How To Price Candles For Sale | Candle Pricing Strategy | New Candle Business Pricing

Hi everyone today we're going to talk about an important topic when it comes to running your own business now it doesn't have to be just a candle making business it could be any business but for this channel we're going to focus really on some examples and talk about candle making and running a candle business specifically So this video as i mentioned is going to be all about pricing your candles but not really in the way that you might be accustomed to there's a lot of videos and and resources and blogs and things out there online

that can help you with different ways to price your candles or your melts or whatever you might be making they can touch on different formulas They talk about the cost of your candles and what you can do to figure out a good price to sell them at and that's all great advice there's a lot of good advice out there and like i said a lot of resources to help candle makers price their products today's video though however is going to dive into the topic a little bit differently we're going to talk about various Pricing strategies

when it comes to pricing your products but also some recommendations that i'm going to offer that has always worked well for me and i've also given advice to other candle makers along the way as well and some of these approaches might be brand new to you and that's completely fine when it comes to pricing products that can be pretty daunting and it is a topic that will often scare or intimidate New business owners and so that is a lot of the reason that i wanted to put together this video today i'm hoping at the end

of this video that you walk away with a renewed confidence but also potentially a new approach when it comes to pricing your products hi everyone my name is wade thomas i'm the owner of black tie barn candle company i also run this youtube channel to help Others in the industry if you are interested in learning any more about candle and melt making or running a candle making business and i would encourage you to subscribe hit the like button below as well and leave a comment if you have any questions or feedback about this video i

do put a lot of time and effort into these videos so i really really hope that they can help some of you out as i mentioned today we're talking about Pricing your products we're going to do it in a little bit different way i've created a presentation that we're going to follow through as well because there's a lot of information to cover and i want to try to do it in the most efficient and helpful way to you possible so let's go ahead and dive right in pricing your products is not a new topic product

pricing and pricing methodologies have been around for a Long time but a lot of times some information and recommendations just become regurgitated and we hear a lot of the same strategies mentioned over and over and so today we're going to take a look at some new strategies for candle making business potentially a new approach for you going forward the road map for today's video is going to be broken really into kind of three main parts and we'll dive into These individually as we move on but the first of that is just going to be talking

about business sales and objectives what are the goals for you as a business owner next we're going to be talking about all these different pricing strategies and this is really going to be the bulk of the video today is what these strategies are how they work and why and when you Should use each one and then finally we're going to wrap this up with some recommendations about these specific strategies and some final thoughts and tips as well so starting off with these objectives and goals as a business owner you really have to think about long-term

objectives obviously all of us have a passion to do what we do and we also have a Passion for profit right we want to sustain our business the reason you get into business is not just because you enjoy it but because you also want to make some money it's how we make a living that is our business but when it comes to objectives and goals you have to think about when you're starting a business is very different than a business two years down the line or five years Down the road every level and stage of

your business is going to require new objectives and new goals and that is why i wanted to throw this in this video today because when you're starting a new business or at least in the early stages of running a business sometimes it's it's easy to just want to focus on profit it's easy to want to focus on sales and revenue And selling and selling and selling which is great because you do need to do that however growth is more important at the early stages of business focusing on profit and sales is only going to get

you so far if your business doesn't last you've got to be able to escalate your business you've got to be able to get it out off the ground and to grow and so the main objective and goal that i want you To focus on here as a new business owner is that you should be focused on growth over profit i know that sounds scary we all get in business we want to be profiting right but it's very very important and profit will come i promise but it's very very important to focus on growth versus profit

the next thing i want to talk about is how do you want to grow your business do You want to grow your business by profiting from friends and family which is completely fine and that's how most of us start right there a lot of them are test groups and that is how we kind of get our feet wet we want to test our products we want to get a little bit of feedback we want to know how our product is working to those that we trust Before we just kind of risk everything and just kind

of jump in the pool when it's cold right we we all fear failure and we all feel getting kind of turned down right in criticism so we like to turn to our friends and families first that's completely normal but long term do you really only want to sell to your friends and family is that all that you're really getting in a business for or Do you want to sell to the world and so the question is what should be driving your business path and your business plan should it be selling to your friends and family

