How to Price Your Candles or Handmade Items to Sell
Pricing your candles or any handmade product can be tricky and if not well thought out can cost you in the long run.
As the industry standard, crafters are told to calculate the cost of their handmade item and multiply by 2 for a wholesale price or multiply by 3 to sell to retail and multiply by 4 to sell as a retail price. A large majority never start with a precise cost of goods, overhead, and general expense values to understand what the value of their inventory is.
Accounting when you are a crafter can get messy. Often selling handmade products start as hobbies or our businesses start in our homes and we overlook hidden costs. We tend to absorb extra spending by mixing it in with our finances when we are out shopping and see something that catches our attention.
I am going to walk you through the pricing and I want you to keep something in mind first.
If you start your candle business in your home and you outgrow your space, you will need to capture additional costs in your candle price. If you want to grow your business you can capture that cost in your candle price NOW so that you have money to invest in a bigger store. Go back and read this again.
As an example, if a candle price is $13 and you are making them from your home but need to rent a space next year, you may need to raise the price to $15. That new price will cover the added expenses of renting a space. The downside to this is you will have to get your customers to adjust to the added cost.
If you have a business plan for growth, your candle price should be set at $15 NOW and the $2 could be accrued to execute your expansion. The planned profits from each candle sale of $2 will fund the capital you need. The upside is your price will remain and your customer’s impact minimal.
What is the candle cost of goods?
The cost of goods is anything that is an ingredient or product partially or completely resold to the end-user or consumer. Examples are
- Wicks / Glue Stickers
- Candle Dye
- Fragrance Oil / Essential Oil
- Gift Boxes / Bags / Embelishments
- Shipping Material / Labels / Postage
Additional costs are hidden costs that cannot be directly assigned to the candle or handmade item. These are the most overlooked.
Expense examples are
- Office Supplies (that cannot be assigned specifically to a candle)- scissors, tape, paper, etc.
- Paper Towels
- Ink Cartridges
- Gas / Milage
- Business Cards / Promotional Material
- Hot glue
Equipment examples are (these have different tax values)
- Wax Melters
- Heat Tools / Sealers
- Computer / Printers
- Work Clothes / Aprons
- Tools / Pitchers / Spoons
Overhead examples are (fixed costs)
- Fees / Commissions
The first step to pricing your candle is developing a budget. I have an article on how much candle-making costs and an article on how much money can you make selling candles. We want to dive a little deeper.
My candle pricing is an average cost. The biggest expense is the fragrance oil or the vessel. I try to buy oils for my candles that fall within that price range. This variable can greatly change your pricing calculation from candle to candle.
It has been my experience that customers do not understand that designer fragrance oils cost 20-30% more than regular candle fragrance oils. Pricing candles based on fragrance oil will confuse your customer.
This is also true for the container choice with one exception. If it looks more expensive, there is a perceived value that will allow you to charge more.
A consumer will not know that the same vessel costs more from a different supplier. It is harder to pass on miss-pricing later on.
Pricing your candle is a business decision and changing prices can also confuse your customer base as you develop your business.
The price for your candle should be based on your budget, not your current cost.
For example, soy wax is $75 for a 45-pound case if I pick it up. It will cost me $1.67 a pound. My budget for soy wax is $1.72 per pound. This allows for a 3% fluctuation in cost in case I need to go to an alternate supplier locally.
With a wax shortage, my budget could be even higher to offset the possibility of shipping. I hope not. The cost or budget could be researched to use a 3% above the average of multiple sources.
Last year I paid $65 for a 45-pound case of soy wax. The cost of candle-making supplies this year has gone up almost 15%. In this case, the pricing needs adjusting.
I still have another source selling at a lower price for now so I am keeping my fingers crossed!
If you plan on growing your business, you want to buy soy wax by the pallet. This is not going to fit in the trunk of your car. If you are lucky to own a pickup truck you can pick it up if it’s local. If not, you will have to have it delivered or make multiple trips.
This changes the structure of your soy candle wax price, availability, and delivery lead time. Working with a budget to cost your goods forces you to be more resourceful and analyze what you are spending your money on.
If your budget dictates $1.72 per pound for soy wax, then you need to start shopping around for pricing when your current supplier raises their prices.
If you are simply adding up the cost of your ingredients and using the formula we mentioned in the beginning, you will be forever chasing your candle prices.
Unlike wax, fragrance oil pricing varies from scent and volume. There are also different grades such as manufacturing grades, candle grades, and cosmetic grades. They may not all be suited to perform for your needs.
I buy cosmetic grade fragrance oils that also safe for candles in larger volumes because I make skin products like soaps and bath fizzes. I could get them cheaper in a manufactures grade by weight but I would have to also buy additional quantities for the skin products which is not cost-effective.
Setting a budget for categories within your candle line may be helpful too. Popular staple candle fragrances like lavender can be purchased in a manufactures grade in 25 pounds or 55-gallon drums much cheaper than combining the cosmetic grade usage.
Your candle budget pricing can be tiered to fit accommodate the range in fragrance costs. We see this all the time and don’t know it with scents like lavender, sandalwood, vanilla, and citrus.
Buying popular fragrances in larger volumes at $.99 per ounce because it is a staple candle fragrance offered will offset the extra cost of more expensive fragrances that average out at $1.59 per ounce (as an example). This would keep your fragrance oil budget around $1.29 per ounce. I use $1.33 per ounce as a budget.
You have to control the cost of your candle. The obvious ingredients are easy. The hidden ones are not. This is all the other stuff that adds up along the way.
It did not take long before I switched from Clorox wipes to generic alcohol and paper towels. No one wants to make hundreds of candles, work a weekend event and throw your profit away in the expensive clean-up products.
What it cost to make candles did not hit me until I rented a space and tried to scale my business. I learned to budget fast!
I also learned that I had to start including labor in the price of my candles. I could not keep up and to pay someone had to be included. I had to add in rent and utilities. The list goes on.
But how do you calculate the cost of doing business into the cost of making a candle so that you can properly price your candle?
I use a job estimating formula. My materials to make a candle are 60% of the cost. Labor and operating expenses are 20% of the cost. Overhead is 10% of the cost. The profit is 10%.
What is brand pricing?
As a product becomes popular the profit margin increases. There is a sliding scale that can be associated with more popular names as a company grows.
Marketing efforts compound the market value and result in revenue that drives up the candle pricing for big names like the Bath and Body Works candles or the Victoria Fragrance lines.
Pricing a candle with designer fragrances can be a special set of candles you offer separately from the standard house fragrances. Usually, these are in different vessels to set them apart such as a 3-wick line.
Larger candles like a 3-wick can be priced with a 25% expense cost for example to make up for added handling. It can also have a high-profit margin as they are a more desirable candle.
Another branded candle is candle art or a candle made by a candle artist. These are priced by the artist as an art piece. The price is determined by value as art. These are signature candles.
Gift sets or candles in gift sets also have a larger mark up because they are put together as a package.
The presentation can make a difference in the price of a candle. A single candle that is presented is worth more than a candle that is just a transaction. The cost of the packaging is part of the materials cost but the perceived value is higher raising the opportunity to higher the profit.