How Do You Price a Food Product ?

Posted by Damian Roberti on

All right, so how do you calculate the selling price of food and how much should I mark up food, when I sell it Damian? These are two great questions, I got from some subscribers. And we're gonna go over those two subscriber questions. I'm gonna show you a huge resource, if you're not familiar with Shopify, on how to sell food on Shopify and figuring out exactly the calculating price, for your food and we're gonna dive into that right now. All right guys, so welcome back to Marketing Food Online.

 

So, if this is your first video welcome to Marketing Food Online, I'm Damian Roberti, founder and CEO of Marketing Food. If you are brand new, definitely hit the subscribe button, we have over a thousand videos for you. The food entrepreneur, I had three questions I wanted to dive into really quick in this really quick video for Shopify, two of the questions were, how do you calculate your selling price of food and how much should I mark up food, when I'm looking to sell it online? And I actually found a fantastic resource.

It's actually through Shopify. I'm gonna show you a little bit on my screen here, how this calculator works and down below this video, I'll have a link, that'll take you right over to our website and get you directly to this link. So, you can actually check out this calculator for your own food products. So, if you're not familiar with Shopify, really quick, let me show you some great benefits. I actually have two stores on Shopify, a marketingfood.com and we have Food Biz USA, which is our generic website, that we actually do a lot of our teaching and training on through Shopify as well. So, what we have right here is Shopify has got three different types, three different levels. The one that we actually use, that's really sufficient for what we do because of the size of our store, is the basic Shopify, which is $29 a month. Now, you can get the Shopify, is the next one up and then advanced Shopify.

The last two, if you're really just starting out, honestly, you wanna stay away from, cause you don't necessarily need that big of a store just yet. I'd recommend you check out the basic ones, if you're not familiar with it. And again, if you want to check out, they have a 14 day free trial, by the way, you can check that link out, down below the video. So, let me show you really quick on how to do this. Shopify is a fantastic platform by the way, to sell food of any kind, if you're looking to sell candy, if you're looking to sell cupcakes, baked goods, if you're looking to even sell stuff through cottage food from home, and you wanna sell locally, you can even tap into Shopify.

If you're a food truck even, you can even tap into their POS system and their website and integrate all of that together. The big thing about Shopify that's really great is the amount of apps that they have, which increases the functionality and features of your website. That's why we love it so much. And that's why we use it for the two sites that we have. Now, here is their little price calculator. Now, this is actually dedicated specifically to food profit margin calculator. This thing is awesome and it's instantaneous. It's quick, it doesn't take much time to obviously do this, but it's gonna give you a really good understanding of how to price your products.

Now, let me give you a few tips though, after we put our numbers in here, I'm gonna go ahead and calculate the profit, but you have to be aware of a couple of things. Number one, if you're gonna take into consideration your fees that you're going to have, you're gonna have a transaction fee, of course, any platform you sell on, online, you're gonna have a transaction fee. Take that into consideration. That could be two, three, 4% or even higher of the transaction. So, when you see this and you see your actual profit, keep that in mind that you may need to increase the actual per transaction amount.

That's something that I recommend to a lot of clients when I do my consulting business, is just that you don't want to sell a product for like three, four, five, $6 because to be honest with you you're gonna get eaten up in fees. You also have to keep in mind Shopify charges, as I showed you, the $29 a month fee. So, that's a fee right off the bat, no matter how much you sell plus any other fees that you may have involved, such as storage of inventory, employee payroll, paying yourself, all of these things are things you need to take into consideration. So, let me show you how this works.

This is a fee calculator right here, very simple, cost of your item. I'm gonna create some generic ideas. So, this cost me $5 to make and the margin, I wanna have a markup of 50%, you hit calculate profit and you're good to go. So, it actually shows you your sell price. You need to be at around 7.50, you're gonna make 2.50, your profit per unit. And then your gross margin is gonna be 33.33%. Cool, fantastic. Now, here's what I would recommend. Most of the average selling amounts for us on our platforms for our candy and snacks and all of it. It's between around 28 to 32, $35. So, the reason being is that I know for a fact that there's some items that sell less and some that sell much, much more, but our average customer spends over $30 per transaction. There's a reason, as I just mentioned, you wanna make sure that you making enough money on each transaction to obviously make it profitable because every transaction is gonna have a multitude of other expenses. Like I said, about the fees where the transaction, if you're using PayPal or Stripe or even Shopify payments, you wanna make sure when you start selling food on Shopify, that you're marking up your product, so it's actually profitable. So $5 items, this is not gonna make it what you need. So, how do you do that Damian? You wanna make sure that you bundle your products. One of the best ways to increase a per transaction amount is gonna be through bundling. So let's say here, right here, instead of $5, what if we went to $35? I'm sorry, half the items is $5 and we wanted to get it up. Let's go to 100% markup. So, the market percentage is gonna be 100%. So, you're gonna sell this $5 item for 10. So, let's say if we want to go, we wanna mark it up 300%. So, there we go. So, your sell price is gonna put you at around $20 for the cost of a $5 item. You're gonna make a profit of $15 on the transaction. Now, if that is obviously something that's applicable for your product, then now you know, you're gonna be making a 75% margin. So, now let's go up maybe 500% on it. There we go, so now, an item that cost me $5. I'm gonna charge 30 and I'm gonna make 25 on. Now Damien, that sounds like crazy. I got 83% margin, believe it or not online. When it comes to specialty food products, it's not, there's some products that we actually make that cost us around 2.25, 2.50, we charge 24.99 for, and let me show you that. 2.50 and let's just say that was that. All right, so we're gonna go up around 700%. That's gonna even put it wow, so we're at about 800% and that's gonna put your sale price around 22.50. It's actually a little bit more than that. So, we make around $20 per unit of that particular product because we make it to order and it's very inexpensive to make. So, this is a great calculator specifically for food. If you looking to find out how much of a margin and how much you should sell for, just keep in mind as I mentioned those other fees, because they will eat up any profit that you may have. So, thank you to the two subscribers for sending in those questions, on how do you calculate the selling price of food? And of course, how much should I mark up my food product? I hope that answers you guys' question. And if it does, please do give us a big thumbs up. If you have any other questions about pricing a product, specifically food products, please let us know down below and I'll hop on your questions as soon as I can. I'll see you guys on our next video.

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