Pricing Your Products

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There are numerous professional methods. I find this one best, easiest and with more wiggle room for our kind of business. I figure the wholesale price. (Because that is the lowest of the possibilities) You always figure the costs of ingredients at what it will cost to replace them. So, whether you were gifted oils or bought them on sale is irrelevant to your pricing. To figure labor you use the cost it would be to hire someone to do those jobs. You need to be sure to figure in all supplies and labor for making the soap but also for cutting, wrapping, making labels and stacking or boxing (in your facility, not for shipping) . You should also figure ordering and stocking time. (But spending an hour looking at new oils… no. That’s R&D) For your “manufacturing plant” you also need to figure the costs. There are two ways to do this. If you are planning to grow your business into a separate building of it’s own you need to figure all the costs of that building (rent, utilities, etc) and use that figure broken down by how much soap you could make there. For your house as your workshop you could figure a percent of the rent (if you use one of 5 rooms for soaping it would be 20% of your rent). Figure electricity and water and any other costs by the number of bars you make or a percentage (if you make different kinds of things) Example if my additional water and electric comes to $100 a month and I make 100 bars of soap it adds $1 per bar.

When all those costs are figured out add percentage for R&D (Research and Development) and for the business or profit. Remember we figured your labor as what it would cost if someone else did it and if that were so, there is no money for you. I figure $10 for labor and $10 for the business (per hour). This brings you to your wholesale price. Double that price for retail.

Now check yourself by comparing this soap price to the going prices in your area. It should be in the ball park if you are going to be successful.

For craft shows, farmers markets etc. take the costs of doing business out of the amount between wholesale and retail prices.

For online sales take the price of web hosting and maintenance out of the difference between wholesale and retail.

I’m still skipping a few facts here but this is pretty much how it would be done in a business plan for the bank if you were applying for a loan (which I very much hope none of you are doing)