If you’ve ever ventured into wholesale you know that the typical way to calculate your prices to make money is something along the lines of add up all of your costs, then double that for wholesale then double it again for retail.
Well, aside from feeling apprehensive about raising your prices, the ease of this formula is NOT one size fits all. And you should not wipe your hands and declare, “Welp, I’m done with that!” after plugging numbers into a formula. (for one thing, many retailers will do a 2.2x markup instead of a straight doubling)
Pricing is about more than just covering your costs. It’s also about the future. It’s about the sustainability of your business.
Pricing doesn’t just allow you to pay your bills this month and have some money left over, it’s about the ability to invest your business now and shape what it will look like a year or two years from now.
When you consider your pricing and you’ve felt the ease of plugging numbers into a formula, are you also considering how this price floats you on a rainy day? How it let’s you keep your prices the same even if the costs of your raw materials went up… without killing your profits.
Does your price actually value the time you take the make your product so that 1) you don’t get burnt out on the labor and 2) you can one day afford to pay someone else to do that labor if you need to?
If the price is right, it will need to be more than the mere output of a formula (which is a GREAT and helpful way to gauge if you’re in the right place). It will set you up for sustainability and let you meet (and exceed your goals).
Is your pricing right… for your business?
I'd challenge you to think about how you can apply this in your own business.
Some questions to think about:
- What hangups do you have about your price and why? What fears does pricing reveal?
- Where have you been lax with your pricing? Where could you refine it?
- What does your pricing say about your product right now? If you knew nothing about your product other than the price, what would it say?
Every other week, Isaac also gives his take of the topic on the Your Handmade Business podcast. The podcast is back after a summer hiatus with an update on changes at Academy of Handmade, thoughts about pricing, and wise words from Kristen Pumphrey at P.F. Candle Co.