If there’s one question that troubles every baker out there, it’s the dreaded “How do I price my product?” question. From determining your per-product costs to deciding your hourly rate, the process can be cumbersome and difficult. But it’s an important one because it’s your pricing strategy that will affect almost all other aspects of your business – most importantly, your revenue. The right price not only makes a good impression upon the customer but also makes you healthy profits. So, you want to make the right decisions here.
At BakersMakers, we’re here to not only assist you in listing yourself on our platform but also guide you through the overall selling process. This is why we’ve put together a quick guide on how you can effectively price your baked goods in a way that works out for you, as well as your customers. Let’s take a look.
Find Out Your Per Product Costs
First and foremost, you must know the various costs that go into making a single product. So, for every cookie, cake, or pastry you bake, identify the costs involved. This includes the price of all the ingredients and raw materials, packaging, shipping or delivery charges, and any other expenses that you may incur while whipping up your baked goods.
Don’t forget to also account for your time – after all, you’re not working for free! Determine an hourly rate for yourself and then divide that by how many products you can make in that time. The sum of all of these expenses should give you your cost per product.
Don’t Forget Your Overheads
Your costs aren’t just going to be limited to your ingredients and labor. To earn a healthy profit margin, one must also take into account overheads. But, what are overheads? Overheads mainly include your fixed costs and startup costs.
Fixed costs are the costs you incur each month irrespective of how much you bake or sell. They remain the same and include expenses, such as rent, utility bills, equipment cleaning and maintenance costs, marketing/promotional costs, etc.
Startup costs are certain (one-time) costs that are usually incurred during your initial stages of setting up the business. From permit and registration expenses to purchasing new equipment, you can take these startup costs into account too.
Add A Profit Margin
Once you’ve all your costs determined, it’s time to account for profit. How much profit you wish to add to your price depends entirely upon you. Generally, in business, a 5% profit margin is low, a 10% an average, and a 20% is considered to be a good margin. Try to be reasonable here and price your products in a way that is acceptable in the market. But at the same time, we also see many bakers who undervalue themselves and their skills and keep low-profit margins. Your profits are what’ll keep the business running, so ensure you give this a good thought.
Don’t Price Based On Competition
A mistake many bakers often make is to simply price their products based on their competitor’s charges. While this may be the easier way out, it will definitely cost you in the long run. No two bakers are alike. The ingredients and costs of your competitor will never be the exact same as yours. This is why it’s always recommended to make your own calculations to arrive at a price that works best for you. The only time you should be looking at your competitor’s prices is at the very end of the process. This enables you to know if your prices are similar to and acceptable according to the current market rates.
Respond To Feedback
Remember that the price you determine at first needn’t be the price you use forever. Test it out, and you can always choose to evolve your prices as your business evolves and grows. An essential trick that most sellers use for pricing is to be responsive to customer feedback. Customers are loving your goods and are finding them excellent? Then you may consider raising your prices. Or are you receiving feedback on your products being a bit pricey? Consider lowering your rates. Irrespective of how you price your products initially, always stay open to feedback and future changes to satisfy and please customers.
We hope this article has been helpful to you, and you’re excited to get started on your pricing strategy. Here’s wishing you good luck and good fortune for your online business!
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Also Read: BakersMakers 101: What To Expect As A Seller