or should it be reaching further out in the world selling to a marketplace also it's very important to understand what your structure is for your business and i don't mean business structure like a corporation versus a sole Proprietorship i have a do have another video on that and that i will link above if you are interested but what i'm more focused on here is your structure as far as your sales structure your marketing structure for example do you plan to only sell directly to consumer are you going to be your own retailer do you only

sell directly from your website Or at craft shows markets things like that or are you also interested in selling wholesale do you want to be a manufacturer that sells your products to a retailer that then marks up them for resale or is this just a hobby and you're just getting into something to create a little bit of a side hustle you just win a little extra money in your pocket every month And then lastly i want to mention that no pricing models are wrong the reason i want to mention this is i don't want anyone

else to think that i'm going to knock on any other pricing models out there and some of this video is dedicated to talk about it but a specific pricing formula that a lot of us here all the time and i don't want anyone to take that as that i'm disagreeing with that formula Or that i think a pricing formula or pricing model is bad there's a time and a place and there's a purpose for them all and today in this video we're going to talk about these more specifically as we move on something you're going

to see repeated a couple times today and that is that pricing is a science pricing is an art and pricing is a strategy Pricing isn't just about math it isn't just about numbers but it's also not just about feel there's an actual strategy that comes into play when we talk about pricing and that is going to be the underlying theme to the recommendations that i provide you at the end of this video before we get into the pricing models we're going to list out five different common pricing models here And and then we're going to

go into each one a little bit more detail but before i go into that before i start that i do just want to say i will have things kind of outlined for you to make it easier to follow along but i would encourage you to to really focus and watch the entirety of this video because some of the information that's going to come later in the video is going to be built off of what we're Talking about now what we're going to be talking about over the next several slides as well so i know that

this could be potentially long a lot of information but it's all very very important will really come all together at the very end so just try to stick with me i hope you i hope you get some value out of this i really do hope you enjoy it but again later on Going to talk about some really neat strategies or approaches that maybe you haven't considered before and i'm also going to show you some examples so we're going to do this together we're going to really go through a few examples together and show you how

this all works so as i mentioned there are five pricing models we're going to cover today anchor pricing keystone pricing loss leading pricing value pricing Cost-based pricing and then finally i said five but the sixth one is the one that we're going to spend a lot of time on and it's going to be that new approach that i'm hoping is you will find helpful in your candle business and that is called mdc we'll come back to that later now you may have noticed that three of these are in white and three are in red the

three that are white we are not Going to talk about in detail but i will cover and recap for you real quickly because there are times where you might use these in your candle business for specific reasons uh however they're not going to be the cornerstone of the pricing strategies that you see most people recommend for a candle making business those are the ones in red and so we will we will spend a little bit more time on those Specifically on the last two but i do want to quickly cover the other three first because

they can supplement other pricing strategies for some specific reasons so these honorable mentions that i've talked about we're going to start with anchor pricing anchor pricing is basically a price point that serves as a starting point uh and it's really meant to be this is we're going to start price talks then We're going to negotiate down from here think of a buying car for example car lots use anchor pricing most of the time because it's kind of the starting recommended price point knowing that you're going to go in and negotiate the price down back and

forth and so it serves as a starting point it allows for negotiations which of course allows for a lot of flexibility in pricing Not something you're going to see in a lot of retail specifically even with candle making but it is worth mentioning the next one is called keystone pricing now this is a little bit more applicable when it comes to retail and potentially candle making but keystone pricing is a very set in stone i don't even want to say formula necessarily because it's very very simple and it's basically just whatever Your cost is times

two and so you'll see a lot of keystone pricing really when it comes wholesalers and retailers retailers buy their products at 50 discount from the wholesaler and then they mark their cost up to uh so two times cost and that's what they sell at retail pricing that is what keystone pricing is in a nutshell it's simply two times your cost it's very common for basic retailers but The problem with the strategy is that there's no versatility it's just kind of a hard fast rule everything i'm going to buy it cost i'm going to mark up

two times and that's going to be the retail cost it doesn't allow a lot of flexibility or a lot of versatility and it can really limit your options and your profits final honorable mention pricing model we're going to talk about is called loss Leading pricing now this is a new one to a lot of people you're very familiar with it most likely but might not be familiar with the term so lost leading prices basically is a method that baits customers in with low prices in hopes that they're going to end up spending more on something

