Is Your Business Ready for Wholesale?

If you landed here you are asking yourself if Wholesale is right for your business.  I'm going to cover some questions you need to answer based on your business pricing model.  

Hi, I'm Steph and I run a small laser business in Columbia, MO.  I'm not claiming to be an expert by any means.  I will say, I learned a lot in my business over the last 20+ years.  

How to determine this you will want to look at your pricing.  Many craft, hobby or small businesses don't make enough money to make it full-time.  This all comes down to your pricing and COG's (cost of goods).  I can give you a mathematical formula, but who are we kidding?  No one uses them when I give them.   I don't think many business owners consider all the aspects that go into pricing.  So let's look at them.

1. Materials- everything down to the glue
2. Time - Machine cost to run per minute to set up
3. Marketing - Like this time it takes to blog, ads, ect. 
4. Your Rate of Pay to make- (Or staff if you have them) 
5. PROFIT - this is the number you won't get if you wholesale.

Rule of thumb, if you look at these steps there are 5.  So I want to ask you to think about this, if you double your cost of materials, you never have a profit.  So many makers double this number or x3 but in reality it should be x4 if you want paid to make the item.   So if something cost 1.50 to make, and you charge $3 there is no room to pay yourself, no room to make and sell wholesale. 

If you take this same structure and it is 1.50 for materials, Time to run a machine starts at 1.00 per minute, and takes 5 minutes to make and 2 minutes to set up. Then you create a flyer or post or email marketing you get paid hourly to make that, let's say $10 hr just to make it a round number that is .17 per minute and your rate of pay is $10 hour you would need to retail it for 30.00 and that isn't always freezable.

 If you sell the item can I get that money? Yes / No

Can I cut this price 50% and still earn an income doing wholesale? Yes /No

So how do you know if your business is ready to wholesale when asked?  The response should be let me run the numbers and get back to you.  NEVER say "I'd love to work with you".  Here is why!  You need to know your COG's and Profit Margins to know if you can do this and still get paid something for your efforts.  Unless you work for free and I just want you to know if that is the case, I'd like to hire you.   

Simple calculations if you double your prices and sell for that amount, then you shouldn't do wholesale.  If you triple it I would still say no, because your efforts to market yourself will wear you out.  If you x4 your costs then possible you could but you might be selling your efforts short if you are not paying yourself enough.  Keep in mind your Minimum wage for entry level jobs average $15-$20 hour.  If you are new at the industry that might be ok.  But if you have been doing this for 20+ years and your experience is greater then you probably are not going to pay yourself enough to do this.  Or it might take less time?  Only you can determine this.  

Take this time to run numbers.  As a small business owner you need to know them to know if you are really making a living wage.  You need to know these if you are thinking about offering wholesale.  

I hope this article answered some of your questions about wholesale.

Steph