Retail and Wholesale Pricing Math That Makes You Profitable

Stop guessing your price. If you sell a physical product and you've ever felt this weird mix of people are buying, but I still don't feel profitable, or I don't know if my prices actually work, this episode is going to give you a simple grounding method you can come back to again and again. Because here's what I know about pricing. Pricing is not just math. Pricing is confidence. Pricing is leadership. Pricing is you deciding my business is going to be sustainable. And today I'm going to teach you the simplest pricing foundation that I teach product-based business owners. It's the framework that protects your profit, sets you up for wholesale when you're ready, and it helps you stop underpaying yourself while you work your face off. Okay? So this is the formula. You ready for it? We're gonna work through this, but it's this: cost of goods times 2 is your wholesale price. And then wholesale times 2 is your retail price. Boom, mic drop, but don't go anywhere because that's the simple version. There are nuances and we're going to talk about them, but if you're not doing at least this, you're definitely underpricing your products. And I want to say this upfront because someone needs to say it. Underpricing doesn't just hurt your bank account, it hurts your energy. It hurts your ability to stay in business long enough to win. So today I'm going to walk you through 3 things. First, what cost of goods actually includes, because most people miss costs and then every number after that is fake. Second is the 2x, 2x pricing method for wholesale and retail with a simple example. And third, what to do when you run the math and the price feels impossible. You're like, there's no way people are going to buy it for this price. So I want to help you with that without lowering your quality or changing your entire product. And I'm going to give you this moment at the end because I believe that our businesses are always mirroring something to us of, of development, of, of something that's blocking our growth because pricing always reveals something deeper. Ooh, it's a little pain point, right? It like, it pokes at scarcity or not enoughness. So we're gonna get into that. Hello and welcome to the Product Boss Podcast. I'm your host, Jacqueline Snyder. I am so glad that you are here. Make sure that you are following the show wherever you're listening so that you get these episodes delivered straight to your podcast inbox every single week. Now, we're here to help product-based business owners no matter what you sell or where you are in the world. So no matter what you sell, where you're selling it, and it works across multiple sales channels because ultimately what we're teaching here at the Product Boss is real business strategy that you can use no matter what you make and no matter where you sell it. So let's start with the first part, cost of goods. So when I say cost of goods, I mean everything that one unit requires, okay? One unit. It's not including your rent, it's not your Shopify subscription, and it's not your marketing. It's also not the cost of doing business overall, like, ah, I've got all the bills. That's not it. Cost of goods is what it costs to produce 1 unit of the product. Cost of goods includes your raw goods. I've got a candle in front of me, okay? The raw goods are the vessel, the wax, the wick, the, the base of it, the, the essential oils that goes inside. Then it includes the labor. The labor is what does it take to make this 1 candle? And then the packaging. Now the packaging can include the label, the box that it comes in, but not the huge shipping box, but literally like how does this one candle get shipped? And anything else that an individual unit of the product requires. So if a unit can't exist without it, it belongs in the cost of goods. And this is where most product business owners get tripped up because they're pricing based on materials and they forget the rest. So The price is based on what it costs me, but what that really means is what the raw materials cost me. Does that make sense? And so then they wonder why they have sales, but they still feel broke. So let's get into that, because a lot of businesses are running on fumes. So here's what I want you to remember. If your cost of goods is missing pieces, your pricing will always feel confusing. So now let's talk about labor, because labor is the most emotionally loaded part of cost of goods, especially if you're a maker. So some of you are very comfortable paying for materials. In fact, if you look around your room right now, your office, your studio, I'll bet you got a lot of raw goods that are not being used, right? So you're like, buy up all the things. And maybe you're even comfortable paying for packaging or labels or inserts. But when it comes to your labor or paying someone else for their labor, You hesitate, right? This is a big, big trip up. You might be minimizing it, or you might be saying, I deserve all the money in the world to make it. You might be treating it like it doesn't count or that it counts too much. And that's the fastest way to build a business that depends on your exhaustion, that's not paying you for the work, and then ultimately the product's not priced right. So here's what I want you to think about when it comes to labor. Labor is not what you're worth. I wish it was, but it's not. Labor is the cost of producing a unit. So we're building a business that can scale beyond your personal bandwidth. That's what we're doing here. And if you're a maker and you're like, there's no way, like I can't possibly make more than what I'm making, that's okay. In this moment you can't, but as you listen to this show, as you subscribe to the YouTube channel, maybe become one of my students at the Product Boss