If you've been struggling with how to price a product – whether your product is handmade or manufactured in a factory – today's episode is for you! This episode is especially geared towards Etsy sellers who often try to compete on price and under-price their products!
I'll share with you the exact formula I've been using for the past 8 years to price a product that I launched (I used this formula for both my t-shirt business and my soap business).
How to price a product
This is the simplest formula you can use – (Labor + Materials) x 2 = Wholesale price
The x2 takes into account your profit and overhead as well, so you’re covered.
And to set your retail price, use this formula – Wholesale Price x 2 = Retail Price (or MSRP)
So if each set of earrings you make costs you $2, and you pay yourself $15 for the half-hour it takes to make them, then your wholesale price is $34 and your retail price is $68.
If you decide to work with sales reps, distributors, brokers or large retailers, you might want to think about increasing your margins even more, so instead of multiplying your wholesale price by 2, you can multiply it by 2.3 – 2.5 to get your suggested retail price.
I hope the tactics above will help you figure out how to price your products and bring your prices to a level that treats you fairly and rewards your creativity and efforts. With this pricing formula, you'll be able to not only invest back into inventory but also pay yourself for all your hard work.