How to Price your Food Product Starting a Food Business Series

Posted by Damian Roberti on

Figuring the retail price of your food products is a challenge. How much should you sell it for? What are the factors that determine the food pricing?


You are looking to figure out how to price your food products. I'm actually going to give you five examples of different ways you need to consider in order to price your food profitably. And I'm going to dive into the first one, which is cottage foods. That is a home based business and sewing the product from home locally and farmer's markets and events. I'm going to show you how to price your product is Damien. And this is marketing food online.




As I mentioned in the introduction, I'm going to give you the five different ways you need to really think about whenever you are pricing your food product. If you're creating a packaged food product or even any free product for that matter, and you're looking to sell it, there's a lot of different ways you actually can sell it. Especially this day and age with the internet being as it is now, the five I'm going to give you are going to be first.




Listen to "Food Business Insurance WHY you need to have it and what kind" on Spreaker.

One is the cottage food business. This is one that's probably going to be the most profitable locally, but it could be a challenge to sell really enough to make it profitable when you are local and you're not online. So again, if you're producing approved product from home, how do you price it to actually be competitive? If you go to a farmer's market or go to an event, how do you make it appealing? But of course make it profitable. So I'm going to give you a handful of the things you need to think about. As far as the expense side of having a cottage food business and factoring that into your product price point, then I'm going to do another video. It could be totally separate. I'm going to do five different videos, five different videos. The second one is actually going to be about selling on online marketplaces like Amazon, eBay, and Etsy.




And I'm actually going to break down each one of those platforms, explain to you the fees. So you can understand where you need to be with your pricing. And then the third video, I'm going to show you an online marketplace of your own selling on your own website is actually slightly different than selling on the other ones like eBay, Amazon, and Etsy. So there's a lot of different fees that come into play. And if you don't think about it, if you're not aware of them, they will eat up your profit very, very quick. The next one I'm going to talk about is wholesale. So if let's say you've got a commercial kitchen or you've got a commercial facility, and then you want to sell a product in bulk. So you're going to start mass producing it or just making it in bulk and selling it wholesale.


There are some issues you need to think of some cost factors as well when you start to price it. And the fifth one is actually one that a lot of people don't ever really use that I've ever dealt with. As far as some of my clients and such and people I've actually helped along the way, but using a food broker. So using a middleman in a sense to sell the product for you, there are also fees involved with that. So pricing a product based on all of those different variables is totally different. Each one at different levels. So let's jump right into it, cottage food business. So you're starting from home and I want to just use an example here. I've got one cost up here of $2 per product. Okay. So if a product costs you $2, what goes into that? And where should you be with your price point?



Okay. So the first thing you're going to think of where are you selling it? Are you going to sell it locally? Great. Okay. So now you're going to go, let's say to a farmer's market. Well, farmer's markets sometimes have a fee that they charge just to get in whether you sell anything or not, they're going to charge you a fee. And some of them actually charge a percentage of what you sell on top of that fee. So hypothetically, they could say, you know what, it's a hundred dollars for Saturday and Sunday and we take 10% of your sales. So now you need to create a price point for a product that costs you $2, but you need to set a sales goal. You obviously need to recuperate at least what you've invested into the fees alone and right off the bat, you're already 10% into it and a hundred dollars into your fee.

Read Andrey Gadashevich's answer to What are the laws and regulations dealing with selling food online? on Quora

Okay? So you've got packaging product, the three main, main things to think about when you're creating your costs before you could create your retail price is your packaging, product and labor. So if you are producing it and you're taking two hours worth of time, you've got to figure out how much are you looking to pay yourself for the time that it took you to produce your products now, little quick tip, if you can utilize your time the most efficiently and produce a lot of product in a two hour period, try to do that. Obviously that's a no brainer make as much of the product that you can completely finished, labeled, packaged, sealed, all that good stuff, as much as you can in a small amount of time, because that way you're using your time more efficiently. So the packaging, is it a bag? Is it a box?

All of that, the labeling, all of that, that goes into the package, end of it costs you money. So you need to factor out and figure out how much is the bad cost of me. How much does the box cost to me that my product is going into? How much is the label? If you're putting your own labels, as I always recommend, definitely do your own labels. Okay. But how much is that costing? So your product, how much of the product in the packaging, how much does that cost you to make? And then of course, as I just mentioned your labor, so these three things, for our example, it's going to create a product that costs two bucks, okay. Now renting a commercial kitchen. So let's say that you can do this at home and you can create it for $2. Well, now you actually are looking to rent a commercial kitchen because maybe that particular food product can't be made at home, what are you gonna do about that?



