The maker's costing glossary
Overhead
The indirect costs of running your business, not tied to any one item.
Overhead is everything you spend that isn't a direct part of a specific product: studio rent, utilities, software, insurance, marketing, banking fees, and tools. It has to be recovered across everything you sell — usually by adding an overhead rate on top of direct cost, or by pricing at a margin wide enough to absorb it.
Why it matters
Overhead is the cost makers most often price as if it were zero. Direct costs feel real (you can hold the lumber); rent and software don't attach to any single item, so they slip out of the price — and out of profit. A business can have healthy per-item margins and still lose money if overhead was never built into pricing.
How to calculate it
Total your monthly indirect costs, then express them as a rate against your monthly direct cost (or per hour, or per unit). Add that rate on top of each product's direct cost.
Overhead rate = total overhead ÷ total direct cost (for the period)
Example
You spend $500/month on overhead and produce $2,500/month of direct cost. Your overhead rate is 20% — so a $60-direct-cost item should carry about $12 of overhead.
In practice
Many makers fold overhead into a generous margin rather than an explicit rate — both work, as long as the number is deliberate. The failure mode is pricing at cost-plus-a-bit and hoping overhead takes care of itself.
Common mistakes
- Pricing only direct costs and treating rent, software, and fees as invisible.
- Setting an overhead rate once and never revisiting it as the business grows.
- Assuming a busy month covers overhead when margins are actually too thin.
How CrafterBy handles it
CrafterBy lets you apply an overhead allowance so every product carries its fair share of the costs that keep the lights on.