I have begun a home-based business, baking bread in a jar. I am selling at Farmer's Market and County Fair. What is a reasonable percent of profit? Also, I would like local stores to sell my product, how should I price for wholesale vs. retail? Thank you for your help. Last week I lost money on sales.
Nuella from USA
Nuella, there are lots of factors which will decide your reasonable percentage profit. What is the level of competition? What are your main expenses? How much you want to increase your sale? For fixing a reasonable percentage of profit, you have to find the answers of these questions. If there is big competition, you can not increase your profit because there are lots of other substitute, so, try to fix less profit and increase the quality of your product. Second, you have to check what are your main expenses. There are two types of profit, you will get one is gross profit. It will be the excess of your revenue over your main direct expenses. Your must try to cover your all direct expenses. The second profit is net profit, you can get net profit by deducting all your expenses from your gross profit. Net profit % on sale, you can keep low and gross profit margin should keep according to your direct expenses of raw material, labour cost and other direct expenses.
Third and important point, you should keep in mind, if you have to increase your sale, you have to set profit % as low as possible because customer is the king of market, he needs high quality product at low prices. Low price can be possible with keeping low profit margin. If you are selling on wholesale, wholesale price should less than retail price. For those, profit % on sale to wholesaler should be less than profit % on sale to retailers.