Setting Prices

[Anonymous]

Is there a set rule of thumb for setting prices on stock- eg if I got a vase from a wholesaler for £30 what % would I add on when selling it in the shop? or is this down to me?

Also what are the rules regarding selling "brand" products, do you have to apply for a licence from the manufacture or can you just get them from wholesalers and then sell them?

-Tom

[Jayne]

Hi,

Most wholesalers have have rrp(recommended retail price) on branded goods. But it is up to you what you charge for things.

I'm not sure about designer clothes etc..but for a vase you pick the price, sometimes it's worth having a nosey at big shop prices to give you an idea :D

Jayne

[multilingual]

Unless there is a recommended retail price from the manufacturer then I can't see any restrictions on how you price something.

It is always a good idea to see what the retail market will pay for a product before negotiating the wholesale price.

Buying a product and putting 30% on top is fine in principle, but another shop nearby might be selling a similar product for less.

A bit of market research first would help in finding your answer.

Hope it helps

JB

[creospace]

Generally speaking its at least 100% markup giving you a 50% margin.

I think generally speaking (for instance)confectionary is 50% markup giving 30% margin. Clothes are high and greeting cards too.

But its up to you, you hve to make a profit but also be competitive!

Gary

[Jayne]

That's just what I said...but JB always says it better :lol:

Jayne

[Anonymous]

lol, thanks guys. Just looking at similar type businesses at the moment to get an idea. One last question (for now anyway) when carrying out a 3 year forcast for my business plan, is there a method for doing this or is it just predicting, based on industy analysis ect?
-Tom

[Jayne]

Never had to do one Tom, ever.

I believe, you cannot guess or forcast the future. I told my bank manager this and he agreed, we just promised to try our best to make a go of the business. Never had to do a business plan either :D

Jayne

[Simon Paul]

As no one ahs answered the first part of your question, here goes. It doesn't matter what level of pricing you employ, just so long as it enables you to make a profit. First of all you need to play around with the following formula in order to establish, a) what level of mark is required and b) break even point. This is the break even formula:

FIXED COSTS divided by UNIT PRICE minus UNIT COST equals NUMBER OF UNITS REQUIRED TO BREAK EVEN.

Therefore, if you have overheads of say, £1000 per month and are selling a vase at £50 that costs you £30, you have a formula that goes like this:

£1000 divided by (50-30) £20 = 50
You therefore need to sell 50 vases per month to break even, the 51st will put you in profit.

Using this formula, you can gauage the reality of required sales to cover expenses and, in order to guage the likely return/viability of any investment decision.

[Anonymous]

Thank you for the formular. All a lot clearer now.
-Tom

[Jayne]

We did answer him Simon, we just didn't go into the techy side and baffle him with science :lol:

Jayne

[wheelie2]

"One last question (for now anyway) when carrying out a 3 year forcast for my business plan, is there a method for doing this or is it just predicting, based on industy analysis ect? "

You need to decide why you're doing this - if it's to go to the bank with, then most people stick their finger in the air and make some reasonable figures fit.

See if you can get hold of competitor's accounts and see how they've done. See what they're doing and what you could learn from them.

Take a look at mintel reports (you can view the summaries for free but have to buy reports) to get an idea of what's going to happen to the market/industry you're in.

Most of it's guesstimating.

[cjd]

Most of it's guesstimating.

You're bang on there.

I spent many an unhappy year doing 5 year planning for a big company. One year I was pulling my hair out struggling to get something right when my boss took me to one side and said.

"Don't worry, you're never in the second year of a 5 year plan" (because of course you do it again next year) "It's all about the process - nobody expects it to be correct - it just makes us think a bit"

[vincent_fan]

what % would I add on when selling it in the shop? or is this down to me?

Also what are the rules regarding selling "brand" products, do you have to apply for a licence from the manufacture or can you just get them from wholesalers and then sell them?

-Tom 10% maybe acceptable.But a rare one have a high price whatever %. I don't know law in UK,but in china, if you get your goods in a legitimate way, should you don not worry licence. I suggest you consult some layers.
Good luck!
-V

[Steve Roberts]

Regarding prices, my attitude has always been "what will the market allow?" The rule of thumb which has worked for me is to charge as much as possible until my sales percentages (enquiry rates, conversion rates, client retention) are negatively effected. Then that's what the market will pay.

The higher the price charged, the quicker you can reach that all important break-even point. Above this turnover, for every Pound of turnover the Gross Margin goes straight onto the bottom line.