Sometimes back I wrote about business ideas for Stay At Home Mums (SAHM). After writing, I had an opportunity of catching up with a girlfriend, she was talking about starting a business but didn’t know how much to sell her goods. It then occurred to me that so many people are in business today and probably selling themselves short or pricing their items way too high (though if you have clients buying your overpriced goods, you might just leave things the way they are, LOL). This is for every person that wants to know the worth of their goods. Below are steps that will help you calculate your selling price.
1. Calculate cost of materials
To calculate the cost of materials, you have to add the prices of all the goods you used. For example, if you are a beader, you need to calculate the cost of the beads, wire, divider, etc you used to make a particular bead.
Hint: Try to buy your goods in bulk from stockists as this will significantly reduce your materials costs.
2. Add your Artistry
There are a few ways to do this, but there are two significant ways:
- Calculate your based on your amount per hour
I use this method most times, but you will have to decide how much you think you should make per hour. For example, let’s use the minimum salary wage in Nigeria which is 18,000 Naira. Assuming you work 6 hours daily (30 hours per week, 120 hours per month) and your salary at the end of the month is 18, 000. To calculate your amount per hour, you can do this simple maths;
120 hours = 18,000
1 hour = 18,000= 150 Naira per hour
For instance, as a beader who has made beaded jewellery worked on for 2 hours, your artistry is 150 x 2 = 300 naira.
- Another method is about the time and energy spent on the particular item and add to the cost of materials end up short changing yourself this way.
You will probably realise after a while that method 1 is better for you.
The Markup is an amount added to the cost price of goods to cover overheads and profit. Your markup normally should be (cost of materials + work) x 2 though you could fix your markup anywhere between 1.5 and 2.5 depending on your overhead cost e.g. you are paying rent for your shop, or you pay electricity bills, etc. If you work at home, you might not pay these running costs so you can still leave the markup at 1.5. It is, however, important you markup your goods (whether you are at home or in the shop) as it is the difference between struggling to make ends meet and you making a profit from your business.
So for the beader whose cost of materials is 500 naira and artistry is 300 naira, your selling price for the beaded jewellery will be (500 +300) x 1.5 = 1200 naira.
This price is your wholesale price you then determine your retail price, though experts suggest you should multiply by another markup of 2 i.e. 1200 x 2 = 2400 but this is your ultimate decision.