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Incrtalent

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Hey guys. Haven't been around for a while 'cause I've been dealing with ISSUES. So I finally put together a spread sheet for in oder to determine my fixed costs, and I'm a bit glum about it, actually. My husband used the formula he used at work, (manufacturing), which was cost & labor x 1.5 for wholesale x 2 for retail, and here's the situation. I'm afraid I'm pricing myself right out of the market. The soaps actually aren't too bad, (I came in between $4.50 and $7.00 for a 4.5 oz bar, depending on the ingredients), but the lotions? Does ANYONE actually pay $15.00 for an 8 oz bottle of lotion? And the scrubs...well. Most of the 16 oz scrubs came in between 19.00 and 20.00. But the coffee scrub, (I use ground espresso) came it at something obscene...like over $30.00. As I understand it, people actually DO pay $20-ish for scrubs, but still.

I don't know. Is my formula totally messed up? Am I through the roof? And since we are just starting out here, how do I adjust according to what the market will bear and still make a profit at the end of the day? Until we get larger, we can't do much about our costs, (i.e., quantity = price breaks, etc.) Sigh. Somebody throw me a rope. I'm trying to get this all sorted out before the November madness kicks in. Thanks!
 

Tabitha

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Here is the most common formula used in the soap/bath/body business:

Materialx4 plus labor=retail
Materialx4 plus labor divided by 2=wholesale

Try that & see how it compares to your husbands formula.

In the begining, I was buying item xyz for $4.00, I knew in about a year I would be able to buy item xyz for $1.50 in bulk. I figured it was not my customers fault I was small beans & could not afford to buy in bulk. I knew it was not their fault I was a beginner & rather then punish them by making them pay exorbident prices to purchase from me, a newbie, I charged what I knew I would be chargeing in a year. This also made sure my prices were consisitant & did not flux when I could/could not buy in bulk.

So, I took the product that in the begining cost me $4.00 but in the future would cost me $1.50 to make and sold it for $1.50X4 for a price of $6.00. The item, in the begining cost me $4.00 to make so my profit was smaller ($2.00), but NO one would have bought it for $4.00x4=$16.00 & my business would have flopped staraight out of the gate.

An artist friend once told me he was hired to do a painting & it took him 4 tries to get it right & that he was going to have to charge $800.00 rather than his usual $200.00 because of the extra time it took. He later decided it was not fair to charge that customer the extra $ for his mistakes.

I hope this makes sense.
 

Tabitha

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I am going to play w/ the 2 formulas just to see.

1)Your husbannds company formula:
Supplies cost $2.00 + $1.00 labor=$3.00 x 2=$6.00 retail
Supplies cost $2.00 + $1.00 labor=$3.00 x1.5=$4.50 wholesale


2)Common B&B formula:
supplies cost $2.00x4=$8.00+$1.00 labor=$9.00 retail
supplies cost $2.00x4=$8.00+$1.00 labor=$9.00 divided by 2=$4.50 wholesale

Well, the wholesale comes out the same, but you would enjoy a larger profit margin & a margin more in line w/ other B&B makers w/ the 2nd formula.

If you choose the formula your husband company uses I can see 1 major problem you will run in to. Retail establishments expect to purchase at 50% off retail. You can not offer that w/ your husbands companies formula. I worked as a buyer in dallas & have spent much time in the World Trade Center of Dallas. The only companies I have ever encountered that did not offer 50% off for wholesale have been a few publishing houses. It's not mandatory, but it is expected.

I hope this helps.
 

Incrtalent

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Thanks!

Tab, this does help alot. Thanks so much for taking the time to write this. Actually, his formula actually multiplies the labor as well. It's supplies + labor x 1.5 x 2. I'm going to try your formula and see how it works out. And you're right. I already know I cannot charge what the market will not bear, so I am going to have to adjust accordingly. I am going to try this and see how I make out. I'll send you an update. And thanks again.

Lisa
 
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