Welcome to Day 3 of the Get Set for Manufacturing Challenge!
Day Three – How much do you want to make your product for?
Have you got your list of products and materials yet?
If not, you can go back over what we have covered so far here:
Day One Instructions
Day Two Instructions
So now you know what it is you want to make and how to describe it, we’re going to tackle how you price it.
There are a few little calculations you need to make, but don’t worry if that sounds a bit scary, as we’ve got you covered with a handy tool to help work out your target cost price. Read on to find out more…
You might be wondering why you need to think about prices at this stage? Especially if you have ever heard me say ‘don’t make your first conversation with a manufacturer one about price’.
However, it is essential that you understand what you’re aiming for in order to be able to know if your product is even viable in the marketplace.
There are two ways of looking at price.
- You take the cost price and then times it by approximately 2 or 4 depending on whether you plan to wholesale or not.
- Or the better way of doing it, I believe anyway, is to take the retail price that you want to sell the product for, and work backwards. This then gives you a target cost price that you can work to.
It is much better to have a starting point like this when you approach a manufacturer as you both then know what you are aiming for.
So here’s today’s part of the challenge:
Use our cost price calculator to work out the target cost price for the products in your range.
Remember that if you want to wholesale the products, either now or in the future, you need to allow for the retailer’s mark-up too.
Not sure how much you want to sell the product for yet?
It’s important that you’ve researched the market before you start on any product development.
If you haven’t yet done this then I highly recommend that you do so. Look at similar products in the market that you think your potential customer might buy, and how much they sell for.
The temptation here is to try and undercut them on price, but this can be a slippery slope and something that you don’t want to get into when you first launch a product.
Your product needs to have it’s own USP that is not about price but about other key benefits and features.
Once you’ve used the calculator this is the time to do a reality check on your prices.
Your cost price needs to include not only the manufacturing cost, but also the raw materials cost and any trims or packaging that you use.
Remember that the National Living Wage in the UK is over £8 an hour.
Your manufacturer will look at how many minutes it takes them to make each product from start to finish. They’ll then add on their own overheads (such as rent, equipment, energy, insurance, and tax) and give you a price.
If you’re asking them to make something for a few pounds, do you think it seems like a fair price based on how long it might take them to make?
Listen to this episode of the Make it British Podcast for further advice about cost prices.
Post on Instagram and use the tag #getsetchallenge and @makeitbritish or send me a DM via Instagram and I’ll give you my feedback.