hello and welcome back to my channel if you're new here my name is Erica with memory box candle Co and I make videos all about the Journey of starting a candle business and today's video we are going to be really diving into the topic of pricing your candles and not only that we're going to be focused on profit and focused on really the difference between retail and wholesale pricing now I've said this before in other videos but I really do think that understanding your cost of goods price and price pricing your products properly is the
foundation of your business because if you're not pricing your products for a profit then you are really not going to do very well in the long run with your business and I do believe that that is just kind of the foundation the starting point of any good business so when it comes to pricing your handmade items I understand that this can be a challenge um and most of the time time it's more mental than anything because we're thinking about okay well we're hand making something and we're supposedly supposed to be pricing it like way higher
than some of these other bigger you know larger manufacturers of candles and all that kind of stuff and it can be kind of one of those things where you feel a little bit of impostor syndrome when it comes to pricing yourself and that's normal that's something that a lot of people go through but at the end of the day it is a business if you are wanting to turn your candle making hobby uh or craft or whatever it is into a business you definitely have to price for profit you don't want to short yourself because
that's only going to hurt you in the long run and then make you feel frustrated later on down the line when you feel like you're not making enough money hi it's me just interrupting this video real fast just to let you know that I do offer a handmade business planner for any business owner that is looking to get organized I have a digital planner template that you're able to use to help with organization planning and structure within your weekly routine I know how overwhelming it can be and this has really really helped me so if
you're looking for something like this go ahead and click on the first link in the description box below so there's a lot that can go into pricing your candles I mean I've talked about perceived value before in the past and that's why some Brands and businesses are able to charge you know over $100 $200 for their candle because of marketing and branding and everything that goes into it and it allows them to be able to charge more for their products and they're not really focused on you know following any kind of formula or anything like
that um they're really taking The Branding and the marketing to be able to have a very very large profit margin but if we're just looking at it from a very basic level um for me personally when it comes to pricing my products um now I didn't know about this at the beginning that I was really kind of pricey at this way this is just something that I've learned over time is that I am taking into account um my cost of goods sold so that is how much it costs me to make a single candle that
is going to affect how much I'm going to retail it for as well as I also add on an additional percentage um an additional amount onto that for labor costs now I'm not going to be spending a bunch of time figuring out you know if I paid myself $20 an hour if it takes this much to make a candle I'm going to add this much on you can do that if you want to um I just have kind of a general guideline which is basically cost of goods Time 4 plus 10 to 20% you could
even do 10 to 25% whatever it is that you want to add on if you want to have you know maybe on the higher side of pricing or maybe on kind of more of that lower mid-range if you just want to do 10% whatever it is it's going to give you a little bit more of a buffer of having you know not just the cost of goods price times four which is kind of the standard when it comes to pricing for retail um and that's just because you want to make sure that you are going
to be having a good gross profit margin when you are selling your candle but you do have to take into consideration you know if you're growing um at a really good rate you end up hiring an employee you want to make sure that you have kind of that uh extra buffer there so that you're paying the employee all that kind of stuff um for us personally it's just me and Chris right now in the business so that's not something that we are you know having to take into account but it may have to be taken
into account in the future so that's definitely something to consider when you are pricing your candles now if you don't know how to find your cost of goods for your products that you are making making there are a couple different ways that you can do it I do have a video I believe where I've gone through and I've showed how to break everything down if you want to really try to do it by hand and understand it um there are apps out there that will do it for you um and then also if you have
inventur which is my inventory software after you put in all of the details of all of your products it will actually automatically calculate your cost of goods for you which is really really helpful um super helpful so uh I no longer personally do it by hand I just go based off of inventor but you have to know that number in order to figure out your pricing for both retail and wholesale so when it comes to retail pricing again I recommend at the bare minimum doing your cost of goods and multiplying that number by four so
if it cost you $5 to make a candle you're retailing for $20 and that is the absolute minimum that I recommend that you do I don't recommend you do 2 * 3 um and sell it at $15 you can if you want to but that is really limiting yourself on um deals that you'd be able you know sales that you'd be able to run um if you wanted to do wholesale having your profit margin be that slim um it really just kind of benefits more of the wholesaler of the retailer than it does for you
um and the reason behind that is because if you are um if your candle cost $5 to make and you are retailing at $15 wholesale pricing is 50% off you're giving a 50% off deal so you are selling each candle for $7.50 and then you would be earning $2.50 for every candle that you sold and uh it shouldn't be that way it should be at least $5 that you're earning off of the $5 that it cost you to make it or even more than that so what I'm going to be doing is I'm going to
be showing you on Shopify so Shopify has something called a um it's called a wholesale profit margin calculator so this allows you to kind of understand the markup percentage understand um what uh if you sell something at a certain price what your profit is and then what your margin is within that profit that you're earning so again let's just say that it cost cost you $5 to make one of your candles for wholesale pricing you have to mark that up at least by 100% so if we're looking right here the cost of the item is
$5 your sale price is $10 your profit is $5 so your gross margin is 50% your gross margin should never be below 50% when it comes to pricing for wholesale and again the reason behind that is is because let's say you only did a markup of 50% you're selling at 750 your gross margin is 33% so your so their gross margin when they go to resell um at $15 they're going to be making that 50% and you're only making 33% it shouldn't be that way you should both be making the 50% or you should be
making a little bit more because you're kind of giving that buffer when it comes to pricing your candles so when it comes to retail pricing I recommend marking up 300% when it comes to retail pricing again the reason behind that is because we're seeing $5 you multiply that number by four your sale price is $20 so your profit on everything is $15 gross margin 75% this is for retail pricing I know this says wholesale profit margin calculator but just as an example I wanted to show you that so when it comes to retail pricing would
mark it up 300% and then of course when it comes to the um when it comes to wholesale pricing definitely at least that 100% but let's say we did 125% that would mean that you would be pricing each of your candles at $22.50 and you can already see that your profit is greater than what it would be if if you only marked it up 100% And that's because you would be selling it and getting back a profit that's larger than the total cost of goods of your item so your gross margin is over that 50%
so again for wholesale when you're looking into it I would recommend to have this number be over 50% to make sure that you're really getting the profit that you really deserve in your business and that's going to make the most sense when when you are scaling and growing and being able to you know make your time worth it so this is definitely not something to over complicate or anything like that but to go on there play around with the pricing understanding the markup percentages the gross profit margin and how much you're actually going to be
earning on each sale that you're going to be getting for both wholesale and Retail um it's really important for you to understand that and know that within within your business business because again this is the foundation this is the foundation of your business this is how you know if this is something that when you scale or you grow longterm that you are actually making a profit on each individual product that you are selling it is very normal and common in business in the first few years to end up in the red at the end of
the year simply because you're purchasing bulk supplies you're purchasing more in supplies then in the sales you have coming in but as long as your individual profit margin on each of your products that you're selling is in the green or the black or whatever it is um as long as you're making a profit a good profit on each individual product that you are selling it's going to catch up over time and you're going to be able to reinvest that money back into it um and uh you're going to be able to end up um you
know in the positive at the end of the year even if it does take a few years for that to happen but with that I think I'm going to end today's video right here if you enjoy today's video make sure to leave it a big thumbs up as well as subscribe to the channel if you haven't already also don't forget to follow me over on Instagram @ memorybox candle Co and I will see you in my next video [Music] [Music] [Music]
