Do you calculate wholesale when selling what you make?

Just curious.  For those of you who sell what you make, do you have a wholesale and a retail price?

Currently I sell my surplus electricity back to the power company at wholesale prices.

r ranson wrote:Just curious.  For those of you who sell what you make, do you have a wholesale and a retail price?

Yes...

When I sell lambs, I always try to sell locally first, on local area swaps and that sort of thing because I can get a better price. If they do not sell, then I go with the wholesale market and ship them onto the National Food Chain through Flames or New Holland, PA. My livestock dealer knows this, and understands, seeing what we are selling and then will call a few days later and take what did not sell. He is hardly upset, he knows he gets what is left. It is just how the system works; he gets what is left over because he pays the least.

This works in Australia

You need to work out your cost of production, if the market will allow some arty things are priced strangely, but always avoid chasing the price to the bottom of the price point


Then add 30% as a margin to wholesale minimum depending on volume
Then the retail margin say 50% of selling price unless its a $1000 item, then about 33% of sell price
Final price depends on volume involved, cost, market conditions
If its $1 items, the volume needs to be high to get a wholesale price,otherwise it may not be worth selling.

This is what I was told to do when I first started, so I've been doing it this way since.

material cost (replacement value)
+time
________
wholesale price
x 30-40% (markup a shop puts on my yarn)
______
retail price

People seem very happy to pay this amount.  If I charge less, I actually loose sales.  

But I'm looking at conversations of other creators online right now and they don't have that much buffer.  2-ish% increase in expenses is enough to put people out of business.  So I was wondering if it's not normal to have a wholesale price when calculating their price.

Pricing is an area that can send you broke overnight.
A 2% margin is not worth thinking about, your bank fees would be that or higher.


If you are making 1000's of items its wise to use a pricing method that is accurate, taking into account all costs.
If you are making  a few the same for a hobby you use what the market will stand.
I ask, why bother with a wholesale price, is it because most of your customers are resellers?

If most of your input is time, you need to think about a level that allows for more than making them.
You need to cover handling, travel and packing expenses if any apply.

If you promote, afverise etc consideration for all that needs to be covered.

I don't have a wholesale price on anything. My prices are always retail prices. And not retail prices of what an allegedly similar item would sell for in the store. My prices are based on how hard it is to grow and harvest something, and get it successfully to the buyer. If something doesn't sell, then I put it into the local gifting economy, or I feed the worms, or chickens.

The few times I have sold something for wholesale prices, I felt cheated. I don't like the feeling, so I don't give wholesale discounts.

At the moment, I'm selling about half retail, and the rest wholesale to shops that sell the yarn or artisans that buy in bulk and sell the finished garment.

Joseph Lofthouse wrote:I don't have a wholesale price on anything. My prices are always retail prices. And not retail prices of what an allegedly similar item would sell for in the store. My prices are based on how hard it is to grow and harvest something, and get it successfully to the buyer. If something doesn't sell, then I put it into the local gifting economy, or I feed the worms, or chickens.

The few times I have sold something for wholesale prices, I felt cheated. I don't like the feeling, so I don't give wholesale discounts.

I price food differently than I do craft items.  Since I'm selling to people I know, I let them choose how much they can afford. Or we do a trade.  

Crafting is different.  I find retail to be labour intensive and stressful.  Wholesale sales are to repeat customers who buy in bulk.  They are really clear about what they want so it's easy to meet their needs.  

RR you may find wholesaling is your better market because you can keep producing lots and selling heaps.
Retail really means selling small amounts and not producing much.
But a bit of retail at quite times improves the margins just enough to be worth that bit extra.
I have no idea about pricing vegetables, at all!
I would not know where to sat art.

My "wholesale" price is what I need to make to make it worth my while, period.  Direct costs, labor, and whatever else needs to be put in there.  "Retail," then, is wholesale plus whatever additional costs (such as commission or farmers market fees, mileage/delivery, etc.) are necessary for selling through that particular outlet.

