So much clarity and confidence comes from getting your wholesale pricing right.
Getting clear on your wholesale pricing, margins, costs and the numbers in your business is one of the most valuable things you can do as a product-based business owner.
Few things give you more confidence than knowing you’re making money on each and every sale, that your business is set up for the future, and you’re charging what you’re worth, and what is fair.
Pricing your products for profit is one of the trickiest things to get right – not because the maths difficult, but because of your own money mindset!
Often pricing feels hard because your own feelings around money, your products, the worth of your time and skill all get in the way.
So, one tip I’ll give you before we dive into the practical stuff is to take the emotion out of your pricing!
When you’re reviewing your wholesale pricing, make sure you stay objective. Don’t put your relationship with money over making a profit, and therefore jeopardise your business.
It’s all about the value you are delivering with your products, not the cost price, or the time it takes to create your products. Your products are SO much more than that.
So, should you use a pricing formula to help you stop your money mindset getting in the way? Here are my thoughts…
Pricing formulas, such as cost price x2 to get your wholesale price, and then x2 to get your retail price – says NOTHING about your brand, your quality, your ethos or where you brand sits in the marketplace.
For example – a gold ring from Tiffany might retail at £1,500, but the actual value of the raw material, the gold could be £100, and the cost of making it could be £50.
If they were to use the above formula on their pricing, (£100 + £50) x2 = £300 x2 = £600 RRP. If they were to put that ring on sale for £600, it would be damaging to their brand which is all about luxury, quality and extravagance.
The same applies to your brand!
Win for you, win for your retailers, win for your customers.
Here’s the thing, retailers aren’t greedy. They have to make their prices work for their business too!
This is something that comes up repeatedly in conversations I have. Brand owners feeling hard done by because retailers are asking for high margins. On the flip-side, I speak with retailers that are feeling frustrating that they can’t stock smaller brands because they don’t price their products right.
When an independent retail buyer says they can’t work with your margins because they are too small – it’s not driven by greed but necessity.
Everyone works with tight margins. The margin of 50 to 60% (2.4-2.5 markup) is not greedy – it’s essential to most retailers. Think of the retailers costs – tax, business rates, rent, staffing, shop fittings, insurance, corporation tax, utilities, and all of the other costs brands incur – marketing and website hosting etc.
Brands and retailers need each other to thrive. And, it’s in most retailers’ interests to find reliable long-term suppliers (that’s you!) that continuously invest in developing new designs and products.
To become a long-term supplier for your retail partners, you NEED to get your pricing right.
If you can’t offer the margins that retailers need right now, it’s time to do a pricing review.
As a small business you already have the products and the knowledge of your brand but could you be doing more to grow? Wouldn’t it be nice to have a helping hand, somebody to help streamline your processes and save you time in the long run? My expertise as a mentor is in helping businesses like yours gain the confidence to sell, be more profitable, feel comfortable with your pricing strategy and be the business owner you dreamed of when you started your journey!
Visit the Small Business Collaborative website, drop me an email at therese@smallbusinesscollaborative.co.uk and I will get back to you personally.