Profit Margins

Lindy, I love your comment on not putting down another product to boost yours. That goes for everything in life, in my opinion, but certainly in marketing your product. Never pull someone else down, just to pull yourself up. Negative advertising usually has a nasty habit of coming back and biting you.

Since I think we've beaten the "how much should you charge" horse to death, and then some, I was thinking maybe we could redirect this conversation in a more productive manner. How to market your soap, in order to increase sales.

Marketing at it's base form isn't about setting a price. It's about expressing the value of your product and/or company to the general public, in order to get them to buy your product. I don't think, we'll ever get a consensus of the price point of soap, but a discussion on different marketing ideas/schemes could help people that visit this forum, in my opinion. Not only the people with aspirations of becoming a seller, but for those that have been selling for years. There's always more to learn, or an idea that seems simple, yet we never even thought of it.

Sorry to post this and run, but I've got to get to work. I'll throw some stuff out there when I get home this aft.

smeetree said:

This is a sincere request: anyone who claims to make a profit selling soap, please PM me your balance sheets/spreadsheets.

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Are you kidding... who in their right mind would share their cash business p&l. I have outlasted many new sellers in my markets and I do make money. Sometimes not sometimes yes, but in the long haul the $6.00 bar makes profit and I do not skimp on quality. I purchase supplies with great discretion. We sold/sued our corporate partner to get out from under the business that was making us a nice high income, but was destroying our relationship and health. We retired and feel much better, maybe cannot own the sportfisher anymore but that is okay, we are having fun and making extra money.
Never ever put down another seller with implied signage or verbally. That is very poor business. In my salon I would have a customer come in to have their hair fixed that another beautician had botched. I never said how bad the work was just fixed it the best I could. It the customer pursed commenting about the former I would just say we can all have a bad day and unfortunetly we are human and make mistakes. Most businesses are a small circle and word spreads very quickly

The Efficacious Gentleman said:

I think that we need to make a distinction between selling soap and running a soaping business.

'Frank' has retired. He has an income that supports his family. He sells soap for fun and for new materials. If he doesn't sell anything for 3 months then he just makes a couple of batches rather than many until things pick up again. He doesn't need to worry about having a robust business.

'John' runs a soaping business. It is his only source of income. When he doesn't sell anything for 3 months, it's game over. Unless he prices his products so that he has a robust business, able to survive the leaner times.

This x4 figure is not just cash in the pocket. Frank can go and get an Orange Moch Frappachino after the market because he sold some bars and has profits enough for his beverage. John can't - that money goes in to his business.

While a market cannot take smee's idea on set prices (or price fixing cartels) as we see with the car example and the supermarket example, there is a point on the other side - a Kia costs less to produce than a Mercedes. Both make profits, though, based on different business models.

If your area can only take $5 a bar then the quality must drop - extra pure Shea making up 50% of your bar (yuck, anyway) won't work here. Think Kia not Mercedes. You have access to a top end spa? Throw in the goodies and charge accordingly.

The product should also reflect the market, it's not just the price that needs to change.

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The only problem with that is that John can open an online shop and sell to up and coming middle classes, such as China, Singapore, Malaysia, etc. If he's selling soap in a small farm town, then yes, he has to sell cheap. But that town is not his market. His market is the entire world thanks to technology.

The car example is not really analogous to soaping since John could buy a used BMW, Volvo, or Mercedes rather than a new KIA, and have a much better piece of machinery that will likely outlast the new KIA. We cannot buy or sell used soap. :razz: Now that is a fast way to go out of business.

I do agree with you that we have the hobby seller and the person trying to make this into a business. I think the hobbiest is in a strong position. They likely will just use their soap on themselves if they can't sell it for all the input costs + profit. The store owner might have to sell it for small profit. I just think they are in a losing business if they do that, because the very likely do not calculate all the actual costs. If someone can show me a business they run with a spreadsheet (to the point above, just show me the inputs not the prices) maybe I change my mind. But does that spreadsheet have every cost I listed in above posts, and those were just the tip of the iceberg? Probably not. What I think the most common problem is is people skimping on their labor. There is a tendency to work for free since we loving doing it, and that gives artificial profit figures.

Smee, please drop it - there are many people successfully running soaping business properly with great and NONE of them have any need to show you any of their calculations.

The Efficacious Gentleman said:

Smee, please drop it - there are many people successfully running soaping business properly with great and NONE of them have any need to show you any of their calculations.