else in other words they are sacrificing certain profits on some products in order to gain More profits on others so a good example of this are dollar drink days happy hours uh movie matinees you know half price appetizers things like that right so it's restaurants again use this a lot with with their dollar drinks and their happy hours and their goal is say their goal is to just get people in the door and they're going to get the people the door because of these great deals and They know they might lose money on some of

these amazing deals right they're just trying to get people in the door but they know that if they get you in the door you're going to spend more money on other things and so they're going to still end up profiting from you and in fact a lot of these promotions end up leading to more profit because people feel like they got such a good deal that they end up splurging on Other things as well so loss leading pricing is very very common but again it's not something you're going to do typically with a lot of

your candle business however sometimes with candle shows or at markets you might do you might do some kind of promotions to get people in the door in hopes that if they do get there to your booth or in the door that they might spend More money so it is something that again isn't really a cornerstone pricing approach but it is an interesting methodology and something you might consider for specific purposes all right so let's talk about the next one and this is now we're starting to get into the realm of actual business pricing models that

could apply to your specific business The first one is called value pricing now value pricing is really a focus on customer satisfaction customer value quality to the customer versus focusing too much on costs in other words you think that your product or service provides such value to your customer that you can price your product or service accordingly often that's a higher price Because you think it's worth it to your customers you think that your customer will see enough value in that product or service that they will pay you x amount of money for that product

or service you'll see this commonly with luxury brands and service oriented businesses so you can see in the image here we're talking about you know spa treatments massages acupuncture Or we're seeing it in concierge services or again if we're talking about products you're seeing it with luxury brands luxury products it's all about branding it's all about marketability and branding and quality over quantity and so the idea with this type of pricing is i'm going to charge you x amount of money because you know that my product or service is worth it But for the strategy

market research is very very very important you've got to understand the market very very well and have done your homework and research to know if how you should price your products it's it's this is more of that art form type of methodology we were talking about it's not something you can find a formula or some easy way to price your products this is a difficult strategy and so you Really have to know what you're doing if you're going to go this route so as i mentioned the goal with the strategy is to really earn higher

profits per interaction per transaction but the caveat is you're going to have less reach you're going to have less business or sales overall and so it's kind of that finding that happy medium a few things to consider when you're talking About value pricing is that it's a very difficult type of model and business to start it's really difficult to gain traction especially as a new business because it relies a lot on reputation branding marketability people have to trust you they have to understand and trust your product there's a lot that goes into value pricing and

so it can be something difficult for new business owners to Start and to grow however that being said this is a strategy that does work with candle making it can work with any business really as long as you understand that that is your goal and your objective so think back to the very first slide that we talked about goals and objectives if you know what type of business you want to run if you have a specific niche or a specific market And you know that you want to focus on a luxury line of candles then

this would be a viable approach for you the next one we're going to talk about though is called cost based pricing now this is in particular the pricing model that most of you may have already seen or had been recommended to before this is the model that is formula driven this is the one that is based Entirely off a formula which is take your cost multiply that by two and that gets you wholesale multiply by four and that becomes your retail price so for example the cost of your candle let's say cost three dollars to

make if you double that you would sell that wholesale for six dollars or you would sell that twelve dollars retail the entire formula is based off of cost Of goods sold or cogs for short this entire formula is based off the foundation of cogs you really have to understand the cost to make your product in entirety now what makes up those costs you might be asking now i'm going to have several videos on cost of goods specifically down the road but just kind of summarize them for you to keep things simple for this video basically

your cogs are Made up of your material costs that go into your product the production of your product so we're talking wax wicks jars fragrance things like that and that includes the incoming shipping for those materials that arrived to you so when you bought wax from your supplier and you also had to pay shipping to receive that wax all of that is considered part of that material cost again i will have other Videos i will have other videos breaking down how to come up with your cogs or cost of goods but just know that it

includes all of your material costs it also includes your packaging and labeling basically any cost that it comes not only to production but also the sale of your product and then i have a question mark next to time value and i'm going to talk about This a little bit later as well but a lot of people wonder should you include the cost of your time into your cost of goods sold well the short answer is yes that is a cost labor is part of your cost of goods sold however the reason i say that with