Sales Accelerator or at the Collective, or maybe you just join one of my bootcamps or challenges. You're going to figure this out, how you get to grow a business, right? We're moving this away from being a hobby and we're growing it like a real business, and we're going step by step. So give yourself that grace because here's what I want you to hear. You deserve to be paid well. Of course you do. But for pricing, we need accurate labor time and a realistic labor cost, and then we work on getting the labor per unit down through better processes so you can be profitable without raising your price into a place where your market can't bear it. Now here's the other thing I want to say to you. This is if you're a maker, but if you are, if you're manufacturing, perhaps you're sourcing the goods or you're having people, like when I was in the fashion industry, I had people cut and sew my garments. That's when I would take the apparel and I would source it amongst multiple manufacturers and say, how much will you charge me for this, for this many units? How much will you charge me for this, for this many units? And then I got to look at the end price of cut and sew and see, did it work into my retail price? If you're sourcing products, same thing. You get to say, okay, like, they're going to give me the finished product shipped to my door for $11. Will the market bear it? So we all have different ways of calculating our costs and our labor, and it just depends on the process in which you're getting your products made. And that's the game, and that's okay. Alright, so once you have the true cost of goods, your raw goods, your labor, packaging, and the per-unit requirements, now we can get to the price. So here's a simple method. I want to use a necklace for example. So let's say the total cost of goods for a necklace is $10. That $10 includes the materials, the packaging, and the labor to make one unit, one necklace. So step one, we look at cost of goods and we take that times 2 to give you your wholesale price. Cost of goods times 2, so $10, let's say the cost of goods is $10, times 2 is $20. Before I move any further, I am giving you a very blanket calculation. So my students in my programs, you get a cost sheet and a calculator and there's more in-depth training. And the reason that, that I wanna say this upfront and, and say this in an important way is that there are thousands and thousands of you listening to the show right now. Thank you for listening. And I'm going to give you a very baseline because if you're pricing, if you're costing and pricing at this 2x2 markup, you're in a good spot. But the more we dig into it, there might be a markup, and I'll share this a little bit later, there might be a markup where it's higher than times 2. Right? It's higher than times 2 times 2, right? We might have bigger margins, but that's gonna be where we get into the nuances of your business, which is why, especially let's say in the Collective, it's very much more personal coaching, more customized to you so that we can really dig into this. But also my Accelerator students, we talk about this in the first and second week in that program. So that with the baseline, but we're gonna come back to the times 2 times 2 for the show. We go back to it, $10. As your cost of goods times 2 is $20 wholesale. So that necklace would be $20 wholesale. Then step 2, we take wholesale times 2 and it gives you your retail price. So $20 times 2 is $40. So the retail price for that necklace will be $40. Now that is the simplest pricing backbone. If you did anything but go off of this, you will be profitable. So cost of goods to wholesale is that 2x markup, but I will say that Wholesale to retail, typically depending on the market that you're in and what retailers want, they may want a 2.2, 2.3 markup. That's where I said it kind of gets into the nuances. If anything, we go with the 2 times 2. Cool? So depending on the market, retailers might be looking for something more, and that's where we get to play, especially when I have the honor of being your advisor and your consultant. Wholesale to retail relationship can range., but I don't want you going lower than this foundation that I'm sharing with you today on the show, because the foundation does two important things. One, it gives you the margins to operate your business from the units sold, and two, it gives you the margin to pay for the cost of doing business, which are your processing fees, your marketplace fees, your booth fees, without destroying your profit. Now, I have zero issues with paying those fees when the pricing is correct, because you've built in the profit margin to afford it. That's the point of your margin, so we can handle this. So if you've been afraid of fees or if you've been resentful of fees, the issue is usually not the fee. The issue is that you're underpriced. Then there's no money left over because you're paying the fees and you're like, why? So let me just talk to you about this here, because this is the moment where a lot of you are nodding along and then you're running the math in real life and you go, cool, But this doesn't work for me. So I want to talk about that because it's really, really, really common, especially for makers, especially early on, especially when you're just starting to do this for the first time. What happens is you calculate cost of goods, you do the 2x by 2x math, and you end up with a retail price that feels way too high for what you think your customer will actually pay. So instead of treating that as information, you treat it as a verdict, like, ah, can't do it. You say, I can't do wholesale, or I can't be profitable, or people will not pay that price. But pricing is not a verdict. It's a mirror. It's telling you, here is what it costs. This is what it could be priced at. And