How to compute the right overhead cost for your pricing

What actually counts as overhead

Overhead is everything that keeps the business running but isn't tied to any one specific order: rent or a share of your home used as a workspace, utilities, insurance, software subscriptions, and general equipment wearing out over time. The defining feature of overhead is that it exists whether you make one order that month or fifty — it doesn't scale cleanly with any single sale the way materials do.

Why skipping it is such a common, costly mistake

Materials are easy to price because there's a receipt for them. Overhead has no single receipt attached to a single order, so it's the cost most likely to be priced at zero by default — not on purpose, just by omission. A price built only from materials and labour looks reasonable and still quietly fails to cover a real, ongoing cost of the business every single time it's charged.

A simple way to compute it

The calculation doesn't need to be exact to be useful — a reasonable estimate is a large improvement over zero. The standard approach:

1. Add up your overhead costs for a typical month.
2. Estimate how many orders you typically complete in that same month.
3. Divide the first number by the second. The result is a rough overhead cost to add to every order, alongside materials and labour.

Worked example: if monthly overhead comes to $300, and a typical month brings 20 orders, that's $15 of overhead to add to each order's cost. It's an average, not a perfectly precise figure for any one specific order — and that's fine. An average overhead figure applied consistently is far more accurate than the number most makers are currently using, which is nothing at all.

Handling a home-based workspace

Many makers work from part of their home rather than a separate studio, which raises a common question: how much of the rent or mortgage, electricity, and other home bills genuinely belongs to the business? The standard, widely-used approach is to work out the proportion of your home's total space that's genuinely used for the business, and apply that same percentage to the relevant home bills.

For example, if a workspace takes up roughly 15% of a home's total floor area, a reasonable approach is to count 15% of rent, electricity, and similar shared bills as a genuine business overhead cost — not the full bill, but not zero either. This is a standard, widely-recognised approach to apportioning home-business costs, not a special or unusual one.

Putting it together

Once a per-order overhead figure exists, it gets added into pricing the same way materials and labour do — not as an afterthought tacked on at the end, but as one of the genuine costs that has to be covered before any margin is added on top. A price that includes materials, labour and margin but leaves overhead out isn't actually covering the real cost of running the business — it's covering the cost of making the product, which is a smaller, incomplete picture.

Where this gets hard to keep up by hand

Working out an overhead figure once is straightforward. Keeping it accurate as bills change, order volume shifts month to month, and the business grows is the part that quietly stops happening once life gets busy — which is exactly when an outdated overhead number starts doing real, invisible damage to every price. Purpose-built tools like CreatorsCogs exist to keep this figure current automatically, so it stays part of every order's real cost without needing to be recalculated by hand each time something changes.