How to Price Your Laser Engraved Products: A Complete Guide for Small Businesses Starting Out
One of the most challenging things for new laser engraving business owners is figuring out how to price their products. Price too high and you won't get any customers. Price too low and you'll end up working for pennies an hour and you won't make any profit.
Whether you're just starting out with a Tyvok A1 Mini or you're already up and running with a Tyvok A1 Mini plus Tyvok P2 combo, this guide will help you figure out how to price your products correctly so you make a profit and build a sustainable business.
The Basic Pricing Formula
There's a simple formula that most successful small laser businesses use to price their products. It looks like this:
Price = Material Cost + (Hourly Rate × Time to Make) + Overhead + Profit Margin
Let's break down each part of this formula so you understand exactly what goes into it.
1. Material Cost
This is the easiest part – it's how much the raw materials for your product cost you. This includes:
- The wood, leather, acrylic, or other material for the product itself
- Any hardware you need (key rings, snaps, chains, etc.)
- Adhesive, finishing oil, or other supplies you use
- Packaging and shipping materials if you're including that in the price
Be sure to include everything that goes into making the product. It's easy to forget the small things like packaging or hardware, but those costs add up over time.
Example: For a custom wooden keychain, your material cost might be: - Wood blank: $1.00 - Key ring hardware: $0.50 - Packaging: $0.50 - Total material cost: $2.00
That's your starting point.
2. Hourly Rate × Time to Make
Next, you need to factor in your time. You deserve to be paid for the work you do. The question is, what hourly rate should you charge?
For a laser engraving business, most people start with an hourly rate between $15 and $25 per hour when they're just starting out. As you get more experienced and your business grows, you can increase this to $30-$50 per hour or more.
Don't undervalue your time. Even if you're doing this as a side hustle, you still deserve to be paid fairly for your work. Many new owners make the mistake of charging too little because they're just excited to get orders, but then they end up working 10 hours for $20, which isn't sustainable.
Next, you need to figure out how long it takes you to make each product. Be sure to include all the time, not just the time the laser is running: - Design time in LightBurn - Preparing the material - Focusing and setting up the machine - Running the laser - Cleanup and sanding after cutting/engraving - Applying finish - Packaging the order
Example: If your hourly rate is $20, and a keychain takes 15 minutes (0.25 hours) to make from start to finish, that's $20 × 0.25 = $5.00 for your time.
3. Overhead
Overhead is all the fixed costs you have to pay even if you don't make any products. These include:
- Your monthly electricity cost for running the machine
- Internet (if you run your business from home)
- Website hosting
- Marketing and advertising
- Insurance (if you have it)
- Replacement parts and maintenance for your machine
- Workspace rent (if you don't work from home)
To calculate your overhead, add up all these costs for the year, then divide by how many products you expect to make in a year, and add that amount to each product.
If you're just starting out working from home, your overhead is probably pretty low – maybe $1-$2 per product. As your business grows, you can adjust this.
Example: For a keychain, let's say overhead is $1.00.
4. Profit Margin
Finally, you need to add profit on top of all your costs. Profit is what lets you reinvest in your business, buy new equipment like that Tyvok P2 galvo laser when you need it, and keep your business growing.
Most small laser businesses add a 20-30% profit margin on top of all their other costs. Some go as high as 50% if they're doing high-end custom work.
Example: So far for our keychain example, we have: - Material: $2.00 - Labor: $5.00 - Overhead: $1.00 - Total before profit: $8.00
Add 25% profit: $8.00 × 0.25 = $2.00 Total price: $8.00 + $2.00 = $10.00
That's a fair price for a custom keychain – it covers all your costs, pays you for your time, and gives you a profit.
Common Pricing Mistakes New Owners Make
Now that you know the basic formula, let's look at the most common mistakes new laser business owners make when pricing their products:
Mistake 1: Underpaying Yourself
This is the number one mistake. New owners often think "Well, I'm just doing this as a side hustle, so I don't need to pay myself much." But the truth is, your time is valuable, and if you don't price it correctly, you'll end up resenting the business and it won't be sustainable.
