Case Study: How One Maker Discovered She Was Underpricing by 60%
Sarah's handmade jewelry business looked successful from the outside—400+ sales, 5-star reviews, featured in boutiques. But after systematically tracking all costs for 3 months, she discovered she was working for $8.14/hour and losing $1,534/month. Here's her complete pricing transformation with real numbers.
The Wake-Up Call
Sarah Kensington had been making wire-wrapped gemstone jewelry for 4 years. She sold 30-40 pieces monthly on Etsy, priced from $45-$85. Everyone said she was doing great—consistent sales, growing follower count, custom requests piling up. But despite working 50+ hours weekly, her bank account stayed flat. After meticulously tracking every cost and hour for 90 days, the math revealed a shocking truth: her bestselling $65 necklace cost $71.42 to make. She was losing $6.42 on every sale, subsidized by her part-time teaching job. This is her story of discovering the problem and fixing it.
Background: A "Successful" Business Losing Money
The Business Metrics (April 2024)
Sales Performance
Time Investment
Sarah's perception: "I make decent money from jewelry as a side business. If I could just get more sales, I'd be profitable enough to quit teaching."
The Cost Discovery: Three Months of Tracking
In May 2024, after another month where sales were strong but her savings didn't grow, Sarah started tracking every cost and every hour meticulously. She used a spreadsheet to log materials, time tracking software for all activities, and categorized every business expense.
What She Discovered: The Real Cost Breakdown
Let's examine her bestselling product: "Moonstone Cascade Necklace" (sold for $65)
Direct Materials (What She Tracked)
Direct Labor (What She Thought She Tracked)
Original pricing logic: $80.50 cost + 35% margin ($28.18) = $108.68, rounded to $110. But market comp research showed similar pieces at $55-75, so she "compromised" at $65.
What She Missed (The Hidden Costs)
1. True Labor Time
2. Platform Fees (Etsy)
3. Overhead Allocation
Monthly overhead: $1,420 ÷ 38 pieces = $37.37 per piece
4. Actual Shipping Costs
(Charged $5.50 shipping to customers, so net -$0.70 loss after packaging)
The Real Total Cost
The Business Reality Check
Monthly P&L After Tracking All Costs
Expenses:
Annual loss: -$64,776
(Subsidized by part-time teaching job earning $2,800/month)
Effective Hourly Rate:
$2,565 revenue ÷ 217 hours = $11.82/hour gross
After subtracting non-labor expenses ($2,538): $0.12/hour net
The Pricing Transformation
How Sarah Fixed Her Pricing (June-September 2024)
Step 1: Calculate True Cost-Based Pricing
For the Moonstone Cascade Necklace:
This represented a 277% increase from $65—impossible to implement immediately
Step 2: Phased Price Increase Strategy
(July 2024)
Price: $65 → $95 (46% increase)
Strategy: Improved photography, added premium packaging, emphasized "12 hours of hand work" in descriptions. Lost 8 customers (20%), but 32 accepted new pricing.
(Aug 2024)
Price: $95 → $135 (42% increase)
Strategy: Introduced "Premium Collection" framing, added lifetime repair warranty, created behind-the-scenes content showing process. Lost 4 more customers (12.5%), down to 28 monthly sales.
(Oct 2024)
Price: $135 → $185 (37% increase)
Strategy: Focused on value-focused customer segment, positioned as investment pieces, emphasized ethically sourced materials. Lost 3 customers (11%), stabilized at 25 monthly sales.
(Jan 2025)
Price: $185 → $225 (22% increase)
Strategy: Launched new "Signature" line at premium pricing, maintained existing pieces. Lost 2 customers, holding at 23 monthly sales.
Step 3: Process Efficiency Improvements
Combined impact: Reduced total time per piece from 4.4 hrs to 3.2 hrs (27% improvement)
The Results: 9 Months Later
January 2025 Business Metrics
| Metric | April 2024 (Before) | Jan 2025 (After) | Change |
|---|---|---|---|
| Monthly Sales (Units) | 38 | 23 | -39% |
| Avg Sale Price | $62 | $218 | +252% |
| Monthly Revenue | $2,356 | $5,014 | +113% |
| Total Hours/Month | 217 | 142 | -35% |
| Cost Per Unit | $172 | $128 | -26% |
| Total Monthly Costs | $7,963 | $4,384 | -45% |
| Monthly Profit | -$5,398 | +$630 | +$6,028 |
| Effective Hourly Rate | $0.12 | $35.31 | +$35.19 |
Financial Turnaround
$6,028/mo
From -$5,398 loss to +$630 profit
Time Reclaimed
75 hrs/mo
35% reduction in total hours worked
Quality of Life
Sustainable
No longer subsidized by teaching job
Key Takeaways from Sarah's Transformation
Lessons for Handmade Sellers
1. Track Everything for 90 Days
You cannot fix what you don't measure. Three months of meticulous tracking revealed $5,398/month in losses Sarah didn't know existed. Use time tracking software, expense categorization, and product-level cost allocation.
2. Count ALL Time, Not Just Production
Sarah's 2.5-hour production time was actually 4.4 hours total including photography, listing, customer service, and admin. Non-production time added 76% to her labor hours—completely unaccounted for in pricing.
3. Phase Price Increases Gradually
A 277% immediate increase would have killed the business. By phasing over 7 months (46%, 42%, 37%, 22% staged increases), Sarah retained 61% of customers while achieving 252% average price improvement.
4. Improve Efficiency Alongside Pricing
Process improvements (batched photography, templates, bulk materials) reduced time per piece 27% and material costs 8%. This amplified the impact of pricing changes and made products more profitable.
5. Lower Volume, Higher Quality Life
Sales dropped from 38 to 23 units/month (-39%), but profit increased $6,028/month and hours decreased 35%. Sarah now earns more working less by serving quality-focused customers willing to pay for craftsmanship.
How TrueCraft Would Have Helped Sarah
Sarah spent 90+ hours manually tracking costs and time in spreadsheets. TrueCraft would have identified her underpricing problem in weeks:
- Automatic cost rollup including materials, labor, overhead, and platform fees for each product
- Real-time profit/loss tracking showing -$107/sale immediately upon entering current pricing
- Recommended pricing calculator suggesting $245 target price to achieve 40% margin goal
- Time multiplier analysis showing true labor was 1.76× production time due to invisible work
- Monthly P&L dashboard highlighting the -$5,398 loss trend before bank account hit zero
Find Your Hidden Losses Before It's Too Late
TrueCraft automatically tracks all costs, calculates true product profitability, and alerts you to underpricing before you lose thousands like Sarah did.
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