How Do You Calculate How Much To Sell Candles?

Table of Contents

Determine Your Costs

The first step in calculating how much to sell candles for is determining your costs. This includes all the expenses that go into making each individual candle. To get an accurate idea of your true costs, break down every component:

Ingredient costs – How much does the wax, wicks, fragrance oils, dyes, containers, lids, etc. cost for each candle? Don’t forget small items like adhesive for labeling.
Direct labor – What is your time worth for pouring, preparing, and packaging each candle? Consider hourly rates.
Manufacturing overhead – These are fixed costs like studio rent, equipment, utilities, insurance, etc. Allocate a portion to each candle.
Packaging – Boxes, wrapping paper, labels, ribbon, and anything else that goes into presenting the final product.
Shipping – What you pay to send each candle, whether it’s local delivery or nationwide shipping.

Add up every cost and you have your total per candle cost. This is the base amount before you apply your profit margin. Tracking expenses at this level gives you an accurate view of your real production costs.

Set Your Profit Margin

When pricing handmade candles, one of the most important factors to consider is your profit margin. The profit margin is the percentage of the sale price that is profit, after deducting all expenses. For handmade products like candles, a typical profit margin is 35-50%. This allows you to cover your costs and make a reasonable profit on each candle.

There are several pricing strategies you can use to calculate your profit margin for candles:

Cost Plus Pricing – Add a set percentage markup to your candle costs. For example, if your costs are $5, add 50% to make the price $7.50.
Value-Based Pricing – Price your candle based on its perceived value, not actual costs. Research competitor pricing.
Multiple of Materials – Charge a multiple of your material costs, such as 3x or 5x.

When setting your profit margin, be sure to consider all business expenses beyond just materials, including labor, packaging, marketing, and overhead. You’ll want a margin adequate to cover those costs and make a profit selling handmade candles.

Calculate a Price

The most basic way to calculate a price for your candles is by using a simple formula: Cost x (1 + profit margin). This allows you to factor in both your costs and desired profit margin to arrive at a retail price.

For example, if your candle costs $5 to make and you want a 50% profit margin, you would calculate:

$5 x (1 + 0.50) = $5 x 1.50 = $7.50

Therefore, your retail price would be $7.50 to build in a 50% profit margin on top of the $5 cost. You can tweak the profit margin percentage to achieve different prices.

This formula ensures you are covering costs and achieving your profit goals. However, it does not account for market factors, which are also important to consider when pricing candles, as we’ll explore in the next sections.

Do Market Research

One of the most important steps in determining pricing for your candles is to conduct thorough market research. This involves analyzing the current pricing of comparable products by competitors in your market. Focus on researching similar candle products, companies and brands in terms of size, fragrance, ingredients, and other characteristics that are directly relevant to your own candles.

Look at how competitors are positioning and pricing their products. For example, are they going for a luxury, high-end market or trying to compete on lower pricing? What do their price points say about their target customer and desired brand image? Make a detailed comparison chart of prices for similar sized jars, fragrances, materials, etc. Consider not just the regular everyday prices but also sales prices and promotions. This competitive pricing analysis will provide critical context as you consider where to price your own candles.

In addition to competitor pricing, research the current market trends and customer demand. What scents and styles are hot sellers right now? What pricing do customers seem most comfortable with and willing to pay? It’s important to balance competitive pricing with what the market will actually bear and what target customers value. Let the market research guide you in finding the optimal price that is both profitable and aligned with customer expectations. Approaching pricing with market insights will set your candle business up for success.

Consider Market Factors

When pricing candles, it’s important to consider market factors that may impact customer demand. One key factor is seasonality. Candle sales tend to spike around certain holidays and seasons. For example, fall scented candles sell very well from late August through November. Christmas and winter candles are extremely popular from late November through December. Sales may dip in the first quarter of the year. Analyzing sales data and trends over the past few years can provide insight into seasonal demand shifts.

It’s wise to raise prices slightly leading up to peak seasonal sales periods to maximize revenue when demand is high. Consider lowering prices in the off-season to attract customers during slower sales cycles. Developing seasonal promotions and discounts can also help move inventory at different times of the year.

Beyond seasonality, be aware of other events, holidays, and cultural moments that may impact candle demand and pricing. For instance, events like Valentine’s Day, Mother’s Day, and graduation ceremonies will drive specific candle purchases as gifts. Even cultural moments like the fall return to school create dips and spikes in candle sales. Staying aware of the market calendar and planning pricing accordingly is key.

