Monday, March 30, 2015

New Online Soap Making Class - Spring Fling


Yay!  Time for a new class sampler.  Are you ready to give these techniques a try?  Go to the Bramble Berry site to join.
This course contains 5 soap designs that demonstrate one or more intermediate to advanced soapmaking techniques.
  • Springtime Lavender Pinwheels - created using a free pour and swirl technique
  • Egg Hunt Pot and Drop Swirl - multiple pot swirls are created and dropped into soap
  • Easy Chevrons - stripes are layered and a hanger is dragged through soap
  • Carnation Pink Lattice - a simple lattice is 'carved' and decorated with candy balls
  • Rainbow 'True' Peacock Marble - a peacock in the soap industry is called a bouquet in paper marbling. A 'true' peacock marble (as traditionally named in paper marbling) is a series of striped arches creating a soap that has lots of mini rainbows.
While our classes at Bath Alchemy Lab follow a progressive curriculum building upon each new skill learned, this course is more of a sampler of various techniques from several different courses we offer. It is a great way to learn a variety of techniques in a short class. While the lessons are thorough, if you find that you are lacking some of the theory and skills you need to be successful, you can optionally take any of our full courses at Bath Alchemy Lab.
Watch the teaser!

Do you have questions?  Leave in the comments below.
Soapmaking, Bath & Body and Candle Making Classes
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Wednesday, March 25, 2015

How to Adjust Your Prices While Maintaining a Profit


First, you may want to read the two posts that lead to this article.


Let's say after reading my previous pricing posts, you feel your prices are way too high for your market.  Perhaps, you did your calculations using the formula provided and your price per bar of soap was $22, while your neutrally priced competition are selling soaps for $8 or 9 each.  In case you forgot, this is your pricing formula:

Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

What do you do?  Start by checking your figures.

  1. Double check your math.
    Make sure you plugged in everything correctly in the formula and made no math errors.  Did you figure the amount a full batch of soap costs to make but forget to divide it by the number of bars in a batch?
  2. Are you charging a reasonable rate for the labor?
    Labor should be figured at a reasonable amount that you would pay an employee to make the soap or cosmetic (or whatever you are making).  You might think your time is worth $30/hour, but would you pay an employee to make it at that rate?  Uh..no!  Then lower this amount to reflect what you would pay someone.
  3. Is your profit reasonable?
    You may be pulling a number out of the air, but it needs to be reasonable.  Perhaps $12 per bar of soap is too high for the profit, unless of course, you are using a premium pricing strategy.  Then you can use a high profit expecting to make fewer sales.
  4. Are your expenses through the roof?
    You can't be running a business with expenses of $10,000 per month when you only produce 10 bars of soap.  You may need to refigure your expenses (especially if you are making a projection), or you need to cut your expenses.  Maybe you don't really need an expensive studio when you make 10 bars of soap per month.
Now, let's say all your figures are correct, and your $22 soap is too expensive for your market.  How do you fix it?

There is only one answer - cut your costs.

  1. Start by shaving your expenses.
    Get rid of everything you don't need to efficiently run your business.  Perhaps you can do your own day to day bookkeeping and only pay a CPA during tax time.  Will taking a free class with the SBA (Small Business Administration) help?  Can you wait on investing in top of the line equipment until you are profiting?  Maybe turning the A/C off in your shop at night can lower costs.  Think of every way to shave things down, including if you are making projections.
  2. Rethink your ingredients/ materials.
    You may want to use real sandalwood essential oils in your products, but unless you are using a premium pricing strategy this may not be doable.  In fact, it isn't doable.  Try using amyris essential oil instead.  It has a similar scent for a fraction of the cost.  If your 80% shea butter soap is too high, try using 20% and choosing a nicely priced oil for the 60%, such as sweet almond oil.  Go through each ingredient and see if there is a comparable replacement that will lower costs while not compromising your recipe.
  3. Work more efficiently to lower labor costs.
    Sometimes, you may need to invest in slightly better equipment in order to save money.  For example, you could buy silicone liners for your molds to cut down the time it takes to line them with paper.  Maybe investing in a professionally printed box or label will cut down time spent printing and cutting your tags for soaps you wrapped manually with fancy paper.

    I once had a lady tell me that she lined a cardboard box with a trash bag to use as a mold at the suggestion of a soap teacher.  Sure this was an inexpensive way to make some practice batches of soap.  But she spent so much time shaving down her soaps so there would not be wrinkle imprints that she was not making money.  Additionally, she was throwing away the bits she cut off.  Essentially, she was wasting her valuable time and a portion of the batch.  By buying a mold she didn't have to line, she was able to save while keeping her sanity.
Even if your costs are low and your product is priced right, you may want to use a few of these tips to create a larger profit for yourself.

What can you do to lower your costs?  What can you do to increase profits?  Share what you come up with in our comments below.


