Set Your Wholesale Price
When setting your wholesale price, first multiply your cost of goods by two. This will ensure your wholesale profit margin is at least 50%.
Profit margin is the gross profit a retailer earns when an item is sold.
Apparel retail brands typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%.
Lets say you sell swimsuits. If you buy each swimsuit for $25 and sell them for $50 each, your retail margin per suit is $25, or 50%.
Retail margin percentage can be determined with the following formula:
Retail Price – Cost / Retail Price = Retail Margin %
In the case of the swimsuits: $50 – $25 / $50 = 0.5, or 50%
Useful Stuff To Know When Selling Wholesale And Setting Your Wholesale Price
Written by // May 19, 2013 // Daily Juice //
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Recently weve had lots of questions about wholesale pricing. Heres a question from Emma that pretty well sums up what everyone has been asking.
I make jewellery and sell it myself mostly via my website and occasionally at fairs. Recently a couple of small retailers have offered to stock my pieces. The trouble is I cant work out my wholesale price.
I usually sell my jewellery for twice what it costs me to make. The profit bit is to pay for my time. The retailers asked my what my usual wholesale price is but as I dont have one they asked my what my retail price was and said theyd work out the wholesale price for me.
That seemed like a good idea until I told them I sell my pieces for $150 and they said theyd buy from me for $75. How does that work? Each piece costs me $75 so I wont make any money.
Id like to sell to the retailers but how do I make it work for me?
Oh pricing! Gosh its tricky to get right. Best digested in small bits I think, so here are ten little thoughts about selling wholesale.
1. As a rough guide, retailers usually double the wholesale price to get to their retail price. In other words whatever Emma charges the retailer, the retailer will double to get to the price it will charge the customer. Sometime retailers mark-up by more than 100%, selling stuff at three or four times the cost!
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What Is The Average Profit Margin For A Bakery
The most profitable bakeries have a gross profit margin of 9%, while the average is much lower at 4%. The growth of profitable bakeries can be as high as 20% year over year. While a large number of bakeries never reach the break-even, a handful of them can even have a net profit margin as high as 12%.
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Come Up With Suitable Branding
Creating a brand for your home bakery increases business awareness. Consider coming up with unique packaging and logo for your baked goods.
Some coffee shops will not mind stocking your unbranded products. However, reputable will prefer to sell baked goods with recognizable brand names. Branding also helps to market your baked goods to new customers. The coffee shops could become a marketing platform to reach new consumers.
Nicely packaged baked goods may attract potential clients, and you may start receiving new orders from individual customers. Soon new coffee shops and restaurants may start ordering your baked goods.
Account For Cost Of Material To Produce Product
Now when you are baking your product, there are many different items that you may use that you do not include in your ingredients list for the product. These are muffin liners, cooking spray, gloves, and other items used to create the product. Even though you are not specifically listing the costs of these ingredients on your recipe, you will want to account for your costs.
For our pricing, we add a 2% mark up for our Q-factor or for the items that we need to produce our product. You will want to include this mark-up in your pricing to make sure you capture the costs for producing your products.
Again, you can create your own spreadsheet for pricing or just grab our recipe pricing worksheet here. This guide includes the Q-factor mark up for all products.
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How To Set A Suggested Retail Price
A suggested retail price , also known as a manufacturers suggested retail price , is the price a manufacturer or wholesaler recommends retailers set for their product.
Its important to make sure retailers follow or at least exceed your SRP, so theyre not undercutting you or your other retail partners.
Retail price is calculated with the following formula:
Wholesale Price / = Retail Price
Heres an example based on a wholesale price of $30 and a 60% markup percentage:
- Convert the markup percent into a decimal: 60% = 0.6
- Subtract it from 1 : 1 – 0.6 = 0.4
- Divide the wholesale price by 0.4
- The answer is your retail price
$30 / = $75
Research your market to see how other comparable brands or retailers set their prices. Then you can work backward to see if your target retail price is feasible, based on the costs you incur to produce your products.
For example, if your target retail price is $60 and you want to give your wholesalers a 55% retail margin and yourself a 50% wholesale margin, you can use this pricing formula to work backward and calculate the wholesale price:
- Convert the markup percent into a decimal: 55% = 0.55
- Subtract it from 1 : 1 – 0.55 =0.45
- Multiply 0.45 times the retail price
- The answer is your wholesale price
$60 x = $27
Then, calculate your target cost price to maintain a 50% wholesale margin:
- Convert the markup percent into a decimal: 50% = 0.5
- Subtract it from 1 : 1 – 0.5 = 0.5
- Multiply 0.5 times the wholesale
- The answer is your target cost price
How To Calculate Your Sales Price For Home
Your sale price for home-baked goods is calculated by marking up your cost of goods sold. Youll need to know the cost of goods sold for each bakery item that you sell.
