When you sell your products through a distributor, the distributor will mark up the price before selling it to the retailers. The retailers then turn-around and mark up the prices again before selling it to the retail/end consumer. Everyone wants a piece of the pie (so to speak).
Typically, distributors want a 25% gross margin. Meaning, if they buy a product for 75 cents, they will sell it for $1. Likewise, retailers want a 40% gross margin.
With all these mark-ups, it can be confusing trying to figure out at what price you should sell your product to the distributor, knowing that everyone wants a cut. If you have a target sales price, what should your cost of production be?
The purpose of the pricing calculator is to help you think about your retail pricing as it relates to your cost of production.
In order to use this calculator, you’ll need to know:
- What is your unit cost of production? If you’re selling salsa, what does it take to get one jar of salsa in the bottle. Be sure to include your packaging costs!
- What is your target retail price? This will help you figure out what you need to sell your product for, knowing that everyone will mark it.
If you need extra help applying this template your specific business, you can sign up for an hour of one-on-one coaching.