How to wholesale- Moving on up (your prices, that is)

If you read Monthly Jolt yesterday, you are aware that one of my goals for this month is to begin wholesaling. Even if you aren't planning to wholesale, or actively seek accounts, you should still have a plan in case you are approached. I've been doing quite a bit of research, and I want to share it with you! Today we will tackle pricing. This is difficult for many of us, we have trouble charging what we are worth. Even if you never plan to wholesale, this exercise can still be worth it to make sure you are charging what your product is worth.

If you are already selling directly to customer, you need to check your retail pricing. Wholesale prices are normally 50% of what you are currently charging retail. There are many pricing formula's out there, one of the most popular being material cost x 2 + profit. I personally figure my overhead to make the product- this includes materials, supplies, and business cost- plus my hourly wage plus my profit markup. An example if I made widgets- (these numbers are completely made up).
It takes $2.00 in supplies and materials to make a single widget.
To run my widget machine cost $1 in electricity an hour, or .05 per widget
Fee's for listing or selling my widgets are $1
I pay myself $10 an hour and I can make 20 widgets in an hour. Prepping them takes another 20 minutes each. So I spend 23 minutes per widget. So labor cost is $3.83 per widget.
I add on a 10% markup, or .68, for profit.
2+.05+1+3.83+.68=7.56
So then I round up to $8 to keep it simple. Now if I am going to wholesale, that is $4 a widget. My overhead is 3.05, so I would only be making .95 a widget. This looks bad, but if widgets are something that are bought in bulk, such as beads, you can put a minimum order on your terms, which can be either a minimum piece or minimum dollar amount. I this still isn't a number you are willing to work for, you need to adjust your hourly wage or profit markup. The trick here is not to mark up something so much that it will not sell. This usually isn't a problem because many artists under price themselves.
Also, the difference between product markup and hourly wage is this- you are paid your hourly wage. This is the amount you will put into your personal account to pay your bills or buy some ice cream. Your markup goes back into your business. If you have a surplus of markup at the end of a quarter or a year, then you can pay yourself a bonus if you so wish.


Now, if after this, you decide that there is no way you can afford to wholesale your widgets, don't despair. Not all items fall under that pricing formula. Demand can change your markup. Let's say you also make doodads. They only cost .40 in overhead to make, you can make 100 an hour for .60 hourly wage, but they sell for $10 each. My math may be failing me here, but that is %900 markup! That means at a wholesale price of $5 you are profiting $4.60. You can at this point decide to only wholesale doodads, or to wholesale both with the plan being to make up for any loss on the widgets with the doodads.

The point I am making is that you need to find a pricing formula that works for you, and if you are planning to wholesale at any point, that formula will need to take account of that from the gt go.

Next time we will tackle production plans and payment, followed by the final installment- terms and invoicing.