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Okay, man. The forum that continues to squash conversation or intellectual curiosity. How long before I get banned for asking questions or just trying to stimulate good conversation? It's an embarrassment that I can't openly discuss this.

I've now been told to drop EVO olive oil conversation because DeeAnna was right, and there was no room for any discussion or God forbid, dissent. Then I proved that Kirkland EVO is a scam, and got flack rather than appreciation for that. And now I have been told to drop this conversation, despite nobody showing that they actually calculate all input costs or making valid, logical arguments to counter sound economics. If there were many soap stores turning profit as you say, a bigger soap company would buy them out. That is how M&A works and the fastest way for big boys to gain market share. Finally, I posted a video that showed Aleppo soap being made with Army Green/black olive oil, and nobody had the intellectual curiosity to ask or explain what was going on?

Yet, I get accused of ignoring what you guys tell me. No, I question it, and that gets confused with ignoring because you don't like it. Then people get passive aggressive with me, don't answer questions, and just try to use their forum status or some vague argument like "I was in marketing so I know" to prove a point. As if I have no knowledge. What a terrible assumption. If I ever boasted about my background or education you'd all eat crow. But I don't want to use credentials to sway argument; I want to see facts, and nobody can provide them.

I don't doubt there are a very small few, probably a handful, who run successful soap businesses. But the majority of people selling soap do it at a loss. It's a saturated market with undercutting, and that formula is always a race to the bottom (lowest margin). The ones who succeed very likely (a) sell globally (b) market completely differently than most (c) factor in all inputs and charge accordingly. Etc.

Feel free to ban me for an opinion that differs than yours and is backed up by economics and examples (the ones on ebay selling at $2.25 per bar. Laughable. Especially after ebay fees and shipping/handling). But that just says more about you than me. If anyone is willing to engage in a real discussion and show facts, such as your inputs, please do. We do not need to see your prices..just delete those, but "I don't know you I'd never show you my costs!" is just a strawman to avoid showing the inputs, which is what I want to see, not the costs.

Instead of all these arguments based around logical fallacy, can you please just show me all these soapmakers running successful stores? Can you please show me your inputs? Some facts rather than jabs based off some bitterness or killing of the dream that you'll one day open a soap shop? That's what I am getting now, all because I want to challenge and ask real, hard questions about this industry and process, and it is stepping on the toes of the old guard.

No no, Smee - I wanted you to drop it because no-one in changing opinions on this. My belief in your credibility on this matter has been reduced a great deal by your insistence that you MUST charge $7 or you can't make it work. News flash - make double the batch size and your manufacturing labour time, including clean up, just dropped by a large factor. Triple your batch size and suddenly you're getting to much reduced costs.

You admit that some people must be doing it correctly, so what is the beef? Do you think that on this forum you alone have the knowledge of all of the costs involved? For the record, another reason why the bar cost x 4 model is important because some of that x4 goes in to R&D and so on. So if I don't have that in my costs, would I fail your business stability test?

I agree that many MANY people are selling at what I would consider to be a loss - mainly due to their costs being too high. But I have always maintained that profit is their problem - going at the market rate for a product is a good rule of thumb, cutting your costs to make your profit is just common sense.

Out of interest, seeing as we have to provide information for our statements, can you quantify and qualify the numbers in this statement -

I don't doubt there are a very small few, probably a handful, who run successful soap businesses. But the majority of people selling soap do it at a loss. It's a saturated market with undercutting, and that formula is always a race to the bottom (lowest margin). The ones who succeed very likely (a) sell globally (b) market completely differently than most (c) factor in all inputs and charge accordingly. Etc.

The Efficacious Gentleman said:

No no, Smee - I wanted you to drop it because no-one in changing opinions on this. My belief in your credibility on this matter has been reduced a great deal by your insistence that you MUST charge $7 or you can't make it work. News flash - make double the batch size and your manufacturing labour time, including clean up, just dropped by a large factor. Triple your batch size and suddenly you're getting to much reduced costs.

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If you make double the batch you do reduce some labor, but you also run more risks if anything goes wrong with the batch (i.e. bigger loses). To avoid that you likely have to do a lot of small test batches, which is time and such. Maybe once you absolutely perfect a recipe and it is flawless every time, you can reduce some labor. But what does this mean? It means you either spend more time building a large mold, or purchased a large, more expensive mold, have more bars to lug to the market each week and back home, etc. It's not a vacuum. But yes, in theory if you produce more you will reduce the per unit cost of labor over time with enough widgets sold. Our apartments, homes, and equipment are a limiting factor so that reduction would be a figure unique to each person.