a caveat and we'll talk about more more about this later is technically speaking yes it is part of your cost of goods sold but you have to Be careful with it especially early on as a business owner when you're just starting your business and trying to get sales we'll come back to that a little bit later but i did want to mention it while we were here the problem with the costa based pricing model is that issues occur when prices end up out of market and this is a common problem with new businesses and this

is why i don't recommend this Strategy when you're first starting out i don't recommend this type of strategy until your business has really settled in and it's grown to a point where it's sustainable you really need to get your business off of the ground before you start using cost-based pricing in my opinion and we'll talk about why later when we go through some examples but this is one of the the drawbacks to Using cost based pricing is if your costs are too high which early on when you're a business and you're not buying bulk and

you don't have low cost of goods sold what tends to happen is you end up with prices that are exaggerated prices that are too high to to really get a good market share and you have a hard time selling to your customers and so what ends up happening is as Candle makers or as business owners we have to figure out a way to get additional sales we're struggling to sell our candles at our current price because the price is out of market so what we end up having to do is supplement that pricing with promotions

right so we we run sales and promotions because we're having a hard time getting our product out the door so we're running two for one specials or 30 Off specials and the problem with and there's nothing wrong with promotional pricing it's good to run promotions every once in a while but you if it becomes a crutch in order just to make sales then that's when you have a problem and so you don't want to have to supplement your regular pricing with promotional pricing too frequently or becomes an issue and then the final couple notes on

Cost-based pricing it is as i mentioned the most well-known this is the pricing model that most people will recommend to business owners it's simple to figure out you know you figure out the cost of making your product and then it's just simply a math problem after that times two or times four to figure out your retail price so it's a very easy to teach type of pricing model And it's very easy to remember as well so it is a well-known and often recommended pricing model however it can inhibit growth early on for the reasons i

mentioned previously because it can cause your products to be marked excessively high early on in your business it can price you out of the market and it can really slow your growth early on okay so now that leads us to this point so i've talked about some of The strategies already but i've also been alluding to the fact that i think that there's a better strategy for new businesses or small new growing businesses remember the goal when you're starting a business is to get your business off the ground start getting some sales start gaining some

traction without traction your business really isn't going to go anywhere it's like a train Stopped on the tracks and unless you start getting some momentum the train's not going anywhere and so the whole purpose of a new business early on the whole focus as i said in the very beginning of this video is growth let profits come later it is is very normal for a business not to show profits for the early stages now i'm not saying that you can't earn profits uh early on in your business or anything Like that what i am just

suggesting though is the focus should be on growth not profits profits will come with the growth and you will also get your businesses going in a better direction if you follow that methodology so if you take one thing away from this video today it's just that i want you to think about things differently think a little outside of the box Don't feel like you have to be stuck to formulas or rules when it comes to pricing products it is your business and so you have to find out what works for you and your business and

and the strategy that i'm going to show you next allows you to do just that it allows you to figure out what works best for your specific business and help price products that will help you grow and get your business to a Place where it becomes sustainable where the profits do start rolling in and you've already gained some traction and you're really really starting to grow as a business that is the goal that is what we're all here for right so so hopefully you find this next part helpful and valuable and take something away from

it but anyways i'm really excited to go ahead and talk about the strategy now and how it can help you hopefully in your Business and we'll even get into a good example too which which i really love doing so the strategy that i'm going to be talking about today is something that i call mdc pricing which stands for market demand and cost pricing now i used to kind of tell others about this i would refer to it as dynamic pricing which does completely make sense however i like to go back and call it Mdc pricing

because it allows you to remember those acronyms market demand and cost and we're going to break these down individually tell you how these all play a part in this pricing model i am not a financial guru i really enjoy finance i've worked i come from a business sector and i understand quite a bit about finance and business mechanics and operations But it is not my career i'm not some kind of licensed financial advisor or anything like that in fact this strategy there isn't there is not something out there called mdc pricing at least as far

as i know it's something that i've just kind of always referred to it as because it's easy for me to remember the focal points and so let me walk you through this and hopefully you find it helpful So as i said mdc stands for market demand and cost let's break this down by looking at market first now this is fairly straightforward what target market are you after are you targeting a specific niche for example or are you targeting more of the mass market in other words are you selling trying to get indoors to the general

