How can i determine price for my decals
I have done an intensive research to identify the extend of the need I intend to address and some of the ways to address it. One of the ways in addressing the need under reference is through the use of decals. I have therefore developed decals for a certain market.
The cost of producing one decal at a printing shop is about $8 and it can last for over 10 years. This cost excludes all other associated costs such as my labor, profits etc. At the moment I do this work myself and in my house, therefore I do not incur charges such as rent, employees etc. However, I would like to be delivering these products to my clients door step. I am having some difficulties in coming up with a tentative price for one decal, a price margin that covers all variables involved in producing one decal right from design to production to marketing to delivery, labor and profit of course.
Using a very simple language, could you please guide me on how I can come up with a final price for my decals. Giving a practical example will go a long way in helping me.
Thank you in advance.
#entrepreneurship #pricing #business #profit #decals #posters #Price margin #pricing-strategy #pricing-analysis
3 answers
Victoria’s Answer
This is a great question.
You are really lucky to live in Atlanta because Atlanta has a lot of resources for entrepreneurs like yourself.
It sounds like you are on your way to running your own business. Entrepreneurs, like you, can gain additional assistance from organizations that encourage and promote business by offering classes, online tools, mentors, and workshops.
You might consider taking a workshop or following a blog at project SCORE: https://atlanta.score.org/
or contacting Junior Achievement for your area: https://www.juniorachievement.org/web/ja-usa/home
There is also a Small Business Administration in Atlanta that might have some resources to help you grow your business. It is also really helpful to get a job or internship with a company that makes a similar product to learn about the industry as well as running your own company.
You are definitely on the right track when it comes to looking at pricing your decals. It is important to think about the question like a company might think about it. Let's pretend just for a second that you are a company and to stay in business you have to turn a profit and pay your staff wages. This will help you come up with a price and suggest some strategies for changing your price point.
Write down all your expenses even if these seem to be free right now. You can even create multiple budgets/scenarios since changes in these expenses will affect your pricing and profit:
Rent
Salary/Wages
Printing
Advertising
Transportation
The printer charges $8 to print each decal but you have to consider all the other costs in addition to the printing to get your actual costs. When you add wages, rent, etc. your actual cost per decal might be $20 per decal!
What are some costs that you might be able to lower? Is it possible to find a cheaper printer? Do you get a discount if you print a specific amount?
Once you have your expenses or costs figured out, try to figure out what the market might be willing realistically to spend on your product. What do other companies charge? Are your prices higher or lower, why? What are your customers willing to pay per decal? It has to be high enough to cover your costs but it the price is too high customers might not buy your decal. This is where companies really examine their costs line by line. It seems like $8 is a lot for printing. Can you find a cheaper printer with the same quality? If you could lower this cost, you might make more profit.
With all this information you can do a rough calculation of whether you can cover your costs per decal.
Here are three examples (for actual costs try to take your monthly expenses and divide these by the number of decals you make to get a rough estimate of the cost per decal):
100 decals x $8 price = $800
100 decals x actual cost $20 = $2000
$800 - $2000 = $1600 loss (your costs were higher than your price and you lost money)
100 decals x $8 price = $800
100 decals x actual cost $8 = $800
$800 - $800 = $0 break even (your costs were the same as your price and you broke even but didn't turn a profit)
100 decals x $8 price = $800
100 decals x actual costs $4 = $400
$800 - $400 = $400 profit (your costs were less than the price you charged and you made money!)
Try to do these types of calculations for yourself and vary the costs and prices.
It is super helpful to graph the costs and track these either in a spreadsheet or on paper. Definitely consider learning Excel or some other spreadsheet program so you can track and trend your expenses and graph your progress. You might consider signing up for a business class or working with a friend to learn Excel. Community Colleges also have great mini-courses to teach business skills in many areas. Business tools like Excel can help you can see how the costs affect you instantly and you can estimate future growth. You can also see problems before they sink your business.
There is so much more to this but hopefully this gets you started and thinking about your business.
Good luck with your decals!
entrepreneurship
Hi Victoria.
Thank you very much for this advice. You have given me a very good response and in a very simple language I can understand with ease. I am going to apply the lessons received from your advice. Be blessed for giving young people an opportunity to learn.
Cornelius
G. Mark’s Answer
I'm not going to use your data for what it costs to produce your product or run your business for the simple reason that it is irrelevant to pricing. Price is determined by what your customers will pay for the value you offer. You can determine this by studying what others are getting for similar products and services and then gathering information from your target market -- i. e., customers -- of what they would be willing to pay. That data is entirely dependent on the customer and what they perceive as your value. Only then do you address the problem of changing your approach to match what you decide is the cash flow you need. You may have to modify your marketing, your product, your material costs, your process, your business overhead, or what you estimate your immediate and long-term cash needs. Maybe you'll take a loss for awhile while you work on those things. Maybe you need to establish credibility before breaking even. You'll have to realize that 86 percent of startups never break even or make a profit. And you'll have to decide just how long you can afford to lose money. So that's the bottom line -- pun intended -- first you find out what people will pay you for what you offer, and THEN you modify YOUR value proposition and costs to accommodate THAT.
David’s Answer
My recommendation to determine pricing for a product is to first research like products and the price of them. The next step is determine it you can you differentiate your product to charge a premium or if you would like to discount your product for greater market share. Additional considerations would be the margin you would like to earn on each sale. An unsaid rule is you want to make sure you can charge or price your decals for more than they cost to produce. I would suggest create a pro-to type decal and ask friends how much they would pay for the decal.
David recommends the following next steps: