Sarah (from the Boutique Hub) presents Part 2 of a short video series on "Finding Cash in My Business," focusing on pricing/markup strategy for small retail businesses. She contrasts 2x vs 3x markup using a $10 cost example to show how retail price affects units needed to hit a $50,000 profit (10% of $500,000 sales target), highlights operational costs and markdowns that scale with volume, and advises pricing to value rather than competing solely on lowest price. The piece emphasizes doing the math, accounting for costs/markdowns, and ensuring owner profit (paycheck) is built into markup.
Chapters
Hey guys, it's Sarah, back with the Boutique Hub. And I'm back with the second part of my video about finding cash in your business. Now it's time to talk about markup. The big question, two time markup or three time markup? Well, you know me, if you've taken any of our courses here at the Boutique Hub or talked with me in any coaching session, especially in rbc, I really like to coach to price your product for what it is worth, what someone will pay for it. Right. And make sure it's worth the that investment of your time and energy. But I just want to bring you up a little breakdown here of the 2x versus a 3x pricing strategy. So let's say you have a $10 item, right? And. Well, let's back it up just a second. So say you want to profit $50,000 in your business. So $50,000 means, you know, 10% of your total sales. That means you should be bringing in 500 grand into your business if you want 10% profit for you. Okay, so $500,000 sale goal. So now you've got those $10 items, right? $10 item, and your two time market means you're going to retail that at 20 bucks. So that retailed item at $20. If you want to bring in $500,000, you need to sell 25,000 units of that $20 retail item, right? So 25,000 units sounds doable. Now let's go ahead and back that up and say, okay, what if that item, that $10 item, I could sell it for $30. What if it's actually worth $30? What does that mean to my business? What does that mean to my time and my investment into my business? Well, that three time markup on that $10 item means now that's going to retail at 30 bucks. So if we take $500,000 divided by the $30 item, that brings that down to 16,668 ish units. That's a difference. That's a difference of 8, 400 units over the year that I would need to sell. Now think of that. 8,400 units. How much time does it take to sell 8,400 units? How many poly mailers, how many people's hands touching it, moving it, merchandising it? All of the things in the store, all of those things cost money. So you could either sell 25,000 units or 16,000 ish units, make the same exact profit, right? That's, that's your gross profit. But then by the time we look at the net, what are we left with? Remember the net? Like scooping water out of the, out of the lake. Everything else that falls back out, what you're left with is what you get to take home. That's your net. So think about the difference there and what it costs you to sell additional 8,400 units. How much time does it take? How much supplies does it take, how many man hours does it take? All of those things. Oh, and yeah, don't forget, we're probably going to end up having to discount some things. Yeah, when you're talking that much volume, you're not selling 25,000 units at full price. You're not actually selling 16,660 ish units at full price either. You have to absorb some markdowns. So that's the biggest question here. Is your pricing strategy able to afford all of those things? And is, are you willing to put in that extra time, the extra effort, the extra expenses to gain those extra, potentially gain those extra clients? Now here's my argument there. I think gaining clients is huge. Yes, you cannot build a business without bringing in new clients. But if you're bringing in new clients based 100% on being the lowest price available, guys, there's always somebody who can do it cheaper. Customers are not loyal to you because of price. There's plenty of big box stores out there that can undercut you in a heartbeat because they buy bigger volume than you do. So I don't want to tell you one way or the other. I just wanted to give you guys a heads up on this. Open up your eyes a little bit to this pricing strategy and put the pencil to the paper and really do the math. Math doesn't lie. Right? Your elementary school teacher told you that. So take a look at what you have in your business and what that markup is currently and how many units you would need to sell just to bring home the amount of money you want to bring home at the end of the year. Your pricing strategy, your markup has got to absorb the cost of the item, the markdown of the item, all your expenses. But don't forget, don't forget this goes along with the first video I did about finding cash in your business. It has to absorb your profit. You're important. You should be paid. You should earn a paycheck in your business. Non negotiable. So my first video is about all the cash laying around in your business. And guys, that markup, you're leaving cash on the table. There's cash. You're just losing out on if you do not pay attention to your markup strategy. All right, you guys follow us for more tips here at the Hub, and we look forward to working with you soon.
