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EBW x INVENTORA | Business Class Ep 2.2 | Pricing Your Products

Krystal Jugarap [00:01:01]:

Today is part two of our three part collaborative series with woman-owned brand, Inventora. And if you missed it last month, Inventora is an inventory management system really geared towards small businesses because the founder, Dianna Allen, is actually also the founder of home fragrance company, Terra, I actually have one of her candles back here. I know it's a little bit blurry, but her candles are amazing. And she started that business in 2019 and she really needed an effective inventory system for herself. So with the help of her now husband, she was able to create a inventory management system that really was amazing for her and she wanted to share it with other small business owners.

So today we're joined by Delmilth Morales, who's actually become one of the faces of Inventora. She does all of the videos and a lot of the tutorials and things like that. So I'm so excited to be joined by her today. And we're going to be talking about all things pricing, which we know is so important for our businesses. So, Delmith, thank you so much for joining us yet again. I'm so excited to be chatting again.

Delmith M [00:02:07]:

Yes, thank you so much. I'm excited to chat with you again. Last time we talked all about inventory management and how important it is to have that automated and how can that help you grow your business. However, I know that something super important is to know how to price your products, right? Many of you, I know that maybe you make your own products or you sell something that is sourced from a supplier, and actually you don't know what is it involved to put that price on it, right? So I think I love to talk about all the things that are in the first stages of the business, but I'm also a small business owner and I have learned so many things during all this process. So I think that we always are learning, right?

Delmith M [00:03:02]:

And to determine your pricing of your products can be, even if you're just starting or even if you're just a really good established business right now, I think this is going to be really good for you. So I'm going to start. So figuring out the price that covers your cost and makes sales is often one of the most hardest parts of running a handmade business or any business, right? So maybe if you set a price too low, you're going to start losing money. Or if you are just guesstimate a price that is too expensive, maybe you're going to not have a lot of sales because your price is too expensive for the market. So both situations are clearly something that we always want to try to avoid. And today I'm going to explain to you some things that you should do to determine the prices of your products. So the first thing that you can do is to research on product prices.

Delmith M [00:04:10]:

How can you do this? So first, you are going to understand your market. Look out your industry. Who are your customers? What are their needs and preferences? So by doing this research, you are going to identify your target audience and determine how to price your products to be appealing for them and to say, okay, they like to spend, I don't know, $10 in a candle, for example. So once you know all of those little details of your audience, you are going to have a better sense of how to price your products. So some factors that you may consider is the demographics, so the age, where are they located, their interest is interested, or their hobbies. All of those little details that can help you figure out what they like and who they are. Next, you need to know your trends, the trends that are happening right now. Maybe it's super helpful to look on social media, TikTok, Instagram, what other businesses are doing.

Delmith M [00:05:30]:

And with this being said, you also need to look out for your competition, research your competition to see how they price their products so they can give you an idea of what your customers are willing to pay. So however, you can change this pricing. Maybe it's a similar business to yours, but you know that your products are more unique or you are offering something that has a very special thing. So you can price a little bit higher, or you can set a price that it's lower. It just depends on your business. But also your competition, in order for you to be affordable in the market as well.

Krystal Jugarap [00:06:16]:

I just wanted to build on what you were just saying. So it really is important to be mindful of how you want to position your company as well, right? So candles is a huge industry, but there are some high end candles that are quite pricey. And then there's those low end candles too, where you can get candles at the dollar tree. So it really is so important to be cognizant of how you want to position your brand. You don't want to look at the industry as a whole and be like, this person is charging a $70 candle. That means I can do the same thing. Are you a luxury candle? Is that the brand that you're putting out there and presenting to your people? That is something that you do want to be very mindful of and really be aware of what brands you're comparing to your own brand.

Krystal Jugarap [00:07:03]:

Make sure it's on that same level that you do want to position yourself in. You talked about the demographics and the age and knowing who your customer is and what their interests are, what they're willing to spend. Where do you find all of those little key factors? Is there something specific that you look at?

Delmith M [00:07:20]:

Well, I love to use, I was going to say how to do it. You can go to your social media, maybe you already have an account for your business and you can go there and see your insights of your account. There you can see the demographic, if they are female or male, the ages, all of those things. And also you can just look on, if you have also an email list, you can just see what type of persons are they. And I must say that I started with Instagram and look out with, I went to their profiles and see if they're moms or they're single parents or something like that. I don't know. And maybe you can see more of their interest there. I think social media is a good key to do that.