The formula for cost of goods sold is:
cost of goods sold=ingredient cost + labor cost + variable costs + overhead
To mark up the cost of your product by a percentage, you multiply COGS by the percent markup and add that number to your CoGs.
+ CoGS= Sales Price
Heres what a mark-up looks like with my sugar cookie recipe:
- CoGS for 1 cookie
- 50 % mark up + 0.66-$0.99
Applying a 50% mark on a cookie that cost me $0.66 to produce, yields a sales price of $0.99 per cookie.
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What Is Retail Price
The retail price is what retailers set as the final selling price for consumers.
Retail pricing is all about the customer. What would they be willing to pay for your product? A retailer will mark up the price on wholesale ecommerce goods to earn a profit, but it shouldnt exceed what the customer will pay for it.
This is the tricky part of retail pricing, as the answer to this question is typically fluid.
Retail prices are first set with knowledge of what will the customer pay for it. It starts there. For me, if this came out to a 50% margin, Id see what increasing the price to $28 or $30 would do. Once it feels good, I would leave it there.
Participant from Contextual Pricing study by Shopify
Say a retailer buys your product for $10 and wants a $10 gross profit, then they would charge $20 for the product in-store. This is also known as keystone pricing, or simply doubling the wholesale cost paid for a product. to retailers they do not have to use it, but its helpful if they do. Well discuss more on this later.)
Stay on top of your finances
With Shopify POS, its easy to create reports and review your finances including sales, returns, taxes, payments, and more. View your financial data for all sales channels from the same easy-to-understand back office.
On This Point We Also Need To Talk About Pricing Your Bakes For Close Friends & Family
Baking for family and friends is a tough one because we love them and feel guilty to accept and ask for payment.
But, heres another perspective: Your friends and family love you and want you to succeed that is why they are ordering from you.
I decided a while ago to have a standard discount for all my close friends and family. The discount is 10% off my direct client prices. To offer them a discount will already seem very generous and courteous to them.
If your friend sells you a car you will be ELATED if they give you a 10% discount, right?
Set up a fixed discount rule for friends & family that you are comfortable with , and stick to it no matter what.
Making a rule like this for yourself and your family/friends eliminates the need to make an awkward decision every time a family member or friend orders something.
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Cheap Prices Attract Cheap Clients
If youve been charging too little for your baked goods, youve probably run into some pretty darn demanding, unrealistic, bartering sort of clients. Am I right?
Chances are, thats what drove you to start looking for cake pricing answers! The type of clients you have are just becoming unbearable and youre constantly second guessing yourself as a baker and business owner.
So heres the deal. Cheap prices will attract budget clients who enjoy nothing more than saving money wherever they can.
They unfortunately are the type of clients who take advantage of you. Theyll get you baking things you hate, on short notice for less money.
The way you get ideal, committed clients with better character is by CHARGING MORE. This separates the cheapskates from the true cake appreciators.
Do Not Charge For Delivery Yet
Do not charge for delivery to the coffee shops. Free delivery helps to establish trust and a long working relationship with the coffee shops.
You may review the terms of your agreement with the coffee shops as demand for your baked goods increases. You may even increase the price of your baked goods with time to cover the delivery costs.
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What Is The Standard Markup Of Wholesale Cakes For Restaurants
Restaurant managers can take one of several approaches when marking up cake prices for on- or off-premises consumption. Standard practice involves keeping food costs around 30 percent, but pricing cakes depends on your goals, menu, suppliers and plating presentation. Some owners prefer a higher markup because cakes dry out and employees tend to sample desserts. Selling cakes by the slice generates higher profits than whole-cake sales, but lower prices on desserts encourage guests to spend more on meals.
Tips For Selling Baked Goods To A Coffee Shop
By selling to a coffee shop, you sell your items at wholesale, a lower price than retail. It is critical to purchase ingredients and packaging at the lowest possible price and know how much it costs you to produce baked goods not only monetarily but also in time. You need to evaluate if it makes financial sense to sell your products wholesale. To be profitable, you might need to offer a limited version of your menu for wholesale.
Be sure to do the math upfront, so you are not losing money down the line. Determine a minimum amount for orders, especially since you will be delivering. All orders have to be worth your while.
In addition to a popular coffee shop, I also had a weekly commitment from a tea shop with a minimum order for cookies, scones, and cupcakes. The delivery day was Friday, and while it was nice to have a steady order, it was hectic to deliver on a busy day.
