Re: How do you set your wholesale price?
Berry, You also have to consider where the costs are. And yes you have to consider your time as cost as well. something most people do not want to do. If you where paying a high school kid xx dollars an hour you would count that as cost.
A formula for setting prices for a small home crafts business is Material costs times three plus labor. But how do we apply that to Colony of bees and the honey they produce?
I am not goign to look up actual numbers but take a rough guess.
The hive itself. Three deep boxes. 30 frames with foundation a bottom board. inner cover and outer cover I am goign to say costs $300 average. It should be expected to last what. 10 20 years. so you can break that down to cost of 15 to 30 dollars per year.
You then have bees that cost around $100. maybe will last you 2 years so add another $50. The cost of bees is a big one that you can fiddle with to lower your price if needed. You can capture swarms do cut outs or make your own splits etc and bring that cost down to just your labor for example.
Lets say a beekeeper spends on average 4 hours per season on a single hive. again this will fluctuate depending on how many hives they have and how quickly they move form one to the next. I have 4 hives and will spend far more time per hive than that this season. if I had 20 the time per hive woudl fall although I spent more time working on hives. Again an effect that needs some attention if you want to build a successful small business situation with your bees. it is not only how many hives do you want. it how many hives must you have to be profitable. So again a factor you can use to help control final cost. I will set my hourly cost at $20 per hour.
So we have at worst $30 for the hive. $50 for the bees and $80 for my time not including time I spend selling the honey. The hive produces 50 lbs of honey.
$240 for materials and my labor is $320. divide that by 50 and I end up at roughishly $6 a lb. This means I must sell my honey at $6 a lb to make the money required to remain successful. And that is not allowing anything for jars, labels. selling at markets etc. that must all be added in as costs to get the honey sold. Even if I don't see it. I am loosing money if I sell it for less. I am not making money if I sell it for less.
But lets say I am selling honey right next to someone selling for $5 a lb. What do I do. I must reduce my equipment and supplies cost or reduce my labor. I must get faster at working the hives. get more honey production from the same effort. reduce equipment and material costs.
If I decide I don't need that formula and can in fact sell my honey at only twice my material and $20 an hour for labor. I will sell honey at a lower price. But I am also slowly putting myself out of business. Or I agree to work for less per hour. And I already consider $20 an hour being cheap.
It is about making the formula spit out the price you need to be at. not just lowering your price to meet the market. if you cannot produce honey and meet the market price. you are not the person to be producing honey. Your methods and the costs associated with it are not getting the job done.
It is in this sort of area that business owners and those that want to be business owners part ways. I helped a person invest nearly $50,000 in a business several years ago. arguing with them every step of the way that they where doomed to fail. they did in less then 9 months. They never did see the losses they took every minute they remained in business. they watched the bills pile up that they could not pay. but it never accoured to them that it was because they where not charging enough. they thought they needed to just sell more. I kept asking them why do you want to sell more things that you loose money on every time you sell one. They could not see it. most people can't that is why most people are employees and not business owners.
Significant Minority vs Insignificant Majority, 20% of causes produce 80% of the effects.