Disclaimer: This post is applicable for small businesses, handmade businesses, artists, self-employed manufacturers of print media etc.
Usually articles on how to price your product have a very straightforward calculation. Let me discuss that a bit, as I explain what’s hindering its sale especially in a marketplace where your product is competing with industrial, bulk product.
| Cost of Materials | xx |
| Time taken x Cost per hour | xx |
| Total Cost of making the item | xx |
| Wholesale Price (Total cost + 50% of Total Cost) | |
| Retail Price (2 x Wholesale Price) |
- Some people include the cost of commissions paid. Some don’t.
- Cost of Materials is vague for small overhead items. Think of an inch of tape or drop of glue used in making your product. How do you assume cost for such things?
- No one discloses concept of ‘Cost per hour.’ It may be either exaggerated or understated based on the makers thought process.
- One way of looking at ‘Cost per hour’ is the labor cost in the region you operate. This can really make the price of your product very high before you add a profit margin.
- Which means the price is not very competitive. You cannot harp on the fact that it is a handmade product and therefore, the price commanded is appropriate. The consumer market is not willing to look at it unless, you have an affluent buyer, which puts your product in a niche and reduces its selling ability. **Unless that’s the intention!