it's showing you what's actually true about your cost structure and your process. Right now. Now I coached someone on this today inside of the Product Boss Sales Accelerator. And if you're hearing it, thank you for being the example. So she makes bags and she's still sourcing her fabric at close to retail prices. She gets a small discount, but it's still expensive. And when I say expensive, when we're really looking at these numbers, we start to say, oh wow, yeah, fabric's costing a lot. So she told me it takes her also, it takes her about 2 to 3 hours to make one bag. So we pulled up our cost sheet that my students do get inside of the accelerator, and we started to do the math. We looked at the real costs. We took raw goods plus the labor plus the packaging, and the pricing came out to be a number that didn't make sense in her current market or for the product she was selling. So here's what I did not tell her. I did not tell her to change her bag design first. I did not tell her to reduce the quality of how she makes it. And I did not tell her to cheapen the product because this is how you lose the customer. So instead, we got to look at this in a different way and asked a different question. How do we reduce the cost to make this product without changing what makes it special? Because in products, we're always looking at what is the lowest cost it can be for the company to make it while we're also keeping the quality where we want it and matching the brand to the end customer. So if the pricing math feels impossible, you you have two main levers that you get to pull. Lever one is sourcing. Are you buying materials like a consumer or are you buying them like a business? Because if you're buying at prices that are meant for the end customer, of course your margin's always going to be tight. You're trying to build a wholesale-ready product while paying retail-level prices. That really raises the cost of your products and that doesn't work. So one of the first questions is, where can you source the same quality fabrics or materials or raw goods at a better price point. And I'm not saying cheaper quality, I'm just saying, can you find better sourcing? Can you find the source to get it from, right? Where your fabric stores are getting the fabric, you go get it from the same place. And if you're like, oh, but my business is too small and I can't do it yet, that's okay. At least start to find the places, at least try to find out what the price is per yard or for raw goods so that you know when your business does get a bit bigger, you can source from those places. Now lever 2 is your process. So let's talk about makers to start. Makers often make 1 unit at a time, or you're operating more in a way of a creative process than in a manufacturing process. Now manufacturers make in larger batches. So when I'm sourcing with a factory, they're asking me, we're talking about what our minimums are. And they'll actually charge me more when I have lower minimums, meaning I'd like you to make 100 of these candles, great, here's the price. But I'd like you to make 500 of these candles, great, here's a lower price. I'd like you to make 1,000, here's an even lower price. So the more units you make with a manufacturer when someone else is manufacturing for you, actually the lower the cost goes per unit. So when you're looking at your labor, we don't just accept this idea of it takes me 3 hours to make 1 bag and then stop there and be like, well, I guess the pricing is just out of whack and I'll never be able to sell it and I have to change everything and throw the baby out with the bathwater. No, we ask, how do we build production in a way that reduces labor per unit without changing the design, without changing the quality? And you start to ask yourself questions. How can I cut more than 1 unit at a time? Or in this case, for example, for this bag, she was cutting 30 at a time, but what if we cut 100? What if we cut 200? Can you see how the price per unit goes down when you cut more at once, or you have the same production capability. So like, you know, you pour the candles and it's like I mix a giant batch. That hour of mixing your batch is the same amount of time of whether you're pouring for 30 candles, you're pouring for 100 candles, right? But you're doing it all at once. So you see how you can make more units per hour. That's how you bring the cost down. Then you have to think, how do I set up my station so I'm not constantly resetting and starting over, right? We really want to think in production and batches. Because when you make more units at once, the labor cost per unit will come down. It's that simple. Same product, same design, same quality, just a better process. And this is why I say your cost structure will mature as your business matures. In the beginning, you might not have the lowest cost of goods. You might not even have the best margins, right? You're not going to have the best sourcing in the beginning. You may not even have the most efficient process. Yes, your margins might be smaller, but the goal is that as you grow, as you make more units, as you make more sales, you will be able to bring your costs down and your margins get healthier. That's the path. I know this because I've started over 2,000 fashion brands, like fashion apparel brands, including my own, and people came in and they had nowhere to sell their products. We were just going into production and then we had to sell it. And so I've always worked from this kind of like we're just starting out, how many can we make and get the best price, and then our next job is how to sell it. So here's another important thing that I need you to hear and what I teach. Sometimes at the point that you're at right now, you may not be ready for wholesale yet. Yet, I say yet, not because your product