Welcome to my "Launching Your Business" series. For more info on what this is, please click here.
This week I want to talk a little about how to price your product. First you can start by searching the Internet for the exact competition of your product. For example, let's say you sell Soy Lotion in a 4 oz plastic bottle. Do a search on "4 oz Soy Lotion". Be as specific as you can. After finding at least 3 competitor's prices, I try to price mine somewhere in the middle. You don't necessarily want to be the lowest, because that doesn't always say "quality".
You can also shop competitors at local stores. I usually see what my competitors are pricing theirs at and go somewhere in the middle. I also try to think...what would I pay for this product? You can also ask close friends and family & get their opinions as to what they would pay for something. Chances are they are going to be your fist customers anyway! ;)
Someone once told me my Scrabble Pendants were to cheap. I personally wouldn't pay much more for one than what I sell it for...so I left it at that price. Don't get too greedy and price too high. And don't sell yourself short by pricing it too low.
In order to price your product, you need to figure out exactly how much it costs you to produce it as well. That includes taxes, shipping, etc. Come up with a complete cost per item. Let's say it costs me $2.50 to make something. All my competitors are selling it for $4.00. You have to ask yourself is it really worth $1.50?
This may be a crazy way of doing things, but here is how I kind of figure out if something is going to be worth my time. Let's just say I am making Bubble Bath and it takes me 1 hour to make 15 bottles....start to finish...labeling it and everything. I have figured my cost, what I will sell it for, and come up with a profit of $2.00 per bottle. So, if I can make 15 bottles in one hour at $2.00 profit per bottle...that means I am paying myself $30 per hour. Not too shabby!
I once wanted to make notecards. After looking at the time it would take me & the cost of the product, I could not justify doing it as a business. If it is a passion, and your number one goal is not necessarily making money, then go for it! But if you are looking for a decent profit, then, this is something worth considering.
So, that's just a little help in pricing your product. Next week I will discuss wholesale versus retail. Questions or comments on this post? Please leave a comment here or email me.
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