Test Different Prices

When launching a new candle product, it’s important to test different price points to see which one maximizes sales. Rather than just picking one price, try offering the same candle at $15, $20, and $25 to see the response. You can do this by setting up different product listings online, or placing test batches in different stores at different prices. Monitor which listing or store sells the most over a set period of time, such as a month. The price that moves the most units is likely optimal.

It’s ideal to run this kind of test before fully launching the product. That way, you can zero in on the ideal price point right out the gate. You may find a surprising “sweet spot” that generates more revenue than just assuming a higher or lower price is best. The sweet spot balances affordable cost with perceived value and quality. Testing different prices requires some extra work upfront, but ensures you have the sales data to maximize revenue.

Account for Channel Costs

When selling candles through retail channels, you’ll need to factor in the various fees and markups that will be applied. Online marketplaces like Etsy and Amazon charge transaction fees, listing fees, payment processing fees, and fulfillment fees if you use their shipping services. These fees can range from 5-15% of the product price. Physical retail stores also markup products to account for their overhead and profit margins. A 100% markup at a retail store would double the price you charge them for your candles.

To determine your wholesale candle pricing for retail channels, take your base candle price and deduct your desired profit margin. Then add the retail channel’s markup percentage. For example, if your candle costs $10 to produce and your profit margin is 40%, your base wholesale price would be $6 ($10 cost divided by 1.4 profit margin). If the retail store marks up your candle by 100%, they would charge $12 for the candle ($6 wholesale price multiplied by 2). This allows both you and the retailer to make a profit while setting a competitive retail price.

Offer Discounts

Offering discounts on your candles can be a great way to increase sales volume and attract new customers. There are several types of discounts to consider:

Coupons

Creating printable coupons that customers can redeem in your store or online is a popular discount strategy. Coupons help incentivize customers to buy more and allow you to track your marketing efforts. You can offer percentage discounts like 15% off or dollar amount discounts like $5 off a $25 purchase. Coupon codes can also be used for online sales.

Sales

Running periodic sales on your candles is another way to give discounts to customers. You can do sitewide sales for major holidays or occasions. Or run sales on specific collections, seasonal scents, etc. Make sure to promote the sales through email, social media, and other channels.

Bulk Order Discounts

Offering bulk order discounts can increase average order value. Provide tiered discounts for larger orders e.g. 10% off 6-11 candles, 15% off 12 or more candles. This incentivizes customers like gift shops, boutiques, and event planners to purchase more from you.

Analyze and Refine

Once you’ve begun selling your candles, it’s important to continuously analyze your sales data and refine your pricing as needed. Review your sales reports regularly to see which candle scents, sizes, containers, etc are performing best. Track how many units you are selling at each price point for each product. If certain products aren’t selling well at their current price, consider lowering the price to see if it boosts sales. If your most popular candles are flying off the shelves, you may have room to increase the price a bit. Make small incremental adjustments and closely monitor the impact on sales.

In addition to sales data, stay aware of any changes happening in your local candle making market. If competitors introduce new products or change their pricing, you may need to adapt your strategy as well. Your costs for materials like wax and fragrance oils might also fluctuate over time, requiring you to raise or lower prices to maintain your profit margin.

The candle market is dynamic, so be prepared to regularly analyze all available data and make thoughtful pricing adjustments to maximize your profits.

Regularly Reevaluate

It is important to periodically reevaluate and update your pricing as your business evolves. As your costs change for materials, labor, shipping, or other expenses, you will need to adjust your pricing accordingly. Review both your costs and profit margins regularly, such as every 3-6 months. If your costs have increased, determine if you need to raise prices to maintain your profit margin. Or if your processes have become more efficient, you may be able to lower pricing. You can also assess if competitive factors or market demand indicate an opportunity to adjust pricing up or down.

In addition to changing costs, sales volume and trends will impact decisions around pricing. Track sales data over time to see if certain prices or promotions lead to more sales. Higher demand may support increasing prices, while declining sales could mean lowering prices to increase volume. Price testing can also reveal optimal pricing levels. Be strategic in making pricing adjustments and aim for gradual shifts rather than drastic changes when possible.

Regular reevaluation ensures your pricing stays aligned with your goals as your candle business evolves. While initial pricing provides a starting point, being flexible and optimizing along the way is key for long-term success.