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The Key To Successful Networking Is Offering Solutions To Problems
When you are cold calling or networking, really listen to what their struggles are and then emphasize what you offer that could solve their problem.
A restaurant isnt satisfied with frozen bread they are using? Show them what you can offer that is fresh-baked daily.
A busy office building needs weekly meetings catered? Emphasize how easy it is to have your company deliver dessert platters with different assortments each week.
Understand Why Home Bakers Feel Awkward & Guilty With Pricing
If you consider the typical prices of baked goods, theyre not exactly expensive compared to all the other things people buy for enjoyment
Every day people spend thousands of dollars around the world on restaurant meals, watching movies, weekend getaways, etc.!
People easily and willingly PAY GOOD MONEY for products that make their lives better. Why should it be any different with homemade products like home baking?
Home Baking is SUPER labour intensive, yet we feel too awkward & guilty to charge what our bakes are TRULY WORTH.
I am convinced that the reason why cake pricing remains an issue, is because we are confronted with adding a VALUE TAB to what we do AND a value tab on what we feel WE are worth.
A lack of confidence is the REAL reason why we overwork ourselves, STRUGGLE WITH PRICING, end up bowing to every whim of demanding clients and get stuck baking things we dont even enjoy making for cheaper prices!
Theres this constant analysis going on in our minds If only I had 1000 likes on my Facebook page, THEN I would know that Im good enough to charge full price for my bakes!
And with Reality TV Shows about baking its the EXACT same story. All home bakers have these thoughts crossing their minds on a regular basis:
If I win this competition, I will finally know that Im good enough.If I win this competition, it will prove to my father that Im talented enough to make a living from dessert making.
What YOU believe about your value is what matters here.
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Afs0: 4 Tips How To Price For Wholesale
In this episode of Angel Foods Show, I have 4 tips on pricing wholesale. How to price your cakes selling wholesale to restaurants, cafes or caterers. Do you charge by % discount off the regular price? If not % percentage, how do you determined wholesale prices.
The Angel Foods Show is brought to you by the Cake Business School. It is only $1 to enroll and learn how to price + market + sell your sweet items. Enroll here
Show Notes:
- For wholesale as an overall rule of thumb I suggest about 15-30% discount of RRP.
- That is because it depends on the product and how you can batch them up and what your current profit margins are.
- Tip #1 Profit margins . Make sure you still make a good profit!
- Tip #2 Quantity. Work out the best quantities in your working space and look at having minimum quantities.
- Tip #3 Batching. Batch your work and tasks, so that it makes the best use of your time.
- Tip #4 Think of the customers.What will the final RRP will be on the product for the end customer? How much profit margins will your wholesale customer have
To help out the show:
- Leave an honest review on iTunes. Your ratings and reviews really help and I read each one.
- Subscribe on iTunes. Thank you!
How Do You Price Baking
Costing a recipe is all about figuring out the price per serving. Youll need to know the cost of each ingredient and then divide that by the number of servings the recipe makes. This will give you the cost per serving. Once you have that number, you can decide if the recipe is worth making based on your budget.
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Bulk Baking Ingredients Make It Affordable To Create Your Sweet Treats
If youre tired of overpaying for the ingredients in your baked goods, then youve come to the right place. We offer a wide range of wholesale baking ingredients, so you can conveniently find all the toppings and add-ins you need for your tasty desserts. You can also browse our flavoring syrups, which are great for coffees, mixed drinks, and iced teas.
From flour and sugar to baking powder and corn starch, weve got all the basic ingredients you need to make decadent cakes, cookies, and pies. We also have wholesale baking ingredients that are ideal for restaurants, diners, and cafes, like salt and pepper, spray releases, and powdered sugar. Some of these products are even useful for banquet halls and buffets that want to quickly whip together a delicious baked treat.
Why Its Important To Price Your Baked Goods Appropriately
Your pricing plays a crucial role in your businesss overall revenue. Incorrect pricing can jeopardize your businesss profitability, and also leave a negative impression on your customers. No one wants to be put out of business or have written about their outrageous pricing! Pricing your baked goods appropriately can help ensure that your business gets off to a great start, both financially and emotionally.
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How To Price A Product For Retail
In the world of retail, consumers have a preconceived perception of what things should cost. Before we pluck something off the shelf, we already have a price range in mind that is influencing our decisions. Supermarkets often price their products to accommodate these ranges.
Cottage food businesses and food entrepreneurs often have to charge outside of these ranges to justify the production of their products. This happens for a variety of reasons, but they are all centered around the inefficiencies of small-scale food production. Your costs are higher per product than a chain bakeryâs because you are not buying in bulk, you have no assembly line, and you donât have any employees to help reduce prep time.