Total Costs x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price
Cost of supplies is pretty obvious; you just work out per item how much the supplies cost. For me this took a little work and time but I had a handy reference then to use for any new products. I started by working out the cost per item of my tin candle. This involved calculating how much wax was needed for the tin (175g) and then figuring out the cost of scent, wick, labels etc. As I buy wax in bulk I had to divide the full cost down until I got the 175g and the same process applied to scent etc. A bit fiddly and time consuming but worth it in the long run!
Also, another point worth noting is that if you source supplies from another country with a different currency; make sure you work out the actual cost in Euro as well as including the shipping and tax. Currency rates do fluctuate so your product may end up costing slightly less or more depending on the rate.
Labour costs are up to you really! Basically you decide on a price per hour and then estimate how long it takes to make a particular product. You might keep it at a low figure like €5.00 per hour but really I think it’s important to value your time and set a realistic labour cost per hour, like €10.00 - €15.00.
The overhead costs are an important thing to factor in and these will differ from business to business. Do you need to drive to pick up supplies? Your petrol costs then would be considered an overhead. One of my overheads is use of the gas cooker to melt the wax and I’m sure there are lots of other things I haven’t thought about related to other businesses.
When you have worked out all of the above and have a final figure, you just double it and violá; you have your sales price!
I should probably add that for items that are very labour intensive, you may end up with a price that’s totally unreasonable. What you can do in this case is lower the price to one that people would be willing to pay and perhaps add a little bit more to items which are quicker and easier to make in order to balance out your final profit.
Also, it’s worth remembering that shops normally expect to pay a wholesale rate of 50% of retail price, i.e. what I sell to a shop for €6.00, will be priced at €12.00 for customers. If you are considering approaching shops, be sure that your wholesale price gives you some profit and that doubled, still seems like a reasonable price to pay for your product. It’s important also that the price that the shop charges is the same as the price you charge at markets or online. There can be small differences of course but no shop owner will be happy if you are charging half their price at a market down the road! They’ll be very reluctant to order from you again.
What if you need to change your prices? Well, as it took me so long to get my own prices right, I can totally understand that you might need to do this. My only suggestion would be that you increase slowly and if customers question it, you can just explain that the cost of supplies necessitated a change in price. There really isn’t any point in putting in endless hours of work if you aren’t making a profit unless you decide there’s too much work in running a business and stick with doing it as a hobby.
Here are a few more of my #craftbiz posts:
Crafter's Guide to Christmas Selling
How to Sell your Craft Product to Stores
Craft Business on a Budget