Krystal Jugarap [00:08:15]:

Yeah, definitely a lot of places you can look. Sorry for jumping the gun there. I'm sure that was something that you were about to go into, so I'll let you take it away.

Delmith M [00:08:24]:

So I just wanted to add on that you can also use Google for researching with what your competition is doing and also in social media to looking like. When you do your research for businesses, you can write like a hashtag, for example, candle makers. And there you're going to see tons of posts and business accounts that are in the same industry that can help you figure out what they are doing. And like you said before you do this research, you need to understand where is your business? Like if it's a luxury brand or it's something that you want to be more affordable or more simple. I don't know. You need to have that in mind in order to make that research, something that makes sense for you, right? So the other thing that you should do is to know your cost of goods.

Delmith M [00:09:31]:

This is something that you need to consider before pricing your products. Cost of goods are the main thing, like the core of your products. So you definitely need to know the cost of your goods. So this includes the materials that you use to create the product, your label cost, if you have employees, their salary, your rent, utilities, packaging, supply guys, all of those things that are included in order to make that product and fulfill every order. So all of these factors will be necessary to determine the price of your product. So it is also vital to keep track of all of your expenses with this specific step. I honestly try to recommend always Inventora, because maybe you're doing your products in batch and you actually don't know how much one of each cost. So in Inventora, if you just input all the things that are included in the batch, you're going to have a cost breakdown per piece.

Delmith M [00:10:44]:

So you will have a better sense of how to price your products. You're going to be able to keep track of all your expenses, which is great. And you're going to have a better sense of how to price your products. Yeah.

Krystal Jugarap [00:11:00]:

So with inventory, I'm glad you brought it up. So for the users that are using Inventoro, like, let's say I bought 1000 boxes, can I just put like 1000 boxes of whatever, $300 - sounds pretty unrealistic. And then it'll break it down individually for you, right? So you're not having to do all those little number crunching.

Delmith M [00:11:22]:

No. When I started playing around with the system, I was like, oh gosh, I wish I had this since I started because that's honestly one of the things that we struggle with, like calculations. So yeah, the system does that for you and you just need to input all the materials and things that you include in each one of your products and that's it.

Krystal Jugarap [00:11:49]:

Awesome. Thank you.

Delmith M [00:11:52]:

So I think right now I'm going to dive deep more into how to calculate your product pricing. And before doing this, you need to determine your profit margin. So a profit margin is of course what you are making and what you want to gain with each sale. So I research a little bit and around 8% to 30% of profit margin is fair for handmade businesses or for product businesses. This means that for every $100 worth of goods you sell, you should expect to make a profit of eight to $30. So it will depend on, like we mentioned, the quality of your products, the type of business that you are in. So once you determine your profit margin, you are able to, and you already know your cost of goods. So once you know all of these details, you are ready to start pricing your products.

Delmith M [00:13:03]:

So I have seen in a lot of places a basic formula that says that you should multiply your cost of your supplies per two, for wholesale price and for your retail price, you're going to multiply your wholesale price per two. But honestly, it's a very basic formula. And of course, in every product, your supplies are not the only thing that are including, right? We also have the hours that you spend doing the product, all your packaging, your overhead prices, and all of those things that are included. So I would say that that's a really helpful formula, but I highly recommend you to dive deep more and to calculate also the time you have spent in making that product. So there are two ways to do this. You can use an hourly rate to price your products.

Delmith M [00:14:14]:

Like set an hourly rate for all of your products. Or if you work out how long each product takes you to make, you can have a guide of those pricing. And you already know how many hours does it takes you to make each one of your products.

Krystal Jugarap [00:14:34]:

Yeah, I'm glad you mentioned that because I think especially for new makers, we often forget to take into account the time that we're spending on it. And it's so easy for us to be like, okay, I spent $10 on this, so let me charge 13. But how long did it take for you to put that together? And we really need to charge our worth, right? Otherwise you're just working for free.

Delmith M [00:14:55]:

Yeah, absolutely. And we know that time is money, so that's something that we definitely have to take into consideration when pricing your products. So now, once you have all of those things figured out, you need to know also what you want to earn each month to cover your costs. So, for example, your monthly overhead costs are $2,000. So this means that you need to earn $2,000 each month to just break even. But of course, we just don't want that. Right. We want to gain a little bit more in order to make a profit for it.

