Pricing formula for business

Learn how to use the pricing formula for business to sell products, keeping in mind that this formula is more for craft businesses and hand made product such as decals, sublimation t-shirts and others!

Don’t repeat the same mistake over and over again and use the pricing formula to sell your products. Above all, in business this formula is not a suggestion, but a kind of rule that we must apply, so don’t try to change it.

Pricing formula for business

Here are two options for you! An AUTOMATIC PRICE CALCULATOR FOR YOUR BUSINESS, just fill in the blanks and you will get the total cost. and also below is the step by step process on how to do it manually with some modifications. Open the link and scroll down until you find the calculator.

First, add up the cost of all the materials and supplies you use to make an item, such as cardstock, vinyl, sticker paper or others. Let’s say it’s $5 total for all the supplies. Next, calculate the cost of labor, which is the money paid to you or anyone else who can make the product.

To calculate it, first decide the hourly wage you are looking for. Do not confuse this labor part with income, they are certainly not the same thing.

Once you have the pay per hour, you need to time the entire production process for each item. Next, calculate the labor cost. For example, if the pay per hour is $20 and you spend 30 minutes making an item; just divide $20 by 2. That is because 30 minutes is half an hour. The labor cost would be $10. On the other hand, if the time is exactly one hour, the labor cost would be $20.

After that, it’s time to apply the first formula to know the cost: cost= Materilals cost + Labor cost. In this example it would be: 5$+10$= 15$.

To continue with the next steps, let’s talk about markup. What is markup?

Markup, wholesale and retail pricee

The markup is the profit you make on each piece, usually a number between 2 and 2.5. It depends on the perceived value of the product. Which means, how much people value your product. If they value it highly, but it doesn’t take a lot of materials or time to make; then you should raise the markup as much as you can. Because people want your product no matter what it costs.

Knowing that, the next two steps will be easy, you are going to markup the cost twice. The first markup will get your wholesale price and the second markup will get the retail price. Knowing that, the next two steps will be easy, you are going to mark the cost twice. The first markup will get your wholesale price and the second markup will give you the retail price.

The formula is wholesale price = markup* cost. For example, let’s use 2 as the profit margin. 15$*2=30$ is the wholesale price. For the second profit markup, in order to find the retail price, apply the following formula: Retail price= Whole sale price* markup: 30$*2=60$, that would be the retail price.

It is necessary to markup twice, even if you do not plan to wholesale in the future. Otherwise, the pricing formula for business will shows an incredibly high number.