Barter! Ask them to paint your house in exchange! Or yard work, or remodel the kitchen, LOL! Seriously, if they have a special talent, barter. Probably wont happen but they will get the point!
i respectfully tell them the truth, the truth about cost of supplies, cost of my labor, the hours it takes. I start with the HOURS it takes. Conversation stops at that. People understand "hourly" vs. reality of cost.
One time, a casual friend admired one of my purses and asked if I made them for other people. I told her that I had invested 8 hours into the purse, she said "NEVER MIND!!" We both had a friendly chuckle! No offense taken on either side.
sandy