Should it Stay a Hobby or Grow Into a Business? Part 2 – Money and Pricing

If you’ve decided to go ahead with starting your own business, that’s awesome! I’m assuming you have a vision already, with a good idea of who you’d like to be selling to and what you’d like to sell. You’re all set to get the ball rolling! The next big thing to consider is money. All the little costs of starting up have a way of sneaking up on you so it’s great to have a solid plan for what you want to put in and what you want to get out of your business. If you missed Part 1 – Laws, you can find it over here at this link.

Investing

As I mentioned, there can be so many costs when starting up a business so it’s good to have an idea of what you’re willing to put in right now and what can wait until you’ve started making some money. Here’s some of the things you might want to buy for your business: branding like a logo, a website, an email address, business cards or other promotional materials, ingredients, packaging, supplies, equipment, software, and rental of spaces like storefronts, kitchens, or land. I didn’t make a solid plan when I started so I bought things I didn’t need and spent too much money on some things that weren’t actually important.

For all of these, there’s a wide variety of options from free to expensive! It can be overwhelming to try to do everything yourself so it’s helpful to really reflect and be honest with yourself about what you need, what you’re good at already, what you can reasonably learn, and what you would rather outsource. Other investment costs will vary depending on the structure of your business. For example, if you sell at markets, you’ll have different start-up costs (like tables and displays) than you would if you just sold online.

Try picking a realistic amount of money you can invest in your business right now. Write down all the things you think you’ll need for your business. Rank them from need to want. Research your options and prices and see if this affects the rankings. Pick what you need the most for launching that also fits into your budget. The rest of the list is like a dream list for when you have more to invest. It’s always good to reassess too after you get going!

Pricing

Since you’re investing in your dream, you want to be sure you’ll see a return on the fruits of your labour! I feel like it’s important to have a firm idea of what you want to get for your work before you start because it helps ensure that you’re confident about selling. You also don’t want to start off by losing money! There’s 5 aspects of pricing I like to consider:

  • Ingredient cost
    • You want to make sure you’re recouping all the money you put into ingredients. If you’re using herbs you’ve grown yourself or foraged, you could look at websites that sell herbs for a good starting point for assessing their value.
  • Labour cost
    • Don’t forget to pay yourself! Your time and expertise are valued. It’s helpful to set your wage per hour so you can just add it to the calculation. If you’re uncomfortable with the idea and have no idea what it should be, I suggest starting at $15/h which is a fair minimum wage.
  • Packaging cost
    • This includes things like: tins, jars, labels, ink, boxes, bags, twine, packing nuts, whatever you’re spending money on that wasn’t an ingredient. Your goal is to avoid taking the hit for any costs yourself.
  • Customer
    • The kind of market you’re entering into and the customer you want to attract will affect the price you set. For example: I found that when I set my price too low, people were less trusting of me because cheap is sometimes seen as suspicious!
  • Internal beliefs
    • As healers, we often want to just share our healing without taking anything in return. For a business, you have to believe that you deserve to be paid fairly for the magic you’re creating and sharing! You pour yourself into your healing work and you share a part of yourself with everything you craft. Our first instinct is often that it feels wrong to charge for healing but if you want to keep sharing your gifts this way, it’s only sustainable if you charge fair prices. This can be difficult for a lot of people so if you need to, spend some time to work on exploring how the concept of money makes you feel. A good book for this is The Art of Money by Bari Tessler. If you know your worth, you can stand rooted in your belief in yourself and your business so that you’ll be able to continue healing others through your work.

Pricing Example

Here’s an example using Wellness Mama’s Imitation Burt’s Bees lip balm:

Lip balm containers are .15 oz and this recipe makes 12 lip balms. We need to make 1.8 oz of lip balm. I prefer working with metric so that’s 51 g. I’m going to round up to 54 g for all the lip balm that won’t make it into the container 😉

It’s too hard to work with tbsp so we’re breaking the recipe into parts so we can see how many grams each part is. Since we have the total grams and each ingredient is equal, we’re just going to divide 54 g by 3 to get 18 g. The ingredient prices are taken from Mountain Rose Herbs.

1 part bees wax = 18 g………… $15 for 454g = $0.03 per gram…… 18g x .03 = $0.59 total

1 part shea butter = 18 g…………$10.40 divided by 454g = $0.02 per gram…… 18g x .02 = $0.41 total

1 part coconut oil = 18 g…………$19 for 907g = $0.02 per gram…… 18g x .02 = $0.41 total

Luckily someone has done all the hard work to figure out how many drops of essential oil are in standard size bottles. Here’s an excellent post from Mountain Rose Herbs. My 15 ml bottle holds 300 drops then and I’m using 30.

30 drops peppermint essential oil: $8.50 for 300 drops = $0.028 per drop and $0.85 for 30 drops.

For the ingredients, our total is: $2.26

For packaging, it’s 30 cents per lip balm tube so 0.30 x 12 = $3.60

The sticker paper I use for labels is $14.45 divided by 8 pages. This is $1.80 per page and 1 page will fit 12 lip balm labels (not cost effective!)

The shrink band I use to waterproof the label and guarantee it stay on is $.09 x 12 = $1.08

For the packaging, our total is: $6.48

Let’s say it takes me half an hour to make the lip balm and get everything labelled. Half of an hour at $15 an hour is $7.50.

For the labour, our total is $7.50

So far, our total is $16.24 for this batch. To be fair, we didn’t buy ingredients or packaging in bulk to help keep costs down, the labour estimate might be off, and my sticker paper is absurdly expensive. If we divide this total by 12, we see that we need to see each lip balm for $1.35 at the very least to break even. We don’t want to just break even though! Often people suggest doubling this number to account for profit. You can decide how much profit you’d like to make off your work but we’ll go with doubling for the example which is standard. The concept of profiting can be uncomfortable as well so spend some time with that concept as well if you need to.

This would take us to selling the lip balm for a minimum of $2.70 per lip balm.

You can adjust this final number based on your market and customer. Perhaps you decide to round up to $3 if that’s normal in your market and your ideal customer would find it reasonable, or perhaps you even jump up to $5. It’s also more convenient for in-person cash sales to use whole numbers. This is definitely a lot of work but if you use programs like Craftybase, you can have it calculated for you. If you’re an Excel Wizard, I’m sure you can make it easy! No matter how you decide to do it, the work is worth it to know exactly what you’re putting in and what you want to get out!

A note – I don’t sell online so I’m not sure how to factor into our price the box and packing nuts and tape and things like that. Please share in the comments your strategy for this if you sell online!

My last bit of advice relating to internal beliefs is to try not to compare your prices to store prices or other people’s prices and feel that you can’t charge $2.70 for a lip balm. Burt’s Bees sells for $4 a lip balm where I am. At markets, I’ve seen lip balm like this selling for $6 a lip balm. Whatever price you choose, you’ll feel confident about it after reflecting and putting in the work to gauge an accurate price for your market and your business. When I first started, I was just arbitrarily picking prices that felt “fair” without looking at the costs beyond ingredients. Prices need to consider the whole process and be fair for us as well! If you struggle with the concept of pricing, breaking down the costs exactly like this will help you feel more confident about the price you choose.


Let us know in the comments your money tips for starting up or if you do pricing differently!

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One Comment Add yours

  1. forgottentraditionsllc says:

    I sell online and the packing materials I use are soured from the packing material received at a local natural food store that I have made arrangements with. By reusing packaging I not only save cost but reduce waste as well.

    Like

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