Even if you love doing it, you still deserve to be paid fairly for your time. Start with at least $15 per hour, and go up from there as you gain experience.
Mistake 2: Forgetting to Include Overhead
Many new owners only add material cost and labor, and they forget about overhead. But you still have to pay for electricity, website hosting, maintenance, and all the other costs of running a business. If you don't include overhead in your pricing, those costs come straight out of your profit.
Mistake 3: Competing on Price Alone
Some new owners think they have to be the cheapest to get customers. But the truth is, there are plenty of people who are willing to pay more for quality custom work and good customer service. You don't have to be the cheapest – you just need to provide good value for the price you charge.
When you compete on price alone, you end up in a race to the bottom, and nobody makes any money. It's better to charge a fair price and provide great quality and service.
Mistake 4: Not Accounting for Waste and Mistakes
Every once in a while, you'll mess up an order and you'll have to do it again. If you don't account for that in your pricing, those mistakes come straight out of your pocket. Adding a little bit extra (usually 5-10% of material cost) to cover waste and mistakes is a good practice.
Mistake 5: Increasing Prices Too Slowly
As you get faster and more experienced, you can afford to increase your prices. Many new owners are afraid to raise their prices, but as your costs go up and your skills improve, you need to adjust your prices accordingly. It's perfectly normal to increase your prices once or twice a year as your business grows.
Sample Pricing for Popular Products
To help you get started, here are some sample price calculations for popular products that you can make with your Tyvok A1 Mini:
1. Custom Wooden Keychain
- Material cost: $2.00
- Time: 15 minutes = $5.00 at $20/hour
- Overhead: $1.00
- Subtotal: $8.00
- Profit (25%): $2.00
- Final price: $10.00-$12.00
2. Custom Pet ID Tag (Anodized Aluminum)
- Material cost: $3.00
- Time: 10 minutes = $3.33 at $20/hour
- Overhead: $0.67
- Subtotal: $7.00
- Profit (25%): $1.75
- Final price: $8.75-$12.00
3. Set of 4 Custom Wooden Coasters
- Material cost: $5.00
- Time: 30 minutes = $10.00 at $20/hour
- Overhead: $2.00
- Subtotal: $17.00
- Profit (25%): $4.25
- Final price: $21.25-$25.00 for the set
4. Personalized Small Cutting Board
- Material cost: $12.00
- Time: 30 minutes = $10.00 at $20/hour
- Overhead: $3.00
- Subtotal: $25.00
- Profit (25%): $6.25
- Final price: $31.25-$40.00
5. Custom Leather Key Fob
- Material cost: $4.00
- Time: 20 minutes = $6.67 at $20/hour
- Overhead: $1.33
- Subtotal: $12.00
- Profit (25%): $3.00
- Final price: $15.00-$20.00
These are just starting points. Your prices will depend on your hourly rate, your material costs, and what the market will bear in your area. But this gives you an idea of how the formula works.
How Does Faster Engraving with the Tyvok P2 Affect Your Pricing?
When you add a Tyvok P2 galvo laser to your workshop, you can do engraving much faster – 20-30 times faster than a gantry machine. How does this affect your pricing?
Actually, you don't necessarily need to lower your prices. Because you can do more orders in the same amount of time, you can actually make more money overall. Your material cost is the same, and your overhead is the same – you just spend less time on each order, so your labor cost per order goes down, which means your profit goes up.
For example: If a photo engraving that used to take 10 minutes on the A1 Mini now takes 30 seconds on the P2, that's a lot less time you have to charge for. You can keep your price the same, and your profit per order goes way up. Or you can charge a little less and get more orders, and still make more money overall.
The speed of the P2 lets you process more orders, which means you can grow your business without working longer hours. That's one of the big advantages of adding a P2 to your workshop once you start getting more orders.
