How to price your Homemade Skincare Products
- taralee
- Feb 24, 2022
- 2 min read
I see far to many crafters under cutting themselves and selling their products for far cheaper then they should. It is so important, as a small business, to make sure you are making a profit. Today I am sharing with you the exact formula I use to price my skincare products.
FORMULA;
(supplies + labor) x 2 + overhead = wholesale x 2 = retail
SUPPLIES
Your supplies are everything that goes into your product. Whatever ingredients are in the product, the packaging, the label, the packaging to ship the item. You want to make sure you are including the cost of all the supplies into each item.
LABOR
First you need to figure out how many items you can make in an hour. Let's say you can make 50 items in one hour. Now you need to figure out, how much you want to pay yourself? Maybe you want to pay yourself minimum wage. (Minimum wage here in Ohio is $8.55) That means you want to divide 8.55 by 50 which equal $0.17 That makes your labor cost $0.17
OVERHEAD
Overhead costs are anything you buy for your business that doesn't directly go into the products you are making. For example; a desk, your internet bill, paper, pencils, printers, ink, tape, etc. Add up all your overhead expenses for the entire year and divide that by the total amount of items you sold that year.
Let's say you spent a total of $1,000 on overhead in a year and you sold 500 items that same year. 1,000 ÷ 500 = 2
That means your overhead is $2
Example product;
For this example, let's say the supplies for an item you make is $1.50 then this is the equation for our "hypothetical product".
(1.50 + 0.17) x 2 + 2 = wholesale x 2 = retail
1.50 + 0.17 = 1.67
(1.67) x 2 = 3.34
3.34 + 2 = 5.34 = Wholesale price
5.34 x 2 = 10.68 = Retail Price
It's very important to make sure you have a wholesale price. Once you start selling product, so many people will ask to purchase your products in wholesale and you want to make sure you are making a profit on wholesale orders too.
If you sell products that take a long time to make, like knitted products, selling in wholesale might not be an option for you, because your labor cost is too high. For products like this, it might be better to actually use the wholesale price as the retail price if your retail price is too high. (just thought I would mention that)
What if you don't have an overhead cost because you just started selling product?
You can use this equation; Supplies x 3 = wholesale x 2 = retail
If that seems to low try; Supplies x 4 = wholesale x 2 = retail
You can't get around not knowing your supplies cost. You have to know how much it costs you to make your products.
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