The hidden costs in running your crafty business, or what is overhead exactly?

Some of your crafty costs are obvious and you can easily recoup them. For instance, a simple pair of earrings cost you $5.00 in assorted parts, and about 15 minutes to make at your $20 hourly rate (or whatever rate you are paying yourself, as discussed in “Starting your crafty business, Part 2 -Okay, I've decided how I want to sell it, how do I price it?”), so, about $5.00, but what is this mystery overhead?

Overhead is all the hidden costs of doing business. Did you buy a canopy for your outdoor craft shows? The cost of that gets paid in your overhead. Folding tables? Display pieces? Business cards? How about the tools you used to make the earrings? That is all covered in your overhead, as well as the less obvious, but still very necessary. In my overhead are things like the fuel I need for my torch so that I can enamel or work with metal clay; also, my enamel powders. It would be impossible for me to figure out how much enamel powder I use per piece (or fuel for that matter), so I can't assign it a price when figuring out my cost for pricing, it absolutely has to become part of my overhead or I wouldn't be able to continue enameling.

If you don't figure your overhead into your prices, you might as well be giving your crafty awesomeness away. The same goes for making sure you get your time paid for and you recoup the cost of your parts. If you think your stuff is good enough to sell, do it right.

Super Model Mannequins = Overhead!