customer or are you going after a specific Niche that could mean uh maybe you want a luxury line maybe you want something based around animals and pets maybe you want to base around sports perhaps you have a niche around books or greek mythology right there's a lot of different niches out there and so in fact the options are kind of limitless but you really need to figure out your market what is your market what is your purpose Why are you here what is your vision for your business who are you trying to go after and

it's a good time to consider whether or not you want to be only focused on retail or do you want to also potentially get into the wholesale market down the road you don't have you're not locked in stone here but it's it's important when you're pricing a product to at least know At the moment which of these is important to you if you're not worried about wholesale at the moment then you can kind of ignore that you can always circle back to it later but just understand at this stage you're focused on your market your

target your niche and what you're after in terms of retail or wholesale the next is demand now demand and markets seem very Close and they are very closely intertwined but the way we're going to talk about demand is really about demand pricing so the first step in figuring out the demand is taking your product and comparing it to other similar products in the market hopefully your specific market as we talked about previously so find comparables just like when you're shopping for a home right you look at comps Comparable homes in the area you want to

do the same thing with your product and once you do that you want to find a typical price range for that product let's say you find uh you find your product in your market and you're seeing that that price range is anywhere from you know ten dollars to forty dollars right that's a rain and that's part of this step here is talking about demand is is finding products similar to yours and what kind of price range do they Fall in you don't need to know anything exact just just a rough idea uh and then based

off of that range what amount does it look like the customers are most willing to pay for or or they have the ability to pay for right you don't want to price yourself out of the market but you don't want to under price either you want to find that amount that range that most of customers are willing and able to pay And then lastly you're going to forecast to project within that current price range all i mean by forecasting within that price range is just to start playing with some numbers so let's talk about an

example let's say that you think maybe you could you could sell 500 candles at a twelve dollar price point that would equal six thousand dollars but you're wondering twelve dollars is in that price range but there's other Amounts in that range as well your goal is to play with the other numbers in that price range and see what else you can come up with because maybe 12 isn't the right price point and so for example you could sell 300 candles for a 20 price point and still make the same amount of money so you sold

less candles for more money and you end up with the same amount of profit but you might be concerned 20 is quite a bit maybe for your candle you know you were considering 12 you've almost doubled that maybe you're concerned that you won't be able to sell that many at that price point but you also think that 12 might be too little too low so what about something in the middle 400 candles that 15 also equals 6 000 you know do you think you would have no problem selling 300 candles for 20 Or do you

think you might need a bit lower the price but lowering the price will allow you to sell more candles and you can still reach your goals the the key is to play with these numbers and then use your best guesstimations or even some trial runs at different price points to see what just tends to work better but remember there's lots of ways to reach these same Numbers and that's kind of the whole point there's there's a lot of ways to bake a cake right and it's because there's lots of different recipes so the trick is

just keep fine-tuning your recipes keep trying different things until you happen to find the one that seems to work best for your business now the last part of mdc pricing of course is cost so when we talk about cost in terms of mdc Pricing you still it's still important to know your numbers you still want to know your cost of goods sold or your cogs in fact part of the strategy is to still make sure that you stay above your breakeven point i may have said earlier that not all businesses start off making a profit

but that doesn't mean you should intentionally price your products below breakeven point so the next part Of the cost to make sure you're at least making some type of profit you're staying above your breakeven mark again we'll talk about all this as we get through an example here's where the trick comes in with this strategy yes we've talked about market and we've talked about demand and we've talked about how your how to calculate your current cost of goods sold however what's really interesting about This strategy is to focus on your future cost of goods sold

now you might be thinking how the heck do i do that i don't know what my cost of goods is going to be in the future well i mentioned this in a video earlier on my channel um it was kind of like how to get started with the candlemaking business um and i'll link it up above where i talked a little bit about this So what i'm referring to here is when you're starting out as a business you're not buying products in bulk you tend to pay more for shipping you're using multiple suppliers you haven't

figured out all your best suppliers yet or at least your most affordable products and materials you really are you're still learning right and so in those early stages of your business as you're still learning and trying to Figure things out is that early on in your business it's going to cost you more to make your product right now than it will later down the road long story short price of your materials to make your current products today should be less than they are right now they should be less down the road the reason i say

to factor in your future cost of goods sold and i understand it can be hard to it can be hard to estimate that and i Mean there are ways to do it you could actually just project and just play with the numbers and say well i think in a year from now i'm going to be ordering this much wax in this many jars this is what i plan to do in the next six months and so you could base your pricing off of that if you'd like or you could really just estimate this as well

