How to price an Etsy item for a target margin (the formula, with fees included)

Most Etsy pricing advice starts with "cost × markup". The trouble is that Etsy's fees are percentages of the price, so the margin you end up with is lower than the markup you added. Here's the formula for pricing to the margin you actually want.

Markup is not margin

A ring costs you $20.80 in total (materials, packaging, postage label, labor), and you charge $4.50 shipping. Add a 35% markup and the price is $28.08. After Etsy's fees ($3.55 on this order), you keep $8.23, which is a 29.3% margin on the price, not 35%.

The formula

For a US shop with no Offsite Ads and no sales tax, Etsy takes 6.5% (transaction) + 3% (processing) of price + shipping, plus $0.20 + $0.25 fixed. Call the share you keep of each dollar k = 1 − 0.065 − 0.03 = 0.905. To earn margin m on the price:

price = (fixed fees + your costs − shipping × k) ÷ (k − m)
      = (0.45 + costs − shipping × 0.905) ÷ (0.905 − m)

For the ring at a 35% target margin:

price = (0.45 + 20.80 − 4.50 × 0.905) ÷ (0.905 − 0.35) = $30.95

Check: at $30.95 plus $4.50 shipping, Etsy's fees are $3.81, and you keep $10.84, which is 35.0% of $30.95.

When the formula changes

• Offsite Ads (15% or 12%): subtract the ad rate from k. For the same ring from an ad, the price for a 35% margin is about $44.08.
• Sales tax: processing is also charged on tax, so k shrinks slightly (3% × the tax rate).
• If k − m is zero or negative, no price can reach that margin after fees. Lower the target or your costs.

The free Etsy fee calculator applies this formula to your own numbers, including ads, sales tax and currency conversion.