Photo by Alexander Mils on Unsplash
How to price your products? 🤔
A simple guide to know when to change prices for small businesses
I have talked with multiple small business owners in order to understand how they operate while also putting some effort to guide them.
What I have seen most people struggling is with pricing artistic products. Hand-made jewellery, custom painted mugs etc. take a lot of time to be made but the pricing is quite hard to decide. Because, along with your raw materials, you are also putting in a lot of your time into the product, which needs to be considered in the pricing.
On the other hand, there are many business owners don't want to turn their hobbies into a scalable business. So, they release a product every once in a while and then put the business on hold for some time.
Here, there is a simple idea that I think can be a great start if you are struggling with the same thing.
1. Find your cost price.
2. Find how much time it took you to make it. (when you were actually on your table with your tools, making the product)
3. Find how much time (on average) it takes to sell your product
4. Find how often you are able to push a product out.
It is important that the amount of time it takes to sell your product is strictly less than your "break" before launching another one. If you are able to make multiple products at one sitting, that's even better. If you find that the situation is the opposite, increase your price and take a note again.
If it takes you more time to make your product than to sell it, you can increase the price. Ideally you want these two times to be relatively equal.
Every product you sell, has to be at least 2x the cost of materials. Because you need to justify your break and compensate for that with your price.
PLEASE NOTE:
There are countless more ideas that you need to master in order to correctly price your products and constantly adapt with your customer's mindset. These are just ideas to set you in the right direction.
Keep applying the same formulas over and over and make any adjustments necessary. Let these be a stepping stone in your business journey so you don't feel as lost when it comes to pricing.