Do you think that on this forum you alone have the knowledge of all of the costs involved?

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I don't know, but based on some of the comments I wonder. I think someone talked about driving their soap to craft fairs and selling it for $4. Unless that fair is very close or they biked (which still requires food inputs), gas becomes a major factor. If they didn't sell all bars, they have to transport those bars each week until they do. Again, I don't know if everyone has knowledge of this, five people do, or only me, because nobody is willing to open up and discuss reality. There is this idea if a bar costs $2 and I sell for $4 I made 100% profit. That is blatantly false on the surface and depends a lot on what they factored into that initial $2. I don't see how it can be everything. Maybe they are writing off a lot of losses? Again, I'd like to see to know.

Out of interest, seeing as we have to provide information for our statements, can you quantify and qualify the numbers in this statement -

I don't doubt there are a very small few, probably a handful, who run successful soap businesses. But the majority of people selling soap do it at a loss. It's a saturated market with undercutting, and that formula is always a race to the bottom (lowest margin). The ones who succeed very likely (a) sell globally (b) market completely differently than most (c) factor in all inputs and charge accordingly. Etc.

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I posted links to people on ebay selling at an obvious loss. Just search there for homemade soap and see the prices. They do not add up unless the seller has free inputs (like he knows a butcher who gives him free fats) or his dad owns a lye factor. Sure then you can pull that off. My other statement about a small few running successful businesses was off the cuff just to agree with your point that there likely are. I'm just guessing that out of the thousands making soap a small % make a product so good, market it, etc etc that they do succeed on a level to quit day job and make it a living. Maybe there are 0 who can do that, I really don't know, but I am willing to agree with you there are likely a few (someone has to be reaping the fruit of the majority's lost labor). Which brings up an interesting point. Adam Smith wrote that doctors, lawyers, cobblers etc high fees were all justified because they made up for all the failed doctors, so the new was a zero sum game for society. This is the same with soaping, I'd think, and a few are getting the real cost of their soap at the subsidy/expense of the majority who don't make it.

JustBeachy said:

Lindy, I love your comment on not putting down another product to boost yours. That goes for everything in life, in my opinion, but certainly in marketing your product. Never pull someone else down, just to pull yourself up. Negative advertising usually has a nasty habit of coming back and biting you.

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Agreed! I started off being slightly negative towards the other products. I thought about it and it seemed very petty and unnecessary. I have since been very careful not to fall into pulling someone else down in order to prop myself up. There are so many positives that can be said instead! It makes me feel much better, and I have since made friends with some of my competitors.

Some really good points being brought up in this thread. Anyone thinking about selling should read through this. There are so many layers to marketing it's to complex to just lump everything into one little box. I think one key thing is being open to change and evolve. Some people will find a niche and fill it well. Earthen Step has not quite filled one yet, we have many plans ahead of us. But we have already changed drastically from day one. Being able to adapt and adjust to what comes your way will go a long way.

I really don't think anyone is wrong on this. I love the conversation going on and thank you all for your comments. It's opinions for the most part and not fact. I think everyone is bringing up great points and many things can work.

E. Gentleman, I also have an opinion that things that are visible (such as dollars, oils, the final bar) are obvious to calculate, and then the hidden costs are much less. We see proof of this in the mass psychology surrounding the dollar itself. For example, a dollar in 2000 purchased much more than a dollar in 2014. People do not see the invisible inflation tax in that situation and rarely factor it in until they do (such as a rise in material costs, their rent, etc) Until it hits them squarely. I don't know if you follow econ at all, but there is massive inflation in the world right now. Inflation does not necessarily mean prices increasing massively, but what it does mean is an increase in money supply, and that money will go into something (it can vary and be unpredictable). After the 2008 housing crash, our central bank printed 5 trillion dollars. Those go into things. Raw materials, for example. Or right now the stock market.

So how this factors into soap. I actually would put it as an input cost. Say my soap sits for a year before I sell it. In that year 1trillion more dollars enter into circulation. Well, my past dollars used to make that old bar had more purchasing power than the new dollars I get when I sell them.

