Determining the price of your product
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Determining the price of your product. Brainstorm…. A list of all factors you think a company would need to consider when pricing a new product. Key Factors to Consider. Materials Labor Expenses Profit. A Simple Formula. Materials + Labor + Expenses + Profit = Wholesale x 2 = Price.

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Determining the price of your product

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Determining the price of your product

Determining the price of your product


Brainstorm

Brainstorm…

A list of all factors you think a company would need to consider when pricing a new product.


Key factors to consider

Key Factors to Consider

  • Materials

  • Labor

  • Expenses

  • Profit

A Simple Formula

Materials + Labor + Expenses+ Profit = Wholesale x 2 = Price


Materials

Materials

  • Make a list of all the material fees you anticipate you will encounter

    • Don’t forget the smallest things like thread, to the largest such as packaging!

  • If you need to “guesstimate” err on the side of caution


Labor

Labor

  • Consider all labor costs that will go into making this product

  • Often forgotten: marketing department, maintenance staff, accountants

  • Research average salaries of employees in your area of production


Expenses

Expenses

  • What additional cost(s) will it take to produce this?

  • Expenses to consider: rent, travel, office supplies, research materials, marketing materials (advertisements, website domain)

  • Steps:

  • Write down all additional costs per month

  • Decide how many items you want to sell per month

  • Divide cost by number of items sold


Profit

Profit

  • Think about where you want your company to be in the future

  • Will this be your only source of income? Will you have more than just one product?

  • Good rule of thumb:10% of Materials, Labor and Expenses


Wholesale price

Wholesale Price

Materials + Labor + Expenses + Profit = Wholesale Price

Why Not Stop There?

  • This may seem like a very affordable price for your product, but…

  • Selling your product at wholesale price undervalues those selling at proper retail price- when the majority of sellers price thoughtfully, everyone benefits

  • Customers will wonder why it’s so low. Are the materials not as good quality? Etc…


Selling price

Selling Price

Wholesale price x 2 = Selling Price

  • How does your price compare to similar products?

  • If the item is priced too high for the market, it’s not the price you need to alter, it’s the design or way you produce the work

  • Get creative and see how you can adjust your prices

    • Can you buy your materials discounted in bulk?

    • Can you produce the product in multiples, reducing the labor?

    • Don’t take the easy way out by slashing your prices!


Now it s your turn

Now it’s your turn

  • Consider all the factors you need to calculate in order to formulate a price

  • Complete the worksheet provided to determine the price of your product!


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