most businesses as they start out within a couple years Their price of per their materials have dropped anywhere from 15 to 30 percent on average that again is because you've found better deals you found suppliers you've done your research your homework you're buying in bulk and so on so you can factor in what those a future cause of goods sold might be and again i know i'm just throwing out some arbitrary topics right now right but we'll talk About this as we get into an example i just wanted to make you aware of that term

future cogs now i earlier i talked about whether or not you should include your time value your labor in other words into your cost of goods sold i said yes it is part of your cost of goods sold however be very careful adding that into your cost of goods sold or into this pricing model at the early Stages of your business why well again you're not running a large scale business at this point you're probably working from home and the time it takes for you to make one or two candles per order maybe you're making

your candles to order or even if you're not maybe you're making batches at a time but you're still only making small batches And they might take you 30 minutes to make a small batch of candles that's a lot of time and a lot of labor just to make a few products yes it's real and it really is your time but then you have to decide how much is your time worth right now do you think that you should be making twenty dollars an hour labor then you need to work that into the cost of your

candles But as a warning doing that early on when you are small and you're making small batches and it's just you putting your labor in and then you factor that in your cost of goods sold it's going to make the cost of your product thus the price of your product very very high so what do we do because if we're supposed to calculate our labor but if we do it's too much what do we do Well early on in your business i like to know what my labor costs would be and i like to have

those numbers but i don't necessarily put it into the cost of my products when i'm selling them as i'm getting started because part of running a business is putting in your own sweat equity putting your own time and energy into creating products into creating your business it's part of being an entrepreneur i Know i've said this many times in this video already but the early stages of your business the purpose is growth it's getting your business going which means you're investing your time your energy your money you're not taking anything back from the business at

this point you're just trying to get it off the ground so you might be asking yourself right now man this sure seems like my cost of My candles is not going to be high enough what about my profit margin and then if i have a low profit margin what if my margins don't allow me to do wholesale so here's the truth those are just distractions those thoughts those questions those ideas are all just distractions early on in your business if you're not careful you end up digging your business a grave and burying it Before it

even begins try not to get wrapped up into things like profit margins and whether or not you can do wholesale things like that early on that those things will come those things will come right now your focus should just be getting your brand out there start getting some traffic start building your business kind of overviewed the three characteristics of mdc pricing Market demand and cost but i'm not going to leave you hanging how do we actually create that price well there's five steps that's a lie there's actually six steps it says five there's six i

forgot to change that number apparently after we run through these steps real quickly we're going to do an in-depth example together and show you how we can come up with it with a price for your product based off Of a real life example step number one is going to be determining your cost of goods sold we've talked about this a few times we need to know what it costs you to make your product even an estimation right now is pretty good step two is to create a cost-based price off of your cogs now you're saying

wait a minute that was one of the other strategies we Said we're not going to use well we're going to use it to help us with the rest of this pricing model so step two is to figure out that cost-based price remember that's the one that's based off the formula your cost times two equals sale wholesale your cost times four equals your retail price so we still want to figure out that price and i'll show you why here in a minute Step three is to factor in your market remember the m and mdc pricing is

about market so we need to consider what type of market we're in and what type of target we're going after step four will be to factor the demand remember that's that price range what are your customers willing and able to pay for your product step five is to factor in your future cost of Goods sold so we're going to do the same thing we did in step one except we're going to estimate the future costs and then the last step is to interpret those results interpret those results to set yourself a new price all right

so this is my favorite part is to actually walk through a real life example and figure out how we can do this together so i know this screen is going To have a lot of information on it but just bear with me it's going to make sense we're going to go through it one chunk at a time this is really the best way for me to show you the strategy that i like to use and that i like to teach others to implement when they're pricing their products early on in their business now this example

is going to be based off of a seven ounce candle now i said This is a real life example but just understand that the amounts that i'm going to be using as examples are just estimations they're not specific to any type of product or materials they're just examples easy numbers for us to work with so step one let's calculate our cost of goods sold for our candle we know that our jar cost 85 cents Our lid is 40 cents the wax amount broken down into one candle is a dollar twenty the fragrance ended up being

