Dear Abacus,
I sell homemade soy candles online and at the local farmer’s market. I started making them as a hobby and mostly sold to family and friends. But with the addition of a booth at the farmer’s market, I’ve started selling a lot more a lot faster. They’re practically jumping off the shelves! I’m starting to really see myself doing this full time. I can barely keep the shelves stocked, and I love making the candles, so it’s a win-win. There’s just one thing I’m not sure about. Am I pricing them correctly?
Always,
The Price is Right???
Hello The Price is Right???,
Congratulations! It sounds like you’re seriously considering taking on the challenges and rewards of growing your business. There are two questions you have to ask yourself in order to see if the price is right. First, what is your break-even point? And second, what do you want for your brand? Are you a luxury candle brand, or something more affordable to everyone?
Your break-even point is the price you have to charge in order to make back the money you spend producing the product. This includes the cost of ingredients (like the jars you put your candles in, wax, fragrances, and wicks), the price of shipping materials and marketing, and the value of the labor you put in. If you sell your candles under this point, you will lose money. Any money you make beyond your break-even point is your profit.
Grab a trusted financial advisor to help you figure out your break-even point. Pay special attention to the value of your time. It’s very common to undervalue your time if you are doing something you love, but you should be paid for your labor, especially if the candles become your sole source of income.
Now, to choose a price that fits your business, think again about all the time you put into making and selling these candles. You mentioned wanting your business to be a full-time job, which is great. That means it will be your main source of income. Work with your financial advisor to decide on an hourly rate you will be paid, based on your current sales. Are you going to be able to make a livable wage with the current numbers? It’s easy to fall into the trap of spending hours upon hours making sure your product is perfect. When it comes to paying yourself, remember that in addition to your time, you’re paying yourself for your professional experience and creativity, too. .
The last thing to take into consideration is your brand. Do you want it to be upscale and fancy, or are you trying to make your soy candles accessible for all? Whatever you choose, you will have to price your products with your branding goals in mind. At the end of the day, this is up to you. Just make sure that however you price your candles, you take into consideration your time, your break-even point, and your profit goals.
Good luck,
Abacus the Accountant
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