Calculating cost and price

Greetings! Can we have a little discussion on cost and pricing? When figuring the cost of my soap, I have been adding all raw materials, a labor cost, and packaging/labels. Do you all use these same factors?

Also, because of the different recipes, not all the soaps cost the same to make. However, for simplicity sake, I have them all priced the same. Do you price yours according to recipe, or all the same?

Thank you for anything you can share!

Check out this pricing breakdown:
http://www.natural-soap-directory.com/sell-soap.html

All of my soaps are priced the same because it all averages out with similar base recipe but different EOs.

I am not currently selling my soaps, but have in the past sold other handmade goods. The factors you list are what I typically use for estimating cost, raw materials and packaging being the biggest factors. Labor is a pretty small percentage of the total cost (in terms of the sell price).

In terms of pricing based on material cost, this one is trickier. If you have 2-3 standard recipes that you use that have a material cost that is fairly close (say within 10% of each other) I would price all of them the same to make it simple. Then if you have a single recipe or two that have an ingredient that is significantly more expensive, then that gets a different price point, but again, make sure that sell price covers a couple of different recipes.

If I were selling as a business, I would figure in the cost of utilities and liability insurance if you have it.

[ame]http://www.youtube.com/watch?v=FqVNU9eN9DU[/ame]

Thank you for the great resources! I will have a look at each of these and see how I am doing! As stated in an earlier post, I want to sell at the Farmer's Market this year and want pricing that is fair for both buyer and seller.

I would also take a look at what others in your areas are pricing their soaps at, I don't sell soap, but work at a hotel, and we call around every week, to see if we priced ourselves out of the local market.

As HouseofWool stated much more clearly than I in my previous post: make sure that sell price covers a couple of different recipes.

Handmade items are "properly" priced by many variables:
Gas/Electric
Water
A percent of your mortgage/lease for the area which you soap in
Insurance
Supplies (Oil, Lye, Fragrance, Color)
Packaging
Labor
Booth fee or website fee
...and a lot of minutia that I probably overlooked...

You also have to consider what the average consumer is willing to pay for a bar of soap, unless you're going the "luxury route" and are looking for a specific buyer. In NYC, you may get $10 for a 5 oz soap...while in rural areas, you would be lucky to get $5. You have to know your market. Let's be honest, most consumers do not know the difference between a commercial detergent bar and the benefits of a handmade soap. They know they can get a 3 oz Dove bar "with 1/4 moisturizing lotion" mad at the grocery store for $2 or so...so they can't see why they should pay $6 for yours. :? So on top of educating them about your product, you have to take what they are willing to pay into consideration...

If it's costing you $5 a bar to manufacture, and you want to wholesale that for $10 and retail it for $15...you've probably just priced yourself out of the market for most soap consumers, and I would say you need to reevaluate your recipe and where you are buying your ingredients. :shock:

Most handmade soaps cost anywhere from 80 cents to $2 to produce in small-ish batches (up to 10 lb or so batches).
If you price yourself far below the competition, people are going to question the QUALITY of your bar (as would I). Everybody wants a deal...they want A+ quality for C- prices...so we have to decide which is more important ethically for ourselves - price or quality (or a blend of both) - and proceed accordingly. My 6.5 oz bars made with Olive/Coconut/Palm/Castor (and some butter or Coconut Milk, depending on recipe) and EOs are $6 on my website. I've seen 4 oz bars for $12 on Etsy made with "cheap" oils (soybean, corn, peanut) and FOs...or better yet, the MP bars made from Michael's base and colors selling for $5 for 4oz. How and If they are selling it is up for debate...but there's a buyer for everything, I guess.

It is more important to me to have a high quality product that is available to a variety of people, than to have a luxury product that will only suit a few...so I do not make as much of a profit as I could. I would rather them come back for more than to make a one time $12 purchase.

Yes, it is a business, but it is also my hobby. I still make a profit with my pricing that I am content with, even though I do not figure labor into my cost. I work out of my home, and would be making the soap (though no where near as much!) whether I had this business or not. If I had to rent a space for manufacture or retail, I would definitely price my products accordingly, and probably cut my bars smaller while keeping the price the same...for example, instead of getting 24 bars (x $6ea = $144) out of a 12lb batch, I would get at least 36 (x $6ea = $216) or 48 (x $6ea = $288 ). But for now, I'm content with my pricing and profit.

You might want to read the Business section of the forum. It is a bit further down on the main forum page.

Edited - Moved this topic in this section

lsg said:

If I were selling as a business, I would figure in the cost of utilities and liability insurance if you have it.

http://www.youtube.com/watch?v=FqVNU9eN9DU

Click to expand...

That's a great question. For those of you in the business, where do you get professional liability and what is an adequate amount of coverage? Do you have LLC or Subchapter S corps set up to shield you personal assets?

DWinMadison said:

That's a great question. For those of you in the business, where do you get professional liability and what is an adequate amount of coverage? Do you have LLC or Subchapter S corps set up to shield you personal assets?

Click to expand...

Any person who is self-employed can get commercial business insurance. I'm a sole proprietor of a hairdressing business. I rent a booth in a salon, and to cover my goods, possible client injury, damage caused by me or a client to the salon, and errors and omissions insurance is $500 a year in my area through Farmer's.

I don't know how that would apply to a person at home with a manufacturing facility, so you might want to check with your insurance companies. They probably have a solution somewhere.

I have liability insurance, $1mil. coverage. I operate as an S-corp. Here in NYC it is very expensive and time consuming to operate as an LLC so, I believe, I picked the next best option for some protection over personal liability as a S-Corp.