Overhead for Makers: What to Include and How to Add It
When you price your handmade products, you need to cover more than just materials and your time. Overhead costs are all the other expenses that keep your maker business running, and if you don't include them, you're losing money on every sale.
What Is Overhead?
Overhead includes any business expense that isn't a direct material or your labour for making a specific product. These are the costs you'd still have even if you didn't make anything for a week.
Common overhead costs for makers include:
- Packaging supplies (boxes, tissue paper, thank-you cards, tape)
- Labels, stickers, and printing costs
- Business insurance
- Market fees and booth supplies
- Website hosting and e-commerce platform fees
- Accounting software or apps
- Banking fees
- Utilities for your workspace
- Equipment maintenance and small tools
- Marketing and advertising
- Professional development (courses, books)
- Home office expenses (if you work from home)
Tracking Your Overhead Costs
Start by listing every business expense for the past three to six months that isn't a direct material cost. Add them up to get your total monthly overhead.
Keep receipts and records of everything. The CRA requires you to keep supporting documents for business expenses if you're going to deduct them. You can learn more about record-keeping requirements on the CRA business expenses page.
How to Calculate Your Overhead Rate
Once you know your monthly overhead, you need to spread it across your products. The simplest method is to calculate an overhead rate based on your labour hours.
Step 1: Add up your total monthly overhead costs.
Step 2: Estimate how many hours per month you spend actually making products (not admin time—that's already covered in overhead).
Step 3: Divide total overhead by productive hours to get your overhead rate per hour.
Step 4: For each product, multiply the time it takes to make by your overhead rate. Add this to your product cost.
Worked Example
Sarah makes candles. Here are her monthly overhead costs:
- Packaging: $80
- Labels and printing: $40
- Market booth fees (averaged): $120
- Website and apps: $45
- Insurance: $35
- Home office portion of utilities: $50
- Marketing: $30
Total monthly overhead: $400
Sarah spends about 40 hours per month actually pouring and finishing candles.
Overhead rate: $400 ÷ 40 hours = $10 per hour
One of Sarah's candles takes 15 minutes (0.25 hours) to make. Her costs are:
- Materials (wax, wick, fragrance, jar): $4.50
- Labour (0.25 hours × $25/hour): $6.25
- Overhead (0.25 hours × $10/hour): $2.50
Total cost: $13.25
If Sarah wants a 50% profit margin, she'd price this candle at $26.50. Without including overhead, she would have underpriced by $2.50 per candle—which adds up quickly when you're selling dozens or hundreds of products.
Adjusting as You Go
Review your overhead costs every few months. As your business grows, some costs will increase (more market fees, more packaging) while others might decrease per unit (better wholesale pricing, more efficient production).
If your overhead rate seems too high, look for costs you can reduce. If it seems low, make sure you haven't forgotten anything—many makers forget to include their own business mileage, home office costs, or equipment replacement funds.
You can use the handmade pricing calculator to work through your numbers and see how different overhead rates affect your final pricing.
MakerCraft helps you track all your business expenses in one place and automatically calculates your overhead costs so you can price products accurately without the spreadsheet headaches.
This article is general information, not tax or legal advice.