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Vanilla 1.1.10 is a product of Lussumo. More Information: Documentation, Community Support.

  1.   1 point
    If nayone out there has a little insight on product pricing I would sure appreciate some input. I always thought that to price say a bar of soap that the formula should be [L+{(m*2)*25%}], L being cost of labor and M being cost of Materials. I was just recently told it should be [M+{L*2)825%}]. Any thoughts would be most helpful!
    • CommentTimeFeb 4th 2010
      2 points
    Materials and labor are only part of the equation.

    You have overhead, equipment costs, taxes, professional services, utilities, advertising, research and development, etc.

    Businesses don't operate on the wind. You should set a budget of how you expect to pay for those items, and how you will replace the materials you have used. Don't forget to allow for taxation. Uncle Sam will let you work for free, but he will not.

    And never price a product by saying to yourself "Oh I don't have to cover labor because it is only me. When I hire employees then I will add labor." First, you are an employee, and second you must plan for those expenses before you get other employees.
  2.   2 points
    First of all, pricing isn't done in a "perfect world" where everyone is clamoring to buy your product. In addition to what Andee said above, and the formulas you are working with, you need to scope the competition and be competitive. Formulas often factor out higher than what the market will bear, so be sensible. BTW, one of the worse things you can do is price BELOW the competition. People will think your product isn't as good as the others. V/V if you price UP a bit, people will wonder why yours is more? They might even ask the question. There's an opening for you to tell exactly why! An easy way to get started selling is figure out how much it costs to make the product. Then figure out how much you can reasonably sell it for. The difference between those 2 numbers is your profit margin. Deduct expenses and there you have your net profit. Just some things to think about.

  3.   0 points
    • CommentAuthorHannahobs
    • CommentTimeMay 24th 2013
      0 points
    I am currently selling my soap. I have calculated all my materials and have per-batch and per-bar pricing. Most of my recipes come to 1-1.50 per bar. I am selling them to retailers for 2.50.
    My husband thinks that is low because I am not accounting for my time etc.
    I am thinking of negotiating with my customers to go up to 2.75 or 3.00.
    Do those prices seem reasonable?
    I really 'fear' going up because I think no one will buy them, but I also don't want to lose money in this endeavor and have to quit. No quitting!


    • CommentTimeMay 27th 2013
      1 point
    Hubby is right-that is nowhere near enough! That is a wholesale cost. If you go with that you will have no room to absorb cost fluctuations so you will end up having to raise the cost frequently or lose money. Also there is the cost of booth rental, packaging, gas and so much more to consider. What if something doesn't sell and you need to clearance it? Where do you work in the costs for promotions such as buy 3 get one free? Free samples? Retail cost is usually 4 to 5 times your cost.
    When I first started selling I thought as you did but when folks see the low price they wonder if the quality is low to match. I'd suggest you do some research as to what others are charging and go mid-range. Those who use handmade soap don't usually mind paying for it since they know it is quality. You have a luxury item so why be afraid to mark it at a luxury price? Just the thought of using something they paid more for is enough to let people feel they are getting a special treat. Crazy but true- think of Paul Mitchel, Lush, Clinique and others. Is their product really that much better than others? At $6 a bar soap is a cheap indulgence :) People should expect to pay more for handmade to begin with as you can hardly be expected to compete with Walmart prices. Why even try? Those who are family and friends you can always give price breaks to. I give a free bar to my closest bunch when they spend $20
    • CommentAuthorHannahobs
    • CommentTimeJun 4th 2013
      1 point
    Thanks Mesha.
    You are right. I am selling to stores, not to individuals right now. As I made my deliveries, I told folks I would have to up my price. Funny, the herb shop who takes the least markup on it said he thought it was a good idea. The other stores are currently wary. I told them it is negotiable. I'll let you know how it goes.
    I need to develop my business plan so that I can get new customers and keep growing.
    • CommentTimeJun 4th 2013
      0 points
    Just explain to them that one of the ingredients made a jump in price to explain it. They can;t argue with that. Heaven knows everything is these days! Another option would be to slowly creep it up on them though they might prefer a single increase of more since every time the price changes they need to re-evaluate their price too.
  4.   1 point
    All prices for all things rise at times, that is life. You do not pay the same for bread this year as you did five years ago, or even last year. If your prices increase, you must pass those along. Businesses understand that, they do the same.

    As for pricing. I disagree with whomever said to look at the competition. I charge based on my costs and my expertise alone. I do not apologize if my price is higher, I use better ingredients than many, and I have been doing this longer than most. That is worth something!

    @Hannahibs, hate to say it, but Hubby is right. You must account for your time. Of course, if you just began making soap you shouldn't get as high of a salary as someone who has been in the business for years, but still, everyone needs a salary. Also, if someone is extra slow to work d/t their experience level, then perhaps they shouldn't charge actual time, but they should still charge the amount of time that the average soaper would use to make that batch. In short, everyone should at least charge minimum wage for their time. You also need to figure in other cost factors.

    I pay myself more now than I did years ago and I give myself cost of living increases annually. I have used two formulas over the years. Either I figure my complete costs (salary, utilities, rent, insurance, everything associated with doing business broken down into a per diem amount and then that further broken down by the number of products made in that day) and multiply by two for wholesale and by four for retail OR, I calculate materials cost and salary, multiply by two for wholesale, by four for retail, and then add a % on top of that which represents a desired "profit" margin. The overhead costs (utilities and rent etc. come out of this number (so not truly profit), so it needs to be sufficient to cover this. In the restaurant business food costs are tripled and then a dollar is added on top of that to set a menu price. The dollar is to cover the labor costs and the utilities. So if you don't calculate it out and add it in specifically, you at least need to add in an average to cover it. I suggest adding at least 20%. Occasionally I will add a different percentage for one product than another, because I think the market will bear a lower % for some things than others. Generally speaking, I would add a lower % to soap than to lotion, as lotion costs less to make, yet sells better at a higher price. So, if I want 25% margins, but I only get 20% on soap, then I might get 30% on lotion or perfume. But this is subjective and based upon my observations and sales records, so what works for me may not work for someone else in another area. *These are not actual margins I use, just examples.
    • CommentAuthorHannahobs
    • CommentTimeSep 11th 2013 edited
      0 points
    So, I have successfully upped my prices, 3+. Existing customers get a small discount, new customers get the new price. And no problems with any customers.
    I have been making soap for many years, but only selling for a short time now. It is all new to me, dealing with clients, retail customers, advertising (just small, word of mouth), packaging etc. so I learn something new every week.
    And thank you all for your support! It really helps.

    BTW, those prices are for wholesale. Retail is $1+ more.

    • CommentAuthorHannahobs
    • CommentTimeSep 23rd 2013
      0 points
    New info!
    I asked all my clients the selling price and it is $5-$6.50/bar.
    Therefore I guess I need to sell my soaps at at least $5 at my small local (just my neighborhood community) fairs in order to not undercut my clients.

    We will see how that goes.
    One shop that I sell too was not happy that I did fairs at all, so I figure I can't go less that her shop.
    I just didn't know all this.