Pricing for Bulk Orders vs Individual Orders
When you get a bulk order – like 50 wedding favors – you can afford to charge a little less per unit because:
- You can set up once and run all 50, so your setup time per unit is less
- You can buy materials in bulk, so your material cost per unit is lower
- You're getting a bigger total order, so even with a lower per-unit price, your total profit is still good
A typical discount for bulk orders is 10-20% off the individual price when you order 20+ units. This encourages people to place larger orders, and it's still good for you because you're getting more total revenue.
What About Shipping?
You have two choices when it comes to shipping:
-
Include shipping in the price – This makes it simpler for the customer, but you need to make sure you average out the shipping cost and include it in your product price.
-
Charge shipping separately – This is more fair because the customer pays exactly what it costs to ship to their location. Most Etsy sellers do this.
Either approach works fine – just make sure you're covering your actual shipping costs. Don't underprice shipping and end up losing money on every order because you have to pay more for shipping than you charged the customer.
How to Check if Your Pricing is Competitive
Once you've calculated your price using the formula, it's a good idea to check what other sellers are charging for similar products. Go on Etsy, Instagram, and local craft fairs and see what other people charge for similar custom engraved products.
If your price is within 10-15% of what other people are charging, you're fine. If your price is significantly lower, you can probably increase it. If your price is significantly higher, you might need to look at your costs and see if you can reduce them, or you need to explain to your customers why your product is worth the higher price (better quality, better materials, better service, etc.).
Remember, you don't have to be the cheapest. Most customers who buy custom engraved products care more about quality and customer service than they do about getting the absolute lowest price.
When Should You Raise Your Prices?
You should think about raising your prices when:
- Your costs go up – If the price of your materials goes up, you need to pass some of that increase on to your customers.
- You get faster – As you gain experience, you can make products faster, which means you can do more orders, but you should still adjust your prices to reflect the value you provide.
- You're consistently booked out – If you have more orders than you can handle, that's a sign you can afford to raise your prices. This filters out the lower-value orders and increases your profit.
- You've added better equipment – When you add a Tyvok P2 and you can deliver orders faster, you can charge a little more for faster turnaround, or just enjoy higher profit margins.
Most successful small laser businesses increase their prices a little bit every year – that's perfectly normal and expected by your customers.
Tips for Maximizing Profit with Your Tyvok Setup
Whether you're just starting out with a Tyvok A1 Mini or you've added a Tyvok P2 for faster engraving, these tips will help you maximize your profit:
1. Start with a small machine and grow gradually
Starting with the A1 Mini gives you a lower upfront investment, which means you can start making profit faster. You don't have thousands of dollars of equipment cost to pay off before you start making money.
2. Add a Tyvok engraving platform to improve quality
A quality honeycomb platform gives you better results with less cleanup, which means you spend less time finishing and you can charge more for better quality. It's a small investment that pays off quickly.
3. Focus on products with good profit margins
Products like keychains, pet tags, and coasters have excellent profit margins – material costs are low, and you can charge a price that gives you good profit after paying for your time.
4. Use faster engraving to take more orders
When you add the P2, you can do more orders in the same amount of time, which means you can grow your revenue without working longer hours. The P2 pays for itself quickly in increased productivity.
Final Thoughts
Pricing your laser engraved products correctly is one of the most important things you can do to build a sustainable and profitable business. By following the simple formula we've outlined in this guide – material cost + labor + overhead + profit – you can make sure you're always making money on every order.
Don't make the mistake of underpricing your work just to get orders. Your time and your skills are valuable, and you deserve to be paid fairly for them. When you price correctly, you can build a business that provides you with extra income (or even full-time income) that you can be proud of.
Starting with an affordable machine like the Tyvok A1 Mini keeps your upfront costs low, which makes it easier to price your products competitively while still making a profit. As your business grows, you can add a Tyvok P2 to increase your productivity and your profit.
Thinking about starting your laser engraving business? Get started with the Tyvok A1 Mini and pair it with a perfectly sized Tyvok engraving platform for the best quality and productivity.