Soapmaking, Bath & Body and Candle Making Classes
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Friday, March 20, 2015

How to Price Your Products for Profit



Our previous post discussed pricing strategies to consider.  If you missed it, you can find it here.

In this article, we will take you through the next step - pricing your products.  Let's walk you through the formula.  While this example is for soap, the formula will work for any product.


Formula


Materials + Labor + Expenses + Profit = Wholesale x2 = Retail

  • Materials (COGS) - Make sure to cover all your material fees. 
  • Labor – How much would you hire someone else to do the work? 
  • Expenses – Determine the costs of rent and utilities, fees online, office supplies, advertising, etc.


Materials (COGS)


Your cost of goods lists your materials that you purchase for use in a product.  Below is a description of how to determine the material costs for a bar of soap.  Since soap is made in batches, we find the COGS for the entire batch and then divide it by the number of bars we got out of the batch.

Bar of soap (materials):

Materials for a 5lb batch that will make 15 soaps 
Oils $8.74
Lye & Water $1.30
Additives $7.03
Packaging $5.27 
Total $22.34 

Divide by 15 bars to get the price of each bar

$22.34 ÷ 15 = $1.49

Labor


You need to pay for the labor to make the soap, whether you are paying yourself to make the soap or paying an employee.  

Bar of soap (labor):
$10 per hour x .75 = $7.50
Divide by 15 bars to get the price of each bar
$7.50 ÷ 15 = $.50

Expenses 


Let's face it.  You spend a lot more money to run your business beyond the cost of the materials.  There are advertising costs, printing your business cards and flyers, water and electricity to make the soap and power your office, fees for your website and the internet, insurance, fees for attending a craft show, and more.  All of this needs to be included in your product.  Take your yearly expenses (not materials to make the soap) and divide by 12 months.  If you are a new business, research a little and estimate what you may spend each month.  Think of all aspects of running the business.  

Bar of soap (expenses per month):
Rent $65
Utilities $15
Internet fees $10
Misc. $10 
Total $100 
Divide by number of soaps we would like to see per month (2 per day x 30 days)
$100 ÷ 60 = $1.67

Next you need to figure out how much you can reasonably sell on average each month. Sometimes this is just a goal. How much do you want to sell per month (maybe two items per day)? Divide the expenses by your monthly sales goal.  Here is an example.  We have $100 in monthly costs and we sell or will sell an average of 2 soaps a day per month (30 days).


$100 monthly costs ÷ 60 items = $1.67


Profit


Profit – This is something you will just have to come up with on your own without a formula. Sometimes, you can work the rest of the formula out without the profit to get an idea of the price the bar may end up being and then add in a reasonable profit. Perhaps $.25 - $1.00 per item if moderately priced? This is entirely up to you. For this example, we felt $.25 was probably a good profit for each bar of soap.


Bar of soap (profit):

Profit per bar $.25


Final costs:


Materials + Labor + Expenses + Profit = Wholesale x2 = Retail
$1.49 + $.50 + $1.67 + $.25 = $3.91 ($4) X 2 = $8 

Wholesale = $4
Retail = $8


Applying Pricing Strategies


As you can see, this price wouldn’t work for penetration pricing as you wouldn’t be able to compete unless you bought in bulk, streamlined production, and lowered profit per bar.


Moderate would work. Many handmade soapmakers sell their soaps at $6-9 per bar depending on ingredients, location, etc.


Premium pricing would require you to increase your profit. Premium soaps would sell for $10-15+ per bar, but your brand, photos, packaging, etc. would all need to warrant this price.


Try the pricing formula and see where you land. Share what you have found and by all means ask questions.


In the next article, we'll explain what to do when your prices seem too high.

Soapmaking, Bath & Body and Candle Making Classes
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Wednesday, March 18, 2015

3 Pricing Strategies for Small Business



Pricing Primer

Pricing products is a tricky task. When running a business, you want to make a profit, but you don’t want to price yourself out of the market. There are numerous formulas listed on the Internet you can try.
Before diving into formulas for pricing, consider your pricing strategy and how this will align with your marketing.


Strategy #1 – Premium Pricing


This attempts to take the maximum amount of money from the fewest customers. It’s a luxury brand strategy.
  • Branding, photos, descriptions are critical
  • Focus on brand building
  • Takes time to build, therefore sales are slow in the beginning
  • High profits, but very few customers

Things to be aware of:
  • Do not use sales and gimmicks 
  • Do not have price wars

A marketing strategy used by luxury retailers is to use a price decoy. A luxury retailer sells an item for $2,000, but has a price decoy item for $300. The rich will take the $2,000 item, which others will envy. The moderate shoppers may purchase the $300 item to have a chance to own something by the luxury brand, usually for status.


