Business 101 with LARK: Pricing, Profit Margins, and Scaling Your Brand
If you've ever asked yourself, "how do I price my products?" or "am I making enough profit?" you're not alone. Pricing is one of the trickiest parts of running a small business. Getting it wrong can risk scaring off customers or not making enough to sustain your brand.
We're help to help. Here is the LARK guide to the essentials of pricing, profit margins, and scaling your business to a thriving and sustainable brand. Let's talk money, honey.
STEP 01. UNDERSTAND YOUR COSTS
The secret to setting a price is knowing exactly how much goes into your product. Your product makeup includes...
Raw materials: Wax, fragrance oils, wicks, jars, lids, dyes, etc. The materials required to bring your creativity to life.
Packaging: Boxes, labels, dust covers, stickers, etc.
Shipping + handling: The cost of shipping your orders. Don't forget to include your packing materials.
Business expenses: Website hosting, marketing, insurance, rent, etc. These are your overhead costs.
Production time + labour: Your time has value. Don't low-ball this one.
Get out your spreadsheet and track all of these expenses to the cent. Guessing at your costs is the fastest way to losing money.
STEP 02. PRICING FOR PROFIT
Math can be hard, but we have a simple formula to get you started.
COST OF GOODS SOLD (COGS) x 3 = WHOLESALE PRICE
WHOLESALE PRICE X 2 = RETAIL PRICE
Simple right? This formula makes sure that when you scale to wholesale, you're still making a solid profit from your products.
And yes, you can charge more than whatever price the formula outputs. Factors like branding, premium packaging, limited edition collections, and high-end raw materials can all justify a higher price point.
STEP 03. PROOFING YOUR PROFIT MARGIN
Your profit margin is the money left in your pocket after covering all those costs we laid out in step 01. An ideal wholesale profit margin is 30–50%, and an ideal retail profit margin is 60-80%. If you're falling below these margins, it's time to reassess your costs or your pricing.
STEP 04. SCALING YOUR BRAND
You've followed the steps and correctly priced your products. Phew. The next phase: scaling your business. In other words, increasing your sales and revenue without working yourself to death. Here are some ways to do it...
Wholesale + stockists: Sell your products in bulk to retailers to boost your revenue.
Subscription boxes + bundles: These encourage repeat purchases via monthly product drops. Keep the people coming back for more.
Limited edition + seasonal products: Keep your customers on the hook with exclusive collections.
Influencer marketing + PR: Get your products in front of new audiences with social media collaborations.
Hiring help: If you're drowning in orders, it's time to expand the one maker show. Outsourcing production or admin work can free you up to do the important work of growing your brand.
Presto. A profitable business is a mix of smart pricing, solid margins, and strategic scaling. Don't fall into the trap of pricing your products too low. It might get you more sales initially, but it will burn you out in the long run. Value your time and your products. Price with confidence and reflect growth in your prices as your brand grows. We believe in you, makers.