Pricing Handmade Chocolates

[InfinityCandies]

Ok. Other question I have— if doing this out of my home, how do I begin to calculate things such as overhead (what does that exclusively include?—- and how do I put a number on such things?), marketing (divide out that expense quarterly/ annually?) and cost of sales (what does that mean exactly? Does that mean what it costs me to get my goods to that store?)

 

Another business person who sells bars in stores broke it down and explained very well why you don’t just markup your item 25% to hope to cover the overhead after calculating COG’s.  His example was a difference of $.32 more by correctly calculating overhead and said it can be the difference that makes or breaks a business that sells to distributors or stores. 
So maybe if I can can some help in proper calculating, I can finally get a clear picture of my pricing and where and with whom I can sell.  😁😁 
 

[pastrygirl]

@InfinityCandies Where are you in the world?

 

Speaking from the US, check with your local department of Agriculture for cottage food laws.  They will tell you what is allowed in a home kitchen.  They would also license your food production facility if you decided to, say, turn your garage into a dedicated kitchen.  Parts of your home used only for your business are a tax expense/deduction.

 

I think for most of us chocolate is very seasonal and you have to look at it annually.  Q4 might be 40% of my annual sales, Q1 30%, Q2 20%, Q3 10%.  If I'm spending a lot in Q3 to get ready for Q4, margins that quarter are going to suck or be negative.

 

How much $ do you want to make, and how much do you want to work for it?  If you want to keep $10k, say you need to sell $30k.  Would you rather sell 10k pieces at $3 each or 15k pieces at $2 each?  7500 at $4 each starts to sound good ...

 

 

[AlaMoi]

there's many factors that go into "pricing"

 

first and foremost:  cost to make - materials, labor, overhead (rent, utilities, taxes, licenses, etc etc etc)

 

many go with 'what the market will bear' - uhmmm, okay - but competing against a large automated giant ala Hershey.... not gonna' win that one.

 

on a recent trip to a small high quality vendor, who was struggling on the financial side . . .

he stated "the people around here are too d*mn cheap to buy good stuff"

 

so that leaves "pricing" in a dilemma - either it covers the sum of costs and makes a profit to support your life, or it does not.

if the price needed to cover those costs+ is not "saleable" - mega.problem . . .

if the number of people who are willing to pay for top quality is limited - and your volume does cannot survive on that volume . . .

you're doomed.  

unless you're in it for the 'hobby' aspect.  doesn't pay, makes for fun but not eating . . .

 

we have a local chocolate shop - they do lots of stuff including "special orders" - when I'm in 'hunt the choco' mode, I go there.  I am fully aware the prices are above 'average' - but I want that candy shop to be there next time I need to order a really big milk chocolate bunny at Easter for DW

(Because,,, as a child she only got 'little' bunnies . . . and after 50+years, I'm happy/willing to give her a really biggie bunny . . . )

[InfinityCandies]

On 10/24/2023 at 12:49 PM, pastrygirl said:

@InfinityCandies Where are you in the world?

 

Speaking from the US, check with your local department of Agriculture for cottage food laws.  They will tell you what is allowed in a home kitchen.  They would also license your food production facility if you decided to, say, turn your garage into a dedicated kitchen.  Parts of your home used only for your business are a tax expense/deduction.

 

I think for most of us chocolate is very seasonal and you have to look at it annually.  Q4 might be 40% of my annual sales, Q1 30%, Q2 20%, Q3 10%.  If I'm spending a lot in Q3 to get ready for Q4, margins that quarter are going to suck or be negative.

 

How much $ do you want to make, and how much do you want to work for it?  If you want to keep $10k, say you need to sell $30k.  Would you rather sell 10k pieces at $3 each or 15k pieces at $2 each?  7500 at $4 each starts to sound good ...

 

 

I’m in Cincinnati.

[pastrygirl]

On 10/24/2023 at 4:48 AM, InfinityCandies said:

if doing this out of my home, how do I begin to calculate things such as overhead

 

You don't have rent expense but there are still taxes, licenses, cell phone, office supplies, kitchen equipment, uniforms, cleaning gear, insurance, repairs, business cards, event fees, signs.  You could estimate operating expenses as equal to COGS as a starting point.  COGS x2 + a piece for you = wholesale price, double that for retail. 

 

 

[GRiker]

Thinking about pricing…I’m in a tourist town on vacation.  Went to the local chocolate shop to check it out and try something new.  From a google review several months ago I knew their products had no prices on them.  Their online response was that they were moving to a new system. When I asked them about it in person they said they were going to some kind of barcode where customers could scan it if they wanted to know the price. At the same time they explained that high end chocolate shops don’t mark their goods and implied that they were going to work under that model. 
 

I’ve probably been to more chocolate shops than average but am not generally a high end shopper so I don’t know much about that market.  
 

I understand that chocolates are a luxury but it does feel like not making prices readily available excludes all but the customers who don’t think about how much something costs.  
 

Is that pricing strategy one you’ve heard of before? Does anyone here use that strategy and if so, why?

[Kerry Beal]

1 hour ago, GRiker said:

Thinking about pricing…I’m in a tourist town on vacation.  Went to the local chocolate shop to check it out and try something new.  From a google review several months ago I knew their products had no prices on them.  Their online response was that they were moving to a new system. When I asked them about it in person they said they were going to some kind of barcode where customers could scan it if they wanted to know the price. At the same time they explained that high end chocolate shops don’t mark their goods and implied that they were going to work under that model. 
 

I’ve probably been to more chocolate shops than average but am not generally a high end shopper so I don’t know much about that market.  
 

I understand that chocolates are a luxury but it does feel like not making prices readily available excludes all but the customers who don’t think about how much something costs.  
 

Is that pricing strategy one you’ve heard of before? Does anyone here use that strategy and if so, why?

I want to know what I'm paying before I make a decision. Seems like one of those 'if you have to ask - you can't afford it' ideas to try to shame you into not asking the price. 

 

I've been in a shitload of high end chocolate shops - prices are clearly marked. 

[gfweb]

@GRiker I'm a high end kind of guy and I've never see a place without price tags other than a jewelry store.  Good luck with that!

[curls]

3 hours ago, GRiker said:

Thinking about pricing…I’m in a tourist town on vacation.  Went to the local chocolate shop to check it out and try something new.  From a google review several months ago I knew their products had no prices on them.  Their online response was that they were moving to a new system. When I asked them about it in person they said they were going to some kind of barcode where customers could scan it if they wanted to know the price. At the same time they explained that high end chocolate shops don’t mark their goods and implied that they were going to work under that model. 
 

I’ve probably been to more chocolate shops than average but am not generally a high end shopper so I don’t know much about that market.  
 

I understand that chocolates are a luxury but it does feel like not making prices readily available excludes all but the customers who don’t think about how much something costs.  
 

Is that pricing strategy one you’ve heard of before? Does anyone here use that strategy and if so, why?

Haven’t been to as many high end chocolate shops as Kerry but all the ones that I have been to in the USA, Canada, and Europe have clearly listed their prices. My chocolate sales brochures also include prices.

[GRiker]

@Kerry Beal @gfweb @curls  Thanks for the responses.  Sounds like I’m not the only one who thought it was an unusual strategy. 
 

That said, we were in one hour before they closed on Christmas Eve and they did have several customers come in and purchase while we were there.  I only heard one comment about prices - something about a larger quantity of truffle box being a better value than a smaller box.