I honestly don't think people factor in things like that. But when making a product like soap, I wrote earlier it's important (to me) to leave a 50% buffer margin in times of high inflation, and this is precisely why. It may sit a while before I sell it, and all that time the dollars tied up in it lose purchasing power. Thought of another way: if I made soap in 2000 and had a $4 price tag on it and it was still sitting on my shelf in 2014 with the same $4 tag, I'd take a huge loss just via inflation (purchasing power) when it finally sold.

Earthen_Step said:

Agreed! I started off being slightly negative towards the other products. I thought about it and it seemed very petty and unnecessary.

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I think this looks bad, too. Think about political ads. When you see candidates bashing one another. It makes you feel bad about both options. Negative advertising is lame. It's best to just inform people. When people are informed accurately (it is equally bad to fear monger them and say they definitely will get skin cancer if they use chemical soap and things like that), they tend to make good decisions. The problem with soap is the masses are simply ignorant on the subject. And rightfully so: who has time to research soap or even consider it in their busy days? This is why I think an honest info sheet showing the pros and cons of Zest vs Homemade soap could be powerful. Zest would have the pros as "price, easy to find, yada yada", and the homemade would have a list of all its benefits and cons (and there are some, such as not being able to replicate easily, price, etc).

Smee let's try this from another direction. The x4 and x2 model does allow for labour. In most businesses you have an overhead and this comes out of your gross sales. It is not included in the cost of your product but rather it is an expense that takes you to net sales which allows for your expenses. If you are not doing a good job of marketing your product you will lose money covering lights, staff an other expenses. Most business are happy with a 15% net profit. When we start talking about businesses that are selling labour they are going to mark up that labour as it is the only profit centre they have. When I was running my architectural sign company I was selling my time and expertise so I marked up that labour costs for design and overseeing of installation. Same as a contractor they are looking for 15% management fees and from there they must take their expenses out. I have worked in sales for most of my life and know how to figure out what the profit margins must be to get where they I need to be to be profitable. I am another one whose business has been around for almost 6 years. This past year I have been able to work off my wholesale accounts. Next year I am going to pick up my retail again because I miss my retail clients and the face to face sales.

I charge $7/bar and the other soaper at my market charges $3.50/bar. True story. My booth is always filled and her booth remains empty most of the time. This is in a blue collar suburb in the midwest. I think sometimes low prices speak of low quality and desperation...and I am neither one of those.

samirish said:

I charge $7/bar and the other soaper at my market charges $3.50/bar. True story. My booth is always filled and her booth remains empty most of the time. This is in a blue collar suburb in the midwest. I think sometimes low prices speak of low quality and desperation...and I am neither one of those.

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My kind of gal/guy!

Lindy said:

Smee let's try this from another direction. The x4 and x2 model does allow for labour. In most businesses you have an overhead and this comes out of your gross sales. It is not included in the cost of your product but rather it is an expense that takes you to net sales which allows for your expenses. If you are not doing a good job of marketing your product you will lose money covering lights, staff an other expenses. Most business are happy with a 15% net profit. When we start talking about businesses that are selling labour they are going to mark up that labour as it is the only profit centre they have. When I was running my architectural sign company I was selling my time and expertise so I marked up that labour costs for design and overseeing of installation. Same as a contractor they are looking for 15% management fees and from there they must take their expenses out. I have worked in sales for most of my life and know how to figure out what the profit margins must be to get where they I need to be to be profitable. I am another one whose business has been around for almost 6 years. This past year I have been able to work off my wholesale accounts. Next year I am going to pick up my retail again because I miss my retail clients and the face to face sales.

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Okay, since you are doing it I respect that. 15% would not be enough for me, personally. And that is not because I am greedy. Again, it's the opportunity cost. Can I get 15% somewhere else doing less work? Yes, investments, for example, and capital gain taxes are significantly lower on investment than self-employment. Then I can simply make soap as a hobby (what I do now) to benefit my skin and hair. Maybe I could get behind a 5x model. But I wouldn't be happy with 15% net given the difficulty of planning, making, and selling soap.

Speaking of Forex, I think soapers would be wise to educate themselves on currency fluctuation and the concept of purchasing power. Open a Forex account and put your currency/"profit" into a currency (like the Yuan) that is going up. The Dollar is stable of late, but got hammered the past five years. The Euro is about to get hammered. The Yen has been getting crushed. I personally buy silver with any profits (from non soaping endeavors) b/c all currency right now is in trouble, but at the very least protect your profits in something appreciating and/or tangible.