a dollar twenty for this candle the wick was fifteen cents and the label is 20 cents again i will have other videos talking about how to come up with all of this most of them are pretty self-explanatory but the wax and fragrance can be a little tricky there'll be future videos on that However let's say that in this example the total cost to make this one seven ounce candle for us is the manufacturer the one making the candle let's say it's four dollars that is your price your cost of goods to make that product today

step two let's create a cost-based price based off of that information well that's pretty straightforward your wholesale will be your four dollars times two which equals eight Or for retail your four dollars times four equals sixteen so based off of your current cost of goods sold the formula based approach that formula cost-based pricing would tell you to price your candle at sixteen dollars for a seven ounce candle your cost would be sixteen dollars step three now it's time to factor in the market Are you this goes back to the two things we talked about earlier

you have to know what market you're after are you spo are you going for a just kind of general customer use general market are you going for a specific niche there's not information here as far as the price to factor in here at this point because this is going to vary you'll know your market better than me If you have a specific niche or your have a luxury line you know that you can probably err on the side of a more expensive product versus someone that's in the mass market so this is just something for

you to know and factor in at the very end step four is to factor in your demand and price range that we talked about so you've done your research you looked into the price range of products similar to yours and you say Pretty much for as a general rule you found that the minimum price a candle is going for for the most part is seven dollars the average price is about ten dollars and the maximum you found for your candle is 15. again these are just arbitrary numbers that i'm throwing out there it's obviously going

to vary on location niche market the type of candle there's a lot Of factors right but let's just use this as an example now step five is to calculate your future cost of goods sold so this is where it starts getting interesting let's say that you're either estimating based off of the information i gave you earlier like i said after you've been in business for a while and you've done your homework and research on your Suppliers you can generally get your costs down once you start buying in bulk anywhere from an additional 15 to 30

percent or even more sometimes discount on your products or maybe you did specific research you've manually went out and tracked down the cost of each of these products if you were to buy them in larger quantities so let's for this example assume that later we know we can get the jar for 60 Cents a piece the lid would be 25 cents each the wax is down to 75 as well as the fragrance the wick you've getting for 15 cents now and the label no longer you're pretty to home maybe you're ordering from a print lab

and they show up and now they're only five cents a piece so now your total in the future to make this candle let's say in the next year or two Is down to 250. so you went from four dollars a candle to 250 which means your new wholesale and retail price would have changed as well your wholesale now is five dollars and your retail cost would be 10. so before we go any further let's just look at a little bit of the information here what we've seen here is that the recommended retail price for your

candle Now based off of the formula has gone from 16 to 10 if you were to use that formula just because of the change in your cost of goods your wholesale obviously is lower as well and more importantly look at those two numbers in green those are the two new recommended retail prices that we talked about based off of the formula look at where those those amounts fall Into the demand range from step four all right now step six of this is to interpret these results to set a new price so this is where it's

fun let's talk about what we see here and figure out what we can do to set an appropriate price well the first thing that jumps to my attention as i pointed out before is those green numbers those recommended Prices based off the two different cogs the cost of goods sold where do they fall in that price range that we found for the demand in our market well as you can see the original price of 16 is actually more than even the maximum amount you found when you looked at your demand when you looked at your

market it's outside the maximum that's not a very good start you're already priced yourself out of the market The new retail price based off of the future cost of goods sold is only ten dollars that actually happens to fall right in the middle of your price range for your demand right at ten dollars is the average okay so then you might be wondering well how does that help me figure out what price the first one clearly is outside of the the market range the price range so i probably don't want to go that route but

Let's start by looking at the rest of the information if you remember your current cost of goods as we've seen step one was only was four dollars if you look at step four the demand even if you priced your candle at the minimum for your price range of seven dollars you're still almost making 100 markup now i'm not saying to go down to seven dollars but even at a minimum price for your price range you're still making a Profit or really anything above seven dollars you're still making a profit now is it a huge profit

margin no but you're still making a profit so what do we do with all this information what would i price my candles at if this was me starting out and this is my seven ounce candle and this is all the information for my product well actually this is not too far Off from what i did starting off so i can tell you comfortably i would probably price my candle somewhere between nine and twelve dollars starting out so why nine on the low end and twelve in the high end well i chose nine on the on

the low end just because if i'm in a market if i'm just trying to start gathering some business and start getting some sales and i i'm i'm not in A very specific niche focused market i might have to kind of go in that lower end a little bit below average just to start building my business right so that's where i kind of come in at nine dollars and i go up to 12 because 12 is still just a little bit above average for the market which is fine it's still pretty close if i'm confident my

product and it's three times the cost of my product Today which is great and the best part about the 12 range is that i can always come down on my price later so let's say i do get my future cost of goods down to 250 as we see in step 5 in a year from now which means i can actually lower my price down on my candle if i want no customers are going to complain at you if you lower your price of your candle as you're in business for a while so Starting out at

