking = $40
• Wages (16 hours x $15) = $240

Total sales channel fees = $912

Revenue ($1472.50) minus Expenses & Wages ($912) = $560.50 profits ($2.24 per scrunchie)

 

C) Selling on Shopify

Let’s say I’ve set up a Shopify store using a basic monthly plan.

• Monthly fee = $19/month
• Transaction fee = 2%
• Credit card fees = 2.9% + $0.30

Scrunchies priced with a 60% markup

When I sell a $5.89 scrunchie through Shopify, they will take:

• Transaction fee = $0.12
• Credit card fee = $0.17 + $0.30 ($0.47)

Total Shopify fees = $0.59

$5.89 minus Production & Overhead costs ($3.50) minus Shopify fees ($0.59) = $1.80

To cover my monthly fee ($19) and break even, I must sell 11 scrunchies in a month. 

Each scrunchie sold after a quantity of 11 will profit $1.85.

 

D) Selling through a Consignment Store

Each consignment shop will have a different commission split. The typical split is 60% of a sale goes to you and 40% goes to the consignment shop owner. Read more about selling through consignment shops here.

Scrunchies priced with a 60% markup

• Scrunchie price = $5.89
• Consignment fee = $2.36
• Production & overhead costs = $3.50

Profit per scrunchie = $0.03

Scrunchies priced with a 100% markup

• Scrunchie price = $7.36
• Consignment fee = $2.94
• Production & overhead costs = $3.50

Profit per scrunchie = $0.92

 

E) Selling Wholesale to Retailers

If I’m selling wholesale to retailers, I would price my scrunchies with 100% markup (minimum). I could mark up more if I want more wiggle room.

I would also set a minimum order quantity (the number of scrunchies a retailer must purchase in one order to receive wholesale pricing). 

For example, a retailer may need to purchase a minimum of 50 scrunchies to get wholesale pricing.

• Scrunchie price = $3.68 (wholesale price)
• Production & overhead costs = $3.50

*Profit per scrunchie = $0.18

*You must consider, overhead costs per wholesale order will be lower. You will only need to use one box, one label, and make one trip to the post office, as opposed to shipping 50 individual orders and making multiple trips to the post office if you were to sell those 50 scrunchies to 50 different customers.

You also won’t need to spend time marketing and selling those 50 scrunchies individually (the retailer takes on those costs and wages).

So depending on how much time and money you spend acquiring a wholesale order, generally your costs should be lower than if you were to sell each item individually, straight to consumers.

 

Step 6 – Adjust your prices

If you run your numbers and you’re not profiting through all your sales channels, or not profiting enough, go back and add a bigger profit margin or a bigger markup.

As you track your expenses and hours and have a year of running your business under your belt, you’ll have more accurate numbers to work with. You can then set a budget, and stick within it (e.g. a budget of $1000/year for craft shows will determine how many craft shows you can participate in for the year).

Don’t be afraid to adjust your prices as you go to ensure you’re covering your costs and profiting.

There won’t be an outrage online because you start charging $1 more per scrunchie due to a business expense you hadn’t considered or because the cost of material goes up. If you do have loyal customers who complain about the increase, explain the reason behind it. You should also have room to offer them a discount on their next purchase.

Pricing isn’t an exact science. Material prices fluctuate, business expenses might increase, your business model might change, your brand will become more well known (and in-demand)…you’re allowed to make changes to your prices as you go.

You also must consider your target market and the brand you want to build. If you follow this pricing strategy and you come up with a $6/scrunchie price point, but you’re trying to build a luxury brand, you’ll probably want to bump up your price…even if you don’t necessarily need to.

Price points impact perceived value and a low price point can tell consumers a product isn’t as high-quality (as higher priced scrunchies on the market).

 

I hope you find this pricing strategy helpful!