How to Price Your Cottage Food Products (Without Losing Your Shirt)

If you’re running a cottage food business — baking your famous sourdough, whipping up small-batch jams, or selling gorgeous homegrown produce — setting your prices isn’t just a nice-to-have skill.
It’s essential if you want to stay in business, pay yourself fairly, and avoid turning into a frazzled, flour-covered cautionary tale.

The good news? Pricing your goods doesn’t have to be confusing or scary (or involve sobbing over spreadsheets).
Let’s break it down: why pricing matters, how to calculate it, ways to boost your margins.

Why Accurate Pricing Matters

(and Why Undercutting is a Trap)

1. You protect your business (and your sanity).
When you price correctly, you actually get paid for your work — shocking, I know! You can afford to buy more ingredients, upgrade equipment, and, you know, keep the lights on.

2. You protect the entire market.
When one business undercharges, it creates unrealistic expectations for everyone else. Pretty soon, everyone’s scrambling to survive on pennies. Spoiler alert: that’s not sustainable.

3. You show customers the true value of your goods.
Homemade, small-batch, local food is special. Pricing it like it’s just another supermarket snack sells your work (and yourself) short.

Bottom line: if you want to grow, thrive, and not resent your business in six months, nailing your pricing is key.

How to Calculate Your Pricing Without Crying

Here’s the secret formula — no MBA required:

Step 1: Add Up Your Costs Per Item

Ingredients/materials: Every teaspoon of cinnamon, every single raspberry — track it all. An easy way to do this is keep a table of all of the ingredients that you ever use, the full cost that you pay for purchase, the ounces (or grams) and then divide the price/ounce to get a price per ounce figure.

An easy way to do this is to keep a table of all of the ingredients that you ever use, total cost, the ounces (or grams) included in that price, and then divide the price/ounces to get a price per ounce figure.

For example: if you buy flour for $3.10 and there is 16 ounces your price per ounce of flour is $.10. Let’s say your recipe for a batch of cookies uses 9.2 ounces. Your cost for the flour for the full batch of cookies is $.89. Repeat that step for all of the ingredients in the recipes. Add up the cost of each and you have a cost per batch.

Next you want to identify the cost per unit. The formula for this is cost for batch / number of items yielded. For example: If the full batch of cookies costs $14.09, and you yield 26 cookies per batch, the cost per cookie is $.52. But don’t stop here – you have other costs to consider before you land at the final price.

Packaging: Boxes, jars, ribbons, fancy compostable labels — it counts.

Other direct (fixed) costs: Cottage food permits, event fees, marketing costs, subscriptions, website maintenance, and “surprise” expenses like booth tables or delivery gas.

Because your direct costs apply to your whole business you need to break it down into a per item amount. To do this total your entire running costs for a period of time (per year, or per month). Divide that number by the total number of units you can sell or deliver within that time frame. This results in your per unit fixed costs. For example if your fixed costs for running the business for one month is $200 and you can deliver 800 units your fixed cost for the item is $.89.

👉 Example:
Ingredient cost: $0.75 per cookie
Packaging cost: $0.25 per cookie
Fixed costs: $.25
Direct cost per cookie: $1.25

But still don’t stop – you have a few more costs to weigh in before you can identify a profitable price to charge.

Step 2: Pay Yourself (Because You Deserve It)

• Pick an hourly wage. (Seriously. $20–$30/hour is a solid start.)

• Time yourself making a batch, then divide your hourly rate by the number of items.

👉 Example:
1 hour to bake 48 cookies
$25/hour = $25 total labor
$25 ÷ 48 = about $.52 labor per cookie

Step 3: Add a Profit Margin

This isn’t being greedy — this is how real businesses grow. A common target is a 30%–50% markup over your costs.

👉 Example:
Cost per cookie (ingredients + labor) = $1.77
Desired markup: 30%
$1.77 ÷ (1 – 0.30) = about $2.53 per cookie
(Go ahead and round up to $3.00. You earned it.)

Shortcut for simple needs:

Some home businesses simply double or triple the total cost (depending on labor intensity) if you want a quick starting point:

• Double costs for low-labor, fast products.

• Triple costs for handmade, labor-intensive items.

⚡ But the full method gives much more accurate, professional pricing — and helps you stay profitable long-term.

Pro Tip: Use Marketplaces to Keep Costs Down

Building your own website, paying for ads, and endlessly posting to social media can get expensive and exhausting fast. These added costs drive up your fixed costs leading to increase in pricing. Finding ways to keep fixed costs down is key to staying competitive. One way to help reduce your fixed costs is using alternative channels to reduce your marketing burden. Online marketplaces have become a new favorite for small food business for such a reason. Sites such as Amazon, Walmart, and even Etsy are great for small food businesses who can ship.

Small food businesses and cottage food businesses may not be as successful on the larger sites, or limited due to their state cottage food laws. For those food businesses smaller and location based search sites such as Butter & Sage Market – a cozy home for local small food businesses – may be a better alternative.

By listing your business in a marketplace you can:

• Lower your marketing costs: You’re tapping into a ready-made customer base without having to reinvent the wheel.

• Boost your credibility: Customers love curated marketplaces that feel personal and trustworthy.

• Increase your sales: Butter & Sage attracts people who are already looking for homemade, small-batch goodies. No need to shout into the Instagram void hoping someone will find you.

Listing on a marketplace is like having a booth at a busy farmers market — without the sunburn and 5 a.m. setup.

How to Improve Your Pricing Over Time

Track Every Cost
Keep a simple spreadsheet (or a notebook, or the back of a cereal box — whatever works). Update ingredient and packaging costs regularly.

Shop Smart
Sourcing supplies through wholesalers, farmers, or restaurant supply stores can lower your per-item costs. Don’t be afraid to negotiate or ask about bulk discounts!

Refresh Pricing Annually
Costs go up. Demand changes. Your time becomes even more valuable. Make it a yearly ritual to revisit your pricing and adjust as needed.

Communicate the Value
If you need to raise your prices (and you will eventually), tell your customers why. Most people want to support small businesses — they just need to understand the love and labor behind every jar of jam or loaf of bread.

Final Thoughts (and a Pep Talk)

Pricing isn’t about guessing or feeling guilty. It’s about building a business you love — one that supports your life instead of draining it.

Remember:

• Your time is valuable.

• Your skills are worth paying for.

• The market is stronger when everyone prices sustainably.

Price with confidence. Bake (or grow, or cook) with pride.
And list your delicious creations somewhere they’ll shine — like Butter & Sage Market.

You’ve got this. 🍪🌱💛

Have other pricing tips to share? Add them to the comments below and spread the wealth 🙂