isn't good, but because your current cost of goods and your labor does not support Wholesale margins. And that's the goal. Whether or not you ever want to sell wholesale in the future or not, the goal is, is that you can get wholesale margins. So if an opportunity arises, you can sell, but for sure, so you have at least a 4x markup. And I know that that can feel disappointing to some of you right now that are excited about wholesale, but I would rather you be honest about your numbers than say yes to wholesale pricing that makes you resent your business or not have any money left over, not be profitable. So if wholesale doesn't work yet, here's the minimum I want you to aim for. Can you go from your cost of goods to retail? Can you try for 3x? Meaning maybe you're not times 2 times 2, but you're like times 1.5 times 1.5? Or can you just say, okay, let's say it costs you $10. Can you sell it for $30 retail? And if not, at least that 2x margin and play with that there. You also have to think, is this a mindset thing, which I'll get into in just a second. So the closer you can get to 4x, great, and above that. And I also need to let you know that there is no rule here. There is no rule. If you can make something for a dollar and sell it for $20, do it. If people are going to pay you and the quality, great, amazing, wonderful. And also, when I say you can sell it for $20, it's because it's what the market will bear. And that takes us down another path of you understanding what the market will bear, not just what your local neighborhood says, not what your local market says, but really understanding your brand and its position. The goal here is that your cost of goods to your wholesale to your retail, what we really wanna do is make sure we're supporting you from a profit margin that is sustainable. If you can't get there yet right now, that's totally okay. It just means that you get to take action and have an action plan. Your goal is to bring your cost of goods down through sourcing and through process. And while you're doing that, you can make some smart decisions about where to sell and how you sell. Now I want to go one level deeper here because pricing is not only math. Pricing also has to do with brand. Your retail price is not always a perfect reflection of your markup. And this is where people get confused because they think pricing is only cost, plus markup and the calculation I just gave you. But the truth is, is that people don't only pay for the materials, they pay for the positioning, they pay for the brand, they pay for meaning. So two products can have the same material, the same cost, and sell at totally different prices because the brands are different. So I've got an example in front of me, so if you were watching this on YouTube, you can see it too. So make sure that you're following and subscribing to the show on YouTube. There will always be a, a link in the show notes. And if you're watching, hi. Okay. So I've got two candles sitting in front of me. They're both the same ounces of what's inside. They're both made with wax, with a wick, with the wick stand, and with essential oils, and with some sort of labeling or packaging on these jars. So what's the difference between these two products? Well, this one that's made by one of our students is a $35 candle. Great, amazing, beautiful. It smells incredible. And then I'm going to show you this candle. Now this brand is, um, Fornasetti, and this candle is $380. So we have a $380 candle next to a $35 candle, same raw goods. Maybe the vessels are a bit different, but to go from a $35 candle to a $380 candle, there's got to be something else, right? Is this like the ears of baby angels? No, it's the brand positioning. That's what makes this product be able to sell for $380 and this product sell for $35. Both are beautiful. They have different customers, but here's what I want you to know. There is no cap to how much you can charge, right? You can charge what you want for anything if you're positioning the brand, you've got solid positioning in the marketplace, and your end customer matches it. Hear me when I say this, your cost of goods will give you the floor, right? It protects your profit, making sure that you know what your pricing is and how you price from that, like your markup, right? It gives you the minimums that you need to be sustainable. But brand and positioning, that influences the ceiling, that influences the market and what the market is willing to pay based on the perceived value. And a customer looking at these candles, they're not saying the perceived value like this wax is made of gold. And you know, like I said, baby tears of, of angels raining from the heavens. No, it's just the perceived value of where this product is sold, the positioning of it, the way it's presented, and the customer match. So it's really what the customer is willing to pay. So the move is not just to think about cost of goods, And it's also not just charge what you want. The move really is, is to build a profitable foundation and then build a brand that can command a higher price. Because when you have the right profit margin, you can operate your business properly. You can pay your fees, you can pay for help, you can pay for better sourcing, and you can pay for the cost of growth. That's what the profit margin is for. Now let's just dig into what might be coming up for you when we talk about pricing and margins and costing, because this is where pricing really gets real. If you're underpricing, it's usually because you're trying to solve a discomfort problem with a pricing problem. So what does that mean? That means you feel uncomfortable being expensive or whatever you perceive to be expensive. I literally today coached someone that was like, my candles are expensive. And I think her candles were