Far too many people (farmers, at least) have a "retail" farmers market price, but then "can't sell to restaurants" because they can't afford to reduce their current price to "wholesale" levels.  This is going about it entirely backwards.

Wes, if the farmer has a low 'retail ' price, surely a competent restauranter would realise and accept that fact?

One of the interesting things about business is, while a person can go insane trying to establish proper prices, the reality is, more businesses fail because of a lack of cash flow then any other reason. They might have resources, but if they cannot pay their bills at the proper time, they are out of business. For the small business, or small farmer, this is even more pronounced.

It sounds counterintuitive, but a person can actually do better overall on a product by selling it lower then cost and stay in business, more so then they can by keeping the product high and lose sales. It happens all the time in business.

Every busisness has ups and downs throughout the year, trends they are called, and by charting out costs and sales, a farmer can get a sense of "net worth at the end of the month"...cash flow. That is based on if there is enough money made...say...during Janurary, Febuary, and March to carry the business through the lean months in April, May and June. It can also be over a series of years, because generally the trend is for a farmer to have 1 really great year, 3 mediocre years, 2 years of loss, and finally a substantial loss in a year over a 7 year cycle. With the VERY TIGHT profit margins most farms run at, especially smaller farms that lack the economy of scale, cash flow over the year or multiple years can be a really large problem. It is why typically most new fams fail in the first 3 years.

But every busisness has this issue. For instance after the busy Christmas season, consumers lack money and often times for retailers sales are way down in Janurary and February until people start getting their income taxes back. That is why a lot of car dealerships have major sales during "President's Week." They are short of cash, and the new car year is rolling in; have a sale and sell more cars when it is needed the most. But banks even have "sales". When they want to bring in more cash into the bank, they advertise higher interests on Certificates of Deposit (say 6 month CD's) and people rush in to get a little on short term savings accounts. They make out better, but teh bank is flush with cash too.

This all sounds big-businessish...but it is not; I have seen a lot of small and microfarms fail because they do not adjust their prices in flux with the time of the year they are in, or the climate the product is currently in. "I am not going to sell a pair of socks for $6", they say, when they could lower their prices to $4 a pair of socks during the Chrismas season, sell a lot more socks, and keep the business afloat while they pay the higher costs of winter feeding for their flock of sheep in the ensuing next few months. Then during the summer tourist season, they charge $8 for a pair of socks on the Fair Circuit and average $6 a pair of socks all year.

Establishing prices is not a one time thing is what I am saying, it is constantly in flux. It is the lack of farms changing that I see is the biggest problem overall. This goes from the biggest dairy farms in my area that I have seen fail, to microfarms.

John C Daley wrote:Wes, if the farmer has a low 'retail ' price, surely a competent restauranter would realise and accept that fact?

Not necessarily.  I expect there are a couple of issues at play here.  One is that the restaurateur expects to pay a price lower than that found at a market stand, regardless of what that market price is.  They're (at least planning on) buying in bulk and regularly, and they want a "discount" for doing so.  Not all have that mindset, but I'm sure plenty do.  Two is that certain farmers expect that they need a lower price to go into wholesale, and being unable or unwilling to take less than market price they never venture any further into selling through those other outlets.

My situation is unique in that I get more money per unit, when selling in large quantity. I'm dealing in recycled lumber. If I'm doing a job that just has a few dozen sticks, I sell it locally to established customers or I throw up a sign. My large buyers don't want to fiddle with small quantity.

When I have tons of the stuff, someone from a mill will supply me with 40 yard containers that are filled with the lumber. On a job like this, there is usually no time to deal with individual small buyers. And, the wholesale buyers pay a premium to have a large amount of material that is roughly the same thickness and age of wood. So, even if someone does stop by, on a big job, I take their number and tell them I will call them when I have small quantity. They usually whine a little bit and suggest that I sell them a small quantity. Then I explain that it will cost them considerably more. It's better for them to wait for a time when I have a little bit and I don't have a guaranteed, high-paying customer and free transportation.

