how to price for wholesale + retail

y guest authors robyn + elle

We wrote a post recently about wholesale and some of the things to consider before deciding if wholesaling is an option that you want to explore for your business. You can read the article here.

Today however, we want to talk with you specifically about pricing and how getting it right can affect your attitude to wholesale and your business.

Firstly, let me ask: How do you work out your prices?

Is it something like…

Materials + Labour = Wholesale Price and
Wholesale Price x 2 = Retail price

 

Or, maybe it is more like…

Materials + Labour + a little extra = Retail Price and I have no clue how I can ever afford to wholesale.

Well if either are the case...

it is time for a new equation!

One aspect of pricing that leaves a lot of business owners short changing themselves when working out the numbers is that;

PROFIT and LABOUR are NOT the same thing.

When working out your product costs you need to pay yourself for your time (aka labour). We sincerely hope you are doing that already. This allocation of labour built into your costing is not your profit. It is simply part of the cost of production.

Materials + Labour + Overheads = Production Costs.

Now try the sums again…

Production Costs + Profit = Wholesale Price.

Now that you are allowing room to make money on your wholesale prices you don’t need to feel stressed or overwhelmed by wholesale orders.

Now apply this sum…

Wholesale Price X (at least) 2 = Retail Price.

Wholesale can be great for your business but it is important to make sure you are not undercutting yourself at any stage. If you are under pricing your products, you are no doubt going to feel resentful about wholesale, frustrated by your business, and probably burnt out by the amount of production required to get you where you want to be.

YOU NEED TO PRICE SO THAT YOU ARE

PROFITABLE AT THE WHOLESALE PRICE POINT!

When you shift your mindset and re-do the math to include profit (and labour!) at the wholesale level, suddenly wholesaling can be exciting and open up new profitable avenues for your business.

Retail sales means more money for your business, but it also involves more of your time doing the marketing and promoting, processing the order, liaising with customers and closing the sale, packing individual parcels, posting each item etc. Wholesale accounts can open up business in markets you would not be able to reach on your own and allow more time for you to do what you love.

So, how do you work out what your profit is?

Well that bit is up to you and it does depend on a few of factors, such as what market you are in, what your goals are for your business and what your overheads and what your goals are for your business.

The point is if you are including some amount of profit on top of your production costs you are working towards building a sustainable business for yourself. Some products may have less, some more, work out a rate that works for your business.

Lastly if the thought of increasing your prices is scary, think of more like an experiment. Do the numbers and work out your costs be sure that you are always covering these and your overheads, then play with the percentage of profit and make tweaks as you go.

Go forth in your business and be profitable.

By Robyn and Elle of Studio Exsto - The workroom for creative business development.