You know I was going to just drop this, but I think it just needs to be said. So here goes.

smeetree said:

The car example is not really analogous to soaping since John could buy a used BMW, Volvo, or Mercedes rather than a new KIA, and have a much better piece of machinery that will likely outlast the new KIA. We cannot buy or sell used soap. :razz: Now that is a fast way to go out of business.

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Sales and marketing is a universal game. The basic principles stay the same no matter what you're selling. Like most of the points I make, you just would rather try to argue the point.

smeetree said:

Okay, man. The forum that continues to squash conversation or intellectual curiosity. How long before I get banned for asking questions or just trying to stimulate good conversation? It's an embarrassment that I can't openly discuss this.

I've now been told to drop EVO olive oil conversation because DeeAnna was right, and there was no room for any discussion or God forbid, dissent. Then I proved that Kirkland EVO is a scam, and got flack rather than appreciation for that. And now I have been told to drop this conversation, despite nobody showing that they actually calculate all input costs or making valid, logical arguments to counter sound economics.

Yet, I get accused of ignoring what you guys tell me. No, I question it, and that gets confused with ignoring because you don't like it. Then people get passive aggressive with me, don't answer questions, and just try to use their forum status or some vague argument like "I was in marketing so I know" to prove a point. As if I have no knowledge. What a terrible assumption. If I ever boasted about my background or education you'd all eat crow. But I don't want to use credentials to sway argument; I want to see facts, and nobody can provide them.

Instead of all these arguments based around logical fallacy, can you please just show me all these soapmakers running successful stores? Can you please show me your inputs? Some facts rather than jabs based off some bitterness or killing of the dream that you'll one day open a soap shop? That's what I am getting now, all because I want to challenge and ask real, hard questions about this industry and process, and it is stepping on the toes of the old guard.

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smeetree said:

I don't know, but based on some of the comments I wonder. I think someone talked about driving their soap to craft fairs and selling it for $4. Unless that fair is very close or they biked (which still requires food inputs), gas becomes a major factor. If they didn't sell all bars, they have to transport those bars each week until they do. Again, I don't know if everyone has knowledge of this, five people do, or only me, because nobody is willing

smeetree said:

.

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[s the masses are simply ignorant on the subject. And rightfully so: who has time to research soap or even consider it in their busy days? This is why I think an honest info sheet showing the pros and cons of Zest vs Homemade soap could be powerful. Zest would have the pros as "price, easy to find, yada yada", and the homemade would have a list of all its benefits and cons (and there are some, such as not being able to replicate easily, price, etc).

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I was going to line item these, but decided it really wasn't worth the time. You'd just come up with some off the wall argument. Smee, you don't discuss or converse, you argue. You hate it when others disagree with you, yet you disagree with **** near everything that's posted. If you'd rather not take the opinions from people that have spent years selling, marketing, making soap,etc than respectfully, that makes you a fool.

No one I've seen on this forum, and I've spent a lot of time looking through old posts, squashes any idea's that are discussed in a constructive way. To be honest, you're the only person I've seen be antagonistic, well until now, I would say I'm being antagonistic. But I don't really see any options in getting through to you.

If you know so much more than I do about marketing and sales, why on earth aren't you out there making high 6 figures in the corporate world? I still get job offers that would blow your mind. You're wasting your talents.

If you know so much more about the profit margins on running a soaping business, than the people who have done it for years, quit your job and go make some money. No one needs to share financials with you to satisfy your desire to try and prove yourself right. I like quite a few people on here and would help them in pretty much any way I could. That doesn't mean I'm going to open up my financial portfolios to them. That's just silly.

Sorry, I'm usually pretty laid back, but shy has never been a word used to describe me, and I tire of this "I'm being persecuted" attitude. I'll end with, if you don't like the environment here, feel that your opinions are being squashed and no one knows what they're talking about, why are you still here? Why would you ask advice from any of us idiots? If I felt that way, I wouldn't be sitting around waiting to get banned, I'd leave and never look back.

Don't bother with another convoluted rebuttal, I truly am done.

Sorry to the moderators/forum members, but I felt it needed to be said.

JustBeachy said:

I'll end with, if you don't like the environment here, feel that your opinions are being squashed and no one knows what they're talking about, why are you still here? Why would you ask advice from any of us idiots? If I felt that way, I wouldn't be sitting around waiting to get banned, I'd leave and never look back.

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You're rude.

But to your question, I didn't ask for advice on profits. I only asked for advice about soap. I have received pm with people thanking me for my posts in this forum, and it's making them rethink things.