like under $50. And I said, this is why I brought up these candles. I was like, $50 expensive? And I pulled up neimanmarcus.com and I was like, look at this $800 candle. Look at this $380 candle, which by the way, my sister-in-law bought it for me. I love it. I burnt it. And right when I got to the end of it, I said, oh my goodness, I need to go reorder one. And then I found out it was $380, and then I thought, oh, my scarcity would've been like, you're never burning that candle, but I did, 'cause I didn't know the end price, right? So expensive to me was affordable to my sister-in-law who bought me this as a gift. So we really can't determine things as expensive. We really just need to match the pricing to the end customer. So expensive is relative. Another thing that comes up for people around pricing is that you might be uncomfortable asking for money, or you might be uncomfortable standing behind the value of your products. Maybe you're afraid that you're going to lose people who want the cheapest option. And here's what I want to tell you. If you want to build a profitable business, you can't price for everyone. In fact, you should not be pricing for everyone. You want to price for the customer you want. You want to price so that your business can sustain and so your business can grow. You get to price your products for the version of the business that you are actually wanting and will actually exist. And it doesn't mean that you have to be the person who buys for your own house $380 candles, but if you know there's a market for them and you know how to build a brand, amazing, right? Amazing, because you know, here's my product, here's my end customer, how do I make the product and the customer fit? So here's a couple questions for you so you can reflect on this for yourself. Are you pricing based on what you think people will pay or based on what it costs to make it and run your business? Because one of those builds a real business and the other one builds a higher effort job. And guess what? We all want to get out of our jobs. Okay, number 2, are you paying yourself for the labor in your cost of goods or are you quietly donating your time to your business, right? Is this a hobby or do you want it to be a real business? Because if you're donating your time or you're not getting paid, then the business will always feel heavy. We need to build labor in so that we can build you out of the making process so that eventually you could just swap yourself out with someone else who would be so honored and excited to work for your company. Think about it. I was just telling them this today. There are potters out there that are skilled at pottery but don't want to own a pottery business? You do. They don't, but they wish they could have a job where they got to make pottery all day. Okay, and number 3, if you raised your prices to a profitable number and sales slowed down a little, would you still be okay? Because selling fewer units profitably is often healthier than selling more units at a margin that doesn't support you. I'd rather you have a smaller business with more profit margin than no profit margin and just having a really expensive hobby that's costing you money and time. And number 4, are you using my market won't pay as the final answer before you've explored sourcing and process? Because a lot of times your market isn't the problem. A lot of times the cost structure is the problem and you can fix that. So let's bring it home with a simple recap. Pricing for profit the way I teach it looks like this. Step 1, calculate true cost of goods, raw goods, labor, packaging, and anything per unit requires. Step 2, cost of goods times 2 gives you your wholesale price. And step 3, wholesale times 2 gives you your retail price. And if your wholesale doesn't work yet, your goal is to get to at least 3 times your cost of goods for retail, ideally 4, but when you mature at sourcing and process, all of this will fall into place. And then you build your brand and your positioning so your customer understands your value and you're not stuck competing on price. So if you've been underpricing, let this be your permission to stop guessing, to stop asking your business to survive on your exhaustion and underpricing, and stop treating profitability as a luxury. Profit is not extra. Profit is what makes the business sustainable. So now if you've listened to this and you're thinking, okay, I need help with my pricing, my product lineup, and my next steps, like I need someone to look at my numbers and tell me what to do. Here's what I want you to do. I want you to consider joining one of my programs. I know I'm just going to say it because in there is, is the roadmap, right? It's the strategy and the support that you're looking for. So if you've been listening to the show and you're like, okay, yes, I really want to explore what program works at The Product Boss to help my business grow so that you can get the trainings and the feedback on your costing and your pricing and really grow your business. Then I want to invite you to book a call with my team. Now, they're not going to review your pricing, but we will talk through where you are, what you sell, and what the smartest next move is for you and how The Product Boss can support you in that. So all you have to do is go to theproductboss.com/bookacall. It's theproductboss.com/bookacall, and you can get on a call with one of my team members so that they can really talk to you about Hey, this is where you are, this is where you want to be, and here are the programs that are going to support you in doing that. So if you found this episode helpful, make sure that you share it with a product boss friend who needs to stop underpricing and start building something that actually supports their life, and I'll see you next week.