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Determining the price of your product

Determining the price of your product. Brainstorm…. A list of all factors you think a company would need to consider when pricing a new product. Key Factors to Consider. Materials Labor Expenses Profit. A Simple Formula. Materials + Labor + Expenses + Profit = Wholesale x 2 = Price.

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Determining the price of your product

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  1. Determining the price of your product

  2. Brainstorm… A list of all factors you think a company would need to consider when pricing a new product.

  3. Key Factors to Consider • Materials • Labor • Expenses • Profit A Simple Formula Materials + Labor + Expenses+ Profit = Wholesale x 2 = Price

  4. Materials • Make a list of all the material fees you anticipate you will encounter • Don’t forget the smallest things like thread, to the largest such as packaging! • If you need to “guesstimate” err on the side of caution

  5. Labor • Consider all labor costs that will go into making this product • Often forgotten: marketing department, maintenance staff, accountants • Research average salaries of employees in your area of production

  6. Expenses • What additional cost(s) will it take to produce this? • Expenses to consider: rent, travel, office supplies, research materials, marketing materials (advertisements, website domain) • Steps: • Write down all additional costs per month • Decide how many items you want to sell per month • Divide cost by number of items sold

  7. Profit • Think about where you want your company to be in the future • Will this be your only source of income? Will you have more than just one product? • Good rule of thumb:10% of Materials, Labor and Expenses

  8. Wholesale Price Materials + Labor + Expenses + Profit = Wholesale Price Why Not Stop There? • This may seem like a very affordable price for your product, but… • Selling your product at wholesale price undervalues those selling at proper retail price- when the majority of sellers price thoughtfully, everyone benefits • Customers will wonder why it’s so low. Are the materials not as good quality? Etc…

  9. Selling Price Wholesale price x 2 = Selling Price • How does your price compare to similar products? • If the item is priced too high for the market, it’s not the price you need to alter, it’s the design or way you produce the work • Get creative and see how you can adjust your prices • Can you buy your materials discounted in bulk? • Can you produce the product in multiples, reducing the labor? • Don’t take the easy way out by slashing your prices!

  10. Now it’s your turn • Consider all the factors you need to calculate in order to formulate a price • Complete the worksheet provided to determine the price of your product!

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