What you say about selling more at a lower price makes sense.  It corresponds to everything I've read... and yet, I wonder.  Quality and perceived quality have more influence on my sales than lower prices.

When I sell yarn, I started at a low price.  It didn't sell.  I was told to increase my price.  At a higher price, I sell a lot more yarn than I did at a lower price.  This makes sense since as a customer, I often avoid lower priced artisanal goods because the perception is lower price = lower quality.  

When we use to sell fruit and vegetables to the wholesaler, who then sold them to restaurants and grocery stores in town, we used to get equal or above the price going in the farmer's markets.  At first, they didn't want to pay that much, so we left some samples with them.  After that, they kept getting requests from the restaurants for our products.  We told them, the produce goes to the highest bidder.  Offer us an equal price for less effort, and you can have everything we grow.  The appearance and ease of using the foods (our fava beans only had 4 in a pod that year, not 6-8 like the other farms) was not as pristine as the other farms, but the flavour was better which is what the restaurants wanted.  

I think training the customer to expect higher quality is important.  

But also being generous in other ways.  If someone cannot afford my product and they live in the same town as me, I'll teach them to make it themselves for the material costs.  I like what Joseph does with the extra produce at the end of the day.  Giving back to the community is important.  

When I helped painting houses (long time ago) I would get a third my partner received a third and whoever found the job received the remaining third. The customer paid for materials.
When you have pinestraw delivered and spread out you normally pay Cost of straw x 3. Materials = 33 1/3% and the rest is divided by the laborers.

Ideally setting a price on what you have made would go like this:
         (Cost of materials plus time at a market wage) ÷ (1 - profit margin expected) = wholesale price
Most of the time there are middlemen type of agencies i.e. distributors, websites (your own or ones like ebay, pininterest etc...) that will add to the wholesale price.
         (Wholesale price plus cost of warehousing, shipping, and distribution) ÷ (1 - profit margin expected) = retail price

This is how I would imagine selling a portable rocket stove kit that I might make:
(the materials may cost $300 + my time to assemble the kit - say 2 hours at $25) ÷ (1 - .50, profit % expected)
300+50 ÷ .5
350 ÷ .5
700
Now if I sell it to a retailer they are going to have to transport to their warehouse and send to each retail store. This cost will be added to the wholesale price.
At retail they will retail at 40% gross margin of if it cost $770 after the warehouse is done adding expenses.
770 ÷ .60 (1-.40) = 1283.34 and they will round it up to 1289 or 1299.
After labor, overhead, shrink, markdowns, marketing and other expenses the store may make 20% of sales. Grocery stores do really well to make 3.5%

Now for the kicker, will they be able to sell the rocket stove kit for 1299?

An example much closer to home:
My mother in law, age 84, started to make outfits to fit American Girl size dolls. She use materials that she already had and spent maybe 3 hours on each. She made a fabulous wedding dress as a special order. 6 dresses were made two years ago and were displayed on pininterest, ebay and in a local consignment shop. All the dresses were top quality but competed with poorly made imports. We started with $29.95 but have cut that price to 12.99. Today the second was sold for 12.99. She did not even get the national minimum for her time and nothing towards replacing materials.
So price has to also factor in what market will pay (demand). By the way, she enjoyed making the dresses and while she does not understand why they don't sell she is glad to have made them.

Some notes:
Selling something at a lower price to sell more will empty your savings real quick. Retailers lower their prices to sell more when vendors lower costs.
Holiday items start at full pricing then are promoted even marked down as the season dwindles.

Advise:
So if you are selling something you made or a perform a service - investigate what other are charging and only make what you can profit from.
Try working the formula starting with the average market price is and work backwards.

