Understanding Overhead

What Overhead Is

Overhead is the cost of keeping your business running that cannot be directly tied to making a specific product. Unlike materials (which you use to make a candle) or labour (which you spend making that candle), overhead exists whether you make one product or a thousand.

Common overhead costs for a craft business:

This €745 per month exists whether you make 10 products or 200. It is a fixed cost of being in business.

Why Overhead Must Be in Your Prices

If you price based only on materials and labour, you are only recovering the cost of making each product. You are not recovering the cost of running your business.

Consider the example above: €745/month in overhead, 100 products produced per month. Each product must contribute €7.45 just to cover overhead. This is before any profit is considered.

If your average selling price is €15 and your direct cost (materials + labour) is €9.00, you might think you are making €6.00 per product. But after deducting €7.45 of overhead, you are actually losing €1.45 on every sale.

The "Busy But Not Profitable" Problem

Many artisans experience a period where they are fully booked, orders are coming in consistently, and they feel the business is doing well — yet at the end of the month, there is very little money left. Overhead is almost always part of the explanation.

When artisans cost products using only materials, the gap between what they charge and what they actually need to earn is hidden. It only becomes visible when they look at their bank account at the end of a busy month and wonder where the money went.

Including overhead in your product costs makes this visible before it becomes a problem. It is uncomfortable to see that your break-even price is higher than you thought — but it is far better to see it now than to discover it later.

How CrafterBy Handles Overhead

In CrafterBy, you set up your monthly overhead amount in your cost settings. CrafterBy then allocates a portion of that overhead to each product you make, based on your chosen allocation method:

• Per-product: each product gets an equal share of monthly overhead.
• By labour hours: products with more labour time get a proportionally larger share of overhead.

See the Overhead Allocation Methods article for a detailed comparison of when to use each method.

Updating Overhead

Your overhead is not fixed forever. When your rent increases, when you take on new software, or when your utility costs change, update your overhead settings in CrafterBy. This will flow through to updated product costs automatically. Review your overhead figures at least quarterly to ensure your pricing remains accurate.