Delmith M [00:15:37]:

So some things that I already mentioned, some of them, but a good way to determine the prices, you need to take into consideration, of course, the production of your cost. So materials hours, price tags, packaging, supplies, all of those things. Next, your markup. So the markup is defined as the amount added to your cost price to arrive at the selling price. Then your overhead cost. That can be your product. Photos ecommerce shop shipping materials, tools and equipment that you have and also your seller fees. If you have an ecommerce shop, of course you're going to have seller fees.

Delmith M [00:16:23]:

And maybe you may say that it's not important, but if you add it to your products, that is something that it's really essential because it is included in every sale you make, right? So I think that's how you can make, how to determine your product pricing. And the last step, I must say, is to test the waters. So you have already your products, you know your cost of goods, you know how much time does it takes you to do that? And you have all of those details. You already price your products and now it's time for you to test the waters. Maybe it's going to be challenging at first, maybe you don't have a sale too fast, maybe it's going to take a while. But the good thing is that it's your business so you can adjust the prices anytime you want. Of course, I would recommend to stick in a price for a few months or so. And then if it's not working, then you can start adjusting your prices.

Delmith M [00:17:37]:

And I can mention some of the reasons that you should start adjusting your prices. And one is that if you're making more of a profit than you originally anticipated and you want to increase your prices to reflect this. The second option is if the cost of your materials in overhead cost has increased. Probably that is happening to everyone right now. So you're going to need to raise your prices to cover these additional expenses. Or if your price is too high and you're not making the profit that you like because you're not having enough sales, you can decrease your prices in order to have that. So whatever reason you choose to adjust your prices, that is completely normal and you just need to make it in a wise way, I must say, because some of your customers may say, hey, what's going on? This is too expensive right now. I can't not afford it anymore.

Delmith M [00:18:43]:

But if you just do like a subtle adjust of the price, people will keep buying from you. So that's completely fine. And always ask yourself, would you buy your product at this price right now? So if the answer is yes, then you are ready to go and you're doing a great job. Those are the basic things to price your products and to have a better sense of how to do it.

Krystal Jugarap [00:19:17]:

I am glad that you brought up that there's kind of a proper way to raise your prices. You don't want to just keep raising it every month because that could really deter a lot of your customers and your clients, and they might start to lose faith in you and not have, there needs to be intention behind it, right. Needs to be very intentional, the way you show up and tell people about any price increases. I think it really helps to be very transparent about the reasoning for it too. Right. Justifying that, I did want to ask you. So there was, I think it was a master class or something that I might have watched back in the day, and they were talking about how it's much easier to decrease your prices, right. Position yourself at a higher price point, and then later on if you feel that's not working for you, then it's easier to go down than it is to do the opposite, right? If you're starting out really at a lower price point and you're like, now I want to charge significantly more, it's hard to make that change. So I would love your insight on that.

Delmith M [00:20:19]:

Yes, I think that's challenging. But for me, well, I love to have a good customer service and to build that relationship with your customers. That way if you have a healthy relationship with them and you show yourself, like, as you said, very transparent and you are struggling with something, and if you're transparent, they are going to understand. So if you have a good engagement with them, people are going to say, it's fine. I love your products. I want to keep buying them. So I honestly must say that customer service and how you treat your customers, it's like the basic and essential thing to help you do this.

Krystal Jugarap [00:21:10]:

I totally agree. And at the end of the day, people really are supporting other people. The funny thing is, now that I'm saying that, I'm so sure that Diana had said that back to me like a couple years ago when we did our first interview. At the end of the day, people want to support other, you know, they're in the journey with you. They're not just buying the product solely for the products. I mean, maybe if you're kind of a luxury high end, they know you just for the brand but not the person behind the brand. Sure. But for small business owners, for handmakers, they really have that affinity attachment to the people behind the brand and they want to continue to support you along the way.

Krystal Jugarap [00:21:49]:

We're all kind of just figuring it out and being very like, I said transparent about any price changes, why and having the intention behind it. And you're not just trying to eye gouge anyone by raising your prices. There is a reasoning behind it and you're sharing that. Do you get any frequent questions from your inventory audience? Because I know you've talked about pricing before, probably on your IG lives or on your facebook group. Is there any common questions that you get that we haven't covered?