Lastly, if you can sell because of value rather than price then you will profit more and customers will cherish your product.

r ranson wrote:What you say about selling more at a lower price makes sense.  It corresponds to everything I've read... and yet, I wonder.  Quality and perceived quality have more influence on my sales than lower prices.

When I sell yarn, I started at a low price.  It didn't sell.  I was told to increase my price.  At a higher price, I sell a lot more yarn than I did at a lower price.  This makes sense since as a customer, I often avoid lower priced artisanal goods because the perception is lower price = lower quality.  

I wonder if you could get the best of both worlds if you priced you yarn high, but had seasonal sales during those times when Travis suggests to price things lower. This way, you might (1) sell more (2) still tell people your product is a high-quality one and reap the sale benefits from that, and (3) make them feel really good that they managed to get a high-quality for a low price. Most people LOVE a good sale. I know I do. I know when I get something on sale, I feel like I WON and that I'm smart. It generally boosts my self esteem, and makes me happy, and those happy emotions get tied to the company like Pavlov's bell to dogs' hunger.

It goes something like this:
I get sale -> makes me feel good -> feeling good is tied to the company -> I want to buy more from them because they seem nice and made me feel happy, even on a subconscious level.

Even just seeing that a company offers sales and rebates makes me like them, even if I don't take them up on it because it's not in my budget at the time. When I do have money to buy the item, I will think of them, and probably buy from them, because they offered sales and I got good deals from them in the past and so I like them.

Ed Bradley wrote:So if you are selling something you made or a perform a service - investigate what other are charging and only make what you can profit from.
Try working the formula starting with the average market price is and work backwards.

I did that sort of math one year for the vegetables I grow. Kept track of labor per row per species, and amount harvested, and came up with a number which was something like $/hour for each crop. It made it easy to see which crops gave the highest return on investment. What I value has shifted since then. It was valuable information at the time.

I will share a story;
I was approached by a wholesaler to buy 1000 plastic grass rakes at $0.25 each.
Current retail price was about $4.95
Sold 500 to a mate at $0.50 he was very happy

I tried to sell the rest at $1.50 and did not sell a single one.

Over about 4 weeks, I lifted the price, using the same sales card, crossing off the lower price and adding a higher price.
At $3.50 they started to sell and I sold the final ones in about 3 months at $4.50.
Unbelievable, but true!

This is a good thread.... that reminder about pricing year round is really important.

I will also throw my experience in- as a handyman- I can make about twice as much per hour in May-June as I can in Nov-Dec.

Why? Because people are desperate to get stuff done in the spring and early summer, they don't care the rest of the year. I used to charge the same rate per hour year-round but now I have started bidding jobs. You want it done? Worth $xxx to you? Consider it done. Simple. One recent example was burying 30 feet of conduit from the house to the garage at a property in the country. I did my estimate and texted her back and said it'd be $400 to do the job.

Ended up taking 3 partial days and $125 in materials to get the job done. 2 hours one afternoon to dig the trench, then went home for lunch as I was worn out. Couple hours later I went back out and started on it. Got started talking to the guy who was renting the place, and worked about an hour. He was a cool guy- I was glad then I wasn't working by the hour. Then my wife texted and our car was broke down so I had to go home. The next day I came back and finished up the job. Total was right at 8 hours labor and a couple trips to the city 120 miles round trip. I LIKE to make $25 an hour, and I basically did. So we were all happy and the person paying the bill was thrilled that it was what I said the bill would be. I was just real glad I added on the extra $50 on my estimate!!! $150 materials + 1 8h day = $350.

Last year AND this year, I've had major jobs that started in April-May and finished in June and not much work the rest of the year. Fine with me, but it's really a seasonal business. If I was advertising I know I could have full time year-round work. My goal right now is to get my cargo van running and put some graphics on it. I'm calling it J.A. Extra ordin aire because I don't want to be limited to "handyman"... I do so much more.