Bill of Materials for Handmade Products — Why Every Maker Needs One (+ Template)

Most makers who’ve been in business for any length of time will tell you the same thing: at some point, you realise you have no idea what your products actually cost to make. Not the rough estimate. Not the price you charged on your first Etsy listing — the real cost, down to every gram of material and minute of your time.

That gap is expensive. It’s how makers end up busy but barely breaking even — pricing based on what competitors charge rather than what their own costs actually require.

A Bill of Materials (BOM) closes that gap. It’s the document that tells you, for every product you sell, exactly what went in and what it cost. If you’re a small batch maker — selling on Etsy, Shopify, at craft fairs, or wholesale — creating BOMs for your products is among the most practical things you can do for your business.

BOMs help you determine the true cost of producing a product, calculate your margins, forecast inventory needs, and react quickly when supplier pricing shifts. Jewelry makers feel this acutely — each piece may involve dozens of components — stones, wire, clasps, and findings — each with their own unit cost that feeds into your pricing. See our roundup of jewelry inventory software for tools built to handle exactly this kind of multi-component tracking, or our step-by-step guide to jewelry inventory management to build your materials register and product recipes from scratch.

In this post, we’ll cover what a BOM is, walk through a worked example with real numbers, explain how BOMs relate to recipes, and show you how to build your first one.

What is a Bill of Materials (BoM)?

A bill of materials (BOM) is a structured list of all the raw materials and components needed to make a product, along with the cost and quantity of each item.

Think of it like a recipe for your product — except it’s not just ingredients. A proper BOM includes supplier information, unit costs, quantities per batch, and ideally your labor time. It’s the foundation for knowing what your products actually cost to produce.

Let’s say you are a soapmaker. To make a batch of 6 bars of cold process soap (such as this example from the Soap Queen), your BOM lists each ingredient, the quantity needed, and the cost:

Dividing $6.51 by 6 bars gives you a material cost of $1.09 per bar. Add your labor and overhead costs, and you have a real cost per unit — the number you need to set a price that actually makes money.

See more real-world examples of Bill of Materials with detailed breakdowns of how BOMs work in practice.

A Worked Example — 4oz Soy Candle BOM

Here’s a complete BOM for a 4oz soy candle, using realistic small-batch supplier pricing. This is the kind of document that tells you, down to the cent, what each unit costs before you’ve sold a single one.

Now add your time. At 15 minutes per candle with a labor rate of $20/hr, that’s $5.00 in labor. Add $0.50 for overhead (a share of your workspace costs, packaging tape, utilities), and your total COGS per candle is $7.93.

If you’re selling at $18, your gross margin is about 56%. That’s a healthy number — but the only reason you know it’s healthy is because you built the BOM. Without it, you’re guessing. And in most cases, makers who guess tend to underprice rather than overprice, because underpricing feels safer.

It isn’t safe. It’s just a slower way to run out of money.

Don’t forget to include internal labor time and an overhead allocation in every BOM. Once your real COGS is accurate, those numbers should flow into your accounting too — Craftybase now syncs COGS and inventory valuations directly to QuickBooks so your books stay accurate without any manual month-end entries.

BOM vs. Recipe — What’s the Difference?

If you spend any time in maker communities, you’ll encounter both terms. The short answer: for most handmade makers, a BOM and a recipe are the same thing — a structured list of materials, quantities, and costs for one product or batch.

The term “Bill of Materials” comes from manufacturing. “Recipe” is the word most makers reach for naturally, because it maps to how they already think about making things. Craftybase uses “recipe” in its interface for exactly this reason, and its recipe costing software gives you the same structured cost tracking you’d expect from a formal BOM.

The distinction matters when you’re building sub-assemblies. Say you make gift sets that bundle a candle, a wax melt, and a bar of soap. Instead of listing every ingredient from all three products in one long document, you’d build:

• A recipe (BOM) for the candle
• A recipe for the wax melt
• A recipe for the soap bar
• A parent BOM for the gift set — which references the three sub-BOMs as components

This is called a multi-level BOM, and it means when your soy wax price goes up, the cost update flows through to the candle recipe, which flows through to the gift set automatically. No manual recalculation.

For most makers just getting started, none of this matters yet. One list. One product. All the materials and labor. Start there.

Advantages of creating BoMs

Outside of pricing clarity, a BOM gives you a whole set of operational benefits.

When you need to create a new batch of your products, you refer to your BOM to see exactly how much you need. This becomes your master production specification — and a good base for a bigger manufacturing record that includes your methods, equipment, quality notes, and batch size.

See also: How to create SOPs for your handmade business →

If you’re also tracking your inventory levels, your BOM tells you what needs restocking before a production run. Rather than discovering mid-batch that you’ve run out of fragrance oil, you check stock against your BOM beforehand and order what you need.

In short, a BOM is the foundation of a managed manufacturing process. It connects what you make to what you have on hand to what it cost you to produce.

Cost savings using BoMs

A BOM is also where cost reduction starts. When you can see exactly what goes into each product, you can identify where the expensive items are — and whether there are cheaper alternatives worth testing.

Say you’re using a premium fragrance oil across three products. Your BOM shows it’s the largest single cost in each. You find a supplier offering the same fragrance at 15% less. You can model the margin impact instantly and decide whether the switch is worth making.

And when supplier costs rise — which lately, they do constantly — your BOM lets you react quickly. You can see which products are most exposed, calculate the impact, and adjust prices before you start selling below cost. Worth noting when material costs have been volatile across almost every category, from packaging to raw ingredients.

A BOM also helps you track cost trends over time. Compare your candle BOM from six months ago to today and you’ll see exactly where the pressure is coming from. That kind of visibility is hard to get from a spreadsheet; it’s straightforward when your material costs are tracked alongside your recipes.

Tips for creating your Bill of Materials

If you don’t already have BOMs worked out for your products, here’s how to start:

• Start by listing out all of the raw materials and components needed to produce each product. Include both standard items and any optional variants.

• For each item, include the supplier name, any item numbers that uniquely identify the material, the quantity required per batch, and the current unit price.

• Make sure you also include your estimated labor time and cost. It’s important to ensure you have enough margin to cover your own time and energy — leaving labor out means your “cost” is understated, and your pricing will quietly reflect that.

• If you have products with multiple variants (size, scent, color), create a separate BOM for each. Margins can differ significantly between variants, and you won’t know that unless you track them separately.

• Update your BOMs regularly as prices change and suppliers are added or removed. If you’re using a spreadsheet, build formulae to make this easier. If you’re using dedicated software, material costs can update automatically.

See our complete guide to how to create a Bill of Materials in 7 easy steps.

Tip: Craftybase is an inventory and manufacturing application that lets makers create complete, accurate Bills of Materials — including material costs, labor rates, overhead allocations, and real-time pricing guidance. Material costs update automatically as you record new purchases, so your margin calculations stay current without any manual recalculation.

Creating BOMs for your products is one of the clearest-thinking things you can do early in a maker business. You learn exactly what you’re making and what it costs. And that knowledge is what lets you price — and run — a business rather than just a very expensive hobby.

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