Delmith M [00:22:21]:

Well, I don't think so. Maybe it's more focused in wholesale pricing because people are. Maybe when they start, they are just thinking about their retail price because they are not able to start wholesaling their products. But I must say that if you already know your retail price, you can just divide it for two, right? And you are going to have your wholesale price because you already know the retail price has already your cost of goods and all of the things that are included. So it's going to be easier for you to calculate your wholesale price. I think that's one of the most frequent questions. And honestly, once they start using inventora, if you haven't seen the product, the system, I encourage you to do it because it really helps you understand your cost of goods and the cost breakdown per piece and all of those things. And with that, I think you're good to go.

Krystal Jugarap [00:23:33]:

Do you find it pretty common that once someone is ready to go into wholesale, they kind of revamp all of their pricing across the board and not just their retail versus their wholesale, they change everything?

Delmith M [00:23:47]:

Yes, I think that happens a lot. And maybe it is because they actually don't know how to do the wholesale pricing. And of course, I always mentioned that not all of your products are going to be good for wholesale. So you need to understand first which products are you going to offer for wholesale and then just focus on that and change the pricing for each one of them, not for all of your collections or for all your products.

Krystal Jugarap [00:24:19]:

Can you speak to the importance of having great pricing when it comes to pitching yourself to retailers?

Delmith M [00:24:26]:

Yes, I think that's something really helpful with wholesaling. Maybe you're contacting more brands that are like high end or they are bigger companies and they actually just really need to know your price. Like, okay, I love your speech, I love who you are, but I need to know the price. Right. So what I always recommend is to have a product sheet like the product pricing. You have to add there all of your details of each one of your products, the description, the details, the sizes that you offer and of course the price. And I think once you have that ready and you are sure, and you demonstrate that trust that you have in your business. And why are you making that with your wholesalers? They're going to say, I love it.

Delmith M [00:25:23]:

I want to work with you. So if you are sure about it and you don't hesitate about that, so you're going to gain their trust.

Krystal Jugarap [00:25:35]:

Love it. I think we could potentially even do, like a whole session on wholesaling. Yes. Because I know that's something that we definitely have a lot of people that are interested in. But thank you so much, Delmith. I think that was really all really important information. I think that is one of the more daunting questions when you first start a business. Like, okay, I made all these candles, but now how much am I going to charge? I have no idea.

Krystal Jugarap [00:25:59]:

Let's just slap around even 20 on it and hope for the best. But there is so much that does go into it. And as Delmith mentioned, for everyone that's listening, inventory makes it really easy for you to know your numbers. And it's so important to know your numbers so you're not selling yourself short, right? We have these businesses because we're really passionate about it, but we still have to take care of ourselves. At the end of the day, we still got bills to pay. So you want to make sure you're pricing it right and you are getting that money that you deserve for all the hard work you're putting into your business. Any last thoughts down there before we end it?

Delmith M [00:26:42]:

No, I think that was, I covered pretty much what I wanted to talk about today. And I hope this helps everyone. If you're starting or if you're just thinking about adjusting your prices. I hope this chat help you figure that out.

Krystal Jugarap [00:27:00]:

Yes. And Delmith and Inventora, Dianan, they're all amazing. So if you do have any questions after watching this or listening to this, you can head over to Inventora's IG page, where they're very active, and reach out to them with any questions. I'm sure Delmith or Dianna will be more than willing to help. Thank you again, Delmith, for joining us today.

Delmith M [00:27:21]:

No, thank you so much for the time. Absolutely.

Krystal Jugarap [00:27:25]:

And then, of course, for those of you that are listening, make sure you tune in next month where we will have our third of three sessions where we're talking about all about being a pop up pro, which I know a lot of you guys are dying to hear about. We have a really incredible small business community here that loves being a part of makers, markets and vendor fairs and all that. Fun stuff. And Dianna and Dalmith are pros in that category. Okay. With Terra, their home fragrance company. Dianna has been a part of so many markets, and she's been able to share that with Delmith. And Delmith, of course, has her own small business as well and works with so many small business owners.

Krystal Jugarap [00:28:08]:

So I know there's going to be so much juicy insight to share again next month. Be sure to tune in. But thank you so much for all of you at home joining us today, and we'll chat soon.

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