12 would be a great thing as well because it's going to help you now potentially but it also gives you some wiggle room to drop down lower i would probably price my candle somewhere around the 10 mark personally and the reason why is because it kind of is the best of all worlds right it it's given me a good healthy Profit starting off it's writing the average of the the demand of the price range that customers are willing to pay for a candle like mine and i already know that it's protected by my future cost

of goods down the road i'm able to price my candle in good position now while also positioning my candle for good pricing in the next year or two so the only question here is if i were To price my candle at ten dollars am i able to do wholesale maybe not right away because i would have to probably if my cost of goods today are four dollars i would have to probably sell it for eight and then you know if it retails 10 that's not enough of a markup really so it's really hard to wholesale

in order to wholesale this candle you would have to probably retail this candle for about 16 Right that's that's what we saw in step two well that's just i'm not comfortable with that that's kind of out of the range right we've already talked about why 16 is really not the best number right now you could do it depending on your niche depending on your market you can definitely do that i'm not saying you can't but if it was me i wouldn't and i also wouldn't focus on wholesale i Wouldn't care at this point remember i'm

a new young business my focus is building customers building reputation building a brand getting traffic i don't have to focus on wholesale however here's where the good news comes in just because wholesale at ten dollars doesn't work right now look at what the future cost of goods is down the road remember it drops to 250. at that point wholesale becomes five Dollars and now my 10 price point pairs perfectly with that wholesale price point so give yourself some time that's kind of the general idea here is just give yourself some time let your business settle

in and eventually these opportunities that might not seem like they're great right now will open up for you down the road this is why i like this strategy So much it allows you to find that great price point to help your business get off the ground and grow early on while also being forward thinking while also being able to project and forecast for the future so i want to leave you with a few final thoughts first is that again pricing is a science and art it's a strategy you have to consider pricing as an overall

part of your business it's a Strategy it's an all-encompassing strategy it's not simply a formula understand your market and your target without knowing those it's really hard to confidently set a price point estimate your current and future cost of goods sold we just did an example of why knowing both of those can be very very beneficial for you not just in setting your price now but understanding your pricing later And remember my advice is to focus on growth early not profits focus on how to get your business off the ground and start worrying about and

and how to grow how to gain traction and then lastly just a reminder that no pricing model is wrong there's a time and a place for all of them in fact after your business has settled in maybe you've been in business for several years You now have all your suppliers locked in your cost of goods have come down or maybe you're changing lines you're adding a luxury line and now it's time to focus on value pricing so there's always reasons to for different pricing models every business is unique products are unique how you run your

business is completely up to you so i just wanted to say again that there are no wrong pricing models they all have a Purpose but for me and for anyone that asks me my advice my personal opinion on how i think new businesses should price their products early on then i would recommend the mdc market demand and cost approach that dynamic pricing model really really can help businesses early on especially those that maybe have been using the cost-based approach To this point you've been using a formula of taking your cost times two or times four

to figure out your price and you've been struggling to get sales a lot of businesses follow that advice and again it's not bad advice but sometimes it doesn't take everything into consideration if you're one of those customers one of those candle makers that have been trying to follow that Model and have really been struggling to to get sales struggling to gain traction struggling to grow your business and kind of get it out of stage one consider this approach well thank you everyone i hope you enjoyed this video i know that there's a lot of content

a lot of information hopefully though it was valuable to you and you and you learned something new if you have any questions or comments uh Or anything you just want to discuss feel free to reach out to me or put it in the comment section below i love seeing the feedback and talking with you all so don't forget to hit the subscribe button if you're interested anything else about candle making or business and if you like this video give it a thumbs up otherwise we will see you next time thanks you