Strategy #2 – Neutral Pricing


This attempts to keep your prices similar to your competitors – not too high, not too low.
  • Branding, photos, descriptions lead to a loyal following
  • Focus on ways to get customers beyond pricing 
  • Less opportunity to gain high profits per transaction or very high sales volume
  • Moderate profits, moderate transactions

Things to be aware of:
  • This is a safe zone
  • Do not have price wars

Since this is a safe zone where most companies price similarly, you will have to get creative with how you will attract and keep customers.


Some things you can try are:
  • Loyalty rewards
  • A unique experience
  • Top-notch customer service
  • Giveaways and free samples


Strategy #3 – Penetration Pricing


This attempts to keep your prices as low as possible and bases sales on a high volume of transactions.  This might seem like a good idea, but you may not be able to compete
  • Profit is extremely low, and you will have to work to streamline your process and do more work for less money
  • Concept is to penetrate market with very low prices to take market share
  • Low profits, many transactions

Things to be aware of:
  • Very difficult to survive this strategy
  • Price wars are the key

Our next article will tell you exactly how to price your products correctly.  But first think of your pricing strategy.


Are you a luxury brand, a bargain brand, or somewhere in the middle?  Will any of these strategies help you solidify where you stand in the marketplace?  Share your thoughts.

Soapmaking, Bath & Body and Candle Making Classes
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Friday, February 6, 2015

Your Questions Answered - Ricing in Soap



Q – What is ricing and what do I do when it happens?

A – Ricing is when your soap separates to look like rice floating in a pot of oil. It is almost always caused by fragrance oils, but some other additives can do this as well. You can often save the batch by continuing to blend it until it traces again, which may take a good amount of time. Make sure you give the mixture a little resting time between long spurts of blending. If that doesn’t work, the batch simply can’t be salvaged.

To avoid ricing try one or more of the following tips:

· Test fragrances in small batches. If a fragrance presents a problem, you may choose not to use it.

· Add your fragrance with a whisk instead of a stick blender.

· Warm your fragrance to that of your oils before adding it to your soap mixture.

· Place a little soap in a separate container. Add your fragrance and blend, then add the fragranced soap to the rest of the batch.

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Wednesday, February 4, 2015

Your Questions Answered - Master Batching Soap Oils and Lye


Q – What is master batching and how do I do it?


A - Master batching is simply making up a large batch of soapmaking oils and/or lye water ahead of time and using it as needed. In a large scale facility, making large batches and using the entire batch for each run is commonplace and is typically not referred to as a master batch. However, in an effort for the small soapmaker to save time to increase profit and to work more efficiently, soapmakers began mixing up their batches ahead of time.

Master batching is very simple to do. Most soapmakers prepare their batches in large buckets that will hold around 35lbs of oils. You can purchase this or reuse one that is now empty. Let’s say you have a recipe for a 5lb batch of soap and you want to create a master batch of 35lbs. You will multiply each oil by 7, since 5 will go into 35 seven times.

Let’s take a look at a recipe:

22 oz Olive oil x 7 = 154 oz
13.75 oz Coconut oil 76° x 7 = 96.25 oz
13.75 oz Palm oil x 7 = 96.25 oz
5.5 oz Sweet Almond oil x 7 = 38.5 oz

Melt the solid fats and combine them with the other oils in a large bucket. Each time you want to make a 5lb batch of soap, you will measure 55 oz from your master batch. Always stir the oils well before measuring, as the fats tend to settle at the bottom of the bucket. To make things easier, wrap your bucket in a bucket warmer. Each time you want to use the oils, plug the warmer in a few hours ahead of time. A warmer will bring your oil temperature to about 100°F while remelting any residual free floating fat. If you or someone you know is handy with a drill, you can fashion a spigot to bottom of the side of the bucket to easily measure your oils. This saves the time of measuring and melting oils for each individual 5lb batch.

You can do the same thing with your lye water. I only recommend this if you have a safe place to store it with no children or pets. If you want things ready to go with no calculations when making the soap, follow the same procedure for making the master batch of oils. Multiply everything by 7.

20 oz Distilled water x 7 = 140 oz
7.7 oz Sodium hydroxide x 7 = 53.9 oz

Mix your lye and water. Allow to cool to room temperature and store in large bucket or jugs made of HPDE plastic. Each time you make your soap using this recipe, you will measure 27.7 oz of lye water.

Or if you are cramped for space, you can make the lye water more concentrated. Reduce your water to half when premixing, and then add that back in when making the soap.

20 oz Distilled water x 7 = 140 oz ÷ 2 = 70 oz
7.7 oz Sodium hydroxide x 7 = 53.9 oz

Mix your lye and water. Allow to cool to room temperature and store in large bucket or jugs made of HPDE plastic. Each time you make your soap using this recipe, you will measure 17.7 oz of lye water mixture plus 10 oz of water.

There is no need to heat your lye water. Use it at room temperature. You can use this same method for mixing up large batches of other products you make, such as lotions and lip balms.

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