Well, you gotta written the kitchen. Well, if you rent a kitchen, exactly the same as what I just mentioned before, the amount of time it takes, you use the commercial kitchen. You need to make sure that you're making as much product as you can in that short period of time, because all of that price, the price, it costs you to rent. That kitchen is going into the production of your food product. So if you're used to making 200 units for two hours worth of time, you go to a commercial kitchen and you can actually put out 400 units, because that way you're able to do it with better equipment, more storage, whatever it may be. I highly recommend you figure out how to do that because that short period of time is going to make the use of the commercial kitchen, more sensitive, and the next up traveling.

So your gas, you've got to keep in mind too. You're going to be transporting all your table, your tent, all this stuff to a farmer's market. You're going to be using gas to go there and come back. Now, the closer you are obviously to the event, the better off you are, but you could use 40 or $50 worth of gas in a day, going to the vent, coming home. Those are all business expenses. Keep that in mind, by the way, even your car and your auto insurance. If you get commercial auto insurance for a vehicle that you use for your home based business, you need to look into that too, and get a quote because the auto insurance that you use for the car that you drive back and forth can actually be a tax benefit for you. So, all right, so now we've got that figured out.

So now you need to sit down and say, look, I've got all of this time and all this money invested in it. I have to rent the space. Where does that price point have to be? Okay. Normally you could go to about two and a half to two and three quarters. The markup let's just say three times. So you want to Mark this up three. So those units now become a retail price point of around six bucks. Okay. And again, this is just an example. Normally some of our, most of our products are about 2.5 to two and three quarters markup, as far as it's a market's concern. So if something were to cost a dollar, we would Mark that up two and a half times or so. And that would actually give us our retail price point. So each unit now retails for throughout $6, do you need to get set that sales goal for that day at the farmer's market to make it most profitable for you?

If you're a hundred bucks into it and you want to make about $500, then you need to sit down and figure out how many of these am I going to need to sell? And how many hours are you going to be at the farmer's market to really produce a profit? Now, next up is to very important factors. And this is something I talked to a lot of my clients when I do my consulting. And by the way, if you need any consulting, a really quick plug down below, there'll be a link. If you need some additional help, I do offer one hour phone consultations and I can work with you directly to help you get this figured out. So these two things very important. Do you sell single units or bundles? My own take on this is that single units of products at farmer's market is okay.

But if you could create bundles, it's much, much better. What does that well, let's say you have four or five different flavors of a certain product instead of selling one bag of it. You should probably put three of them together, maybe even four of them and sell them for about, you have a price point that of about $18. You're retelling for six and you sell three of them. That transactions were 18 bucks. Would you rather transact at $18 for one customer or six? Obviously it's a no brainer. You would want a team try to figure out what kind of bundles you could put together with your product. I mean, of course they vary. I can't speak on what you're specifically making, but if you have several variations sizes or even flavors, bring those together and try to get a higher price point and per transaction a sale for that individual customer, instead of just six bucks, you see what I'm saying?

So that way you don't have to sell as many units to assortment of different customers. You could just sell a handful of units to just even few customers and still make your profit for the day. So as you set, your goal, we talked about here is setting a sales goal for that farmer's market. You can make it a profitable cottage food business by simply adding and creating bundles of your product. Now, maybe you sell a variety thing. Maybe you sell granola and you sell a chocolate covered pretzels or something like that, or a variety of different stuff. Bring them together, sell one individual unit of four or five different items. So now you're up to about maybe 24 or $25.

So by selling $25 worth of product to one customer, you've done half to sell almost five it's about 30 bucks. You sell four to five customers worth of $6 products. So these are some of them, some of the most important fees and things to think about when you're going to do it from home from a cottage food business standpoint. And as I go on the series and I show you the other four methods of sending the product, I'll break down these expenses for selling online there's merchant fees, there's subscription fees, there's transaction fees. A lot of stuff comes into place. So you have a better understanding of where this needs to be. That's your retail price. So if this helps you out, please do give a big thumbs up. If you have any questions about cottage, food, product pricing, let me know down below, and I'll try to get to your questions as soon as possible.

I have a lot of you asking a ton of questions and I sincerely appreciate it. I'm getting too much cause I can't see you guys in the next video. And again, we'll post to other four different methods and you'd want to sell online. Definitely watch as well. So one really quick question. If you're working from home or trying to start doing cottage, let us know down below what type of product are you working on? And then we'll see if we can give you some more specific information. Thanks for watching marketing food online. And if you are looking to create your own food truck, start a home based food business. Under the cottage food law franchise, a food operation start a packaged food business, private label, your own food product, sell on Amazon, get your own online store or sell food online. Remember to subscribe and check out these videos for more resources, take care.