Pricing handmade candles is a crucial part of successfully running your business. Not only must the price cover your costs and generate a reasonable profit, but it also plays a significant role in determining your product's market position. Pricing too low can harm brand reputation and profitability, while pricing too high can alienate customers. In this article, we'll provide you with detailed steps and tips on how to price handmade candles in a way that ensures you cover your costs and achieve a fair profit.

1. Calculating direct costs

A. Raw material cost

Direct costs include all expenses related to making a single candle. Knowing the exact cost of each candle component is important for determining the final selling price.

• Wax : Calculate the amount of wax used for each candle and calculate its cost based on the purchase price.
• Wicks : Wicks come in different sizes and prices, so be sure to add the exact cost for each wick.
• Essential oils and colors : These items vary in price depending on quality and concentration, so base the cost on the percentage you add to each candle.
• Packaging : Whether you use glass jars or special boxes, the cost of packaging and any other packaging materials such as tapes or labels must be factored in.

b. Labor cost

Don't forget to factor in your time cost when calculating the final price. Calculate the time you spend making each candle, then set a fair price for your work.

• Tip : Estimate your hourly rate based on your skills and experience level. For example, if it takes you 30 minutes to make a candle, and you want an hourly rate of 100 riyals, then the cost per candle would be 50 riyals.

2. Calculating indirect costs

A. General operating costs

Besides the costs of materials and labor, there are other indirect costs that must be taken into account, such as:

• Electricity and gas : Calculate the average monthly cost you consume for melting wax and operating equipment.
• Marketing and advertising : Any amounts you spend on marketing your products online or paid advertising should be included in the cost of the candle.
• Packaging and shipping : If you are shipping candles to customers, be sure to factor in the packaging and shipping cost as part of the final price.

B. Equipment and supplies

Equipment such as bowls, scales, and other tools that you consume in candle making may have a significant initial cost, but the cost can be spread over its lifespan.

• Tip : Divide the cost of the equipment by the number of products you expect to make during the equipment's usage period.

3. Determining the profit margin

A. Choosing the appropriate profit margin

The profit margin is the difference between the cost of making the candle and the final selling price. This margin must be sufficient to cover additional indirect costs and generate a reasonable profit.

• Tip : As a general rule, profit margins can range from 30% to 50% for handmade products. The margin may be lower if you're targeting a competitive market, or higher if you're selling luxury or custom candles.

b. Taking competition into account

Check the prices offered by competitors who sell similar products on the market. This will help you determine the right price for your candles.

• Tip : If your candles are unique in terms of quality or design, you can raise the price a little compared to the competition.

4. Price Test

A. Providing trial prices

Before making a final decision on candle pricing, try offering them at a trial price for a short period and observe customer feedback. You can adjust prices based on demand and sales.

b. Offering discounts and promotions

To boost sales and increase your product's reach, you can offer discounts on candles for bulk purchases or during special occasions. This will help you achieve higher sales and expand your customer base.

5. Pricing according to the target audience

A. Pricing of luxury candles

If you create luxury candles using natural and authentic materials such as beeswax or premium essential oils, you can raise the price based on the high quality. The price should reflect exclusivity and luxury.

B. Pricing of daily candles

If you're targeting a customer segment looking for affordable daily candles, focus on reducing costs without sacrificing quality. Choose good quality but economical materials and set a reasonable profit margin.

Conclusion

Pricing handmade candles isn't just a simple calculation; it requires considering production costs, competition, and your target audience. By determining the cost of each component, calculating indirect costs, and establishing a reasonable profit margin, you can ensure your price covers all expenses and generates a fair profit.