How I Price My Candles (After $2.7M in Sales)

We break down candle pricing using real numbers, starting with true cost of goods and ending with a price that can support growth. We also explain why a simple multiplier often fails and how a clear customer avatar makes pricing feel obvious instead of stressful. 
• defining cost of goods sold for candles including materials and packaging 
• accounting for supply order shipping fees handling fees and tariffs 
• using software to track COGS pricing and inventory 
• avoiding random 2x 3x 4x pricing without customer data 
• choosing one ideal customer and pricing for that buyer 
• researching boutique price bands to set a realistic target 
• working backward to reduce costs while keeping perceived value 
• planning for overhead like markets payroll rent design and marketing 
• understanding keystone wholesale pricing at 50% of retail 
• deciding whether direct to consumer or wholesale fits the margins 
• using markets to test pricing fit versus customer fit 
Check out makersmanager.com to learn more. 
If I can help you with anything when it comes to your pricing, just leave a comment below.

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Transcript

The Pricing Question Everyone Asks

SPEAKER_00 0:01

How much should I sell my candles for? This is one of the topics that comes up daily inside of candle making and candle business communities. And it's sometimes gonna be a hot topic. People have different strategies or different ideas of how they come up with their pricing. In today's episode, I'm gonna break down our cost of goods, how we calculate that, the tools that we have found that are amazing to help us with this, and how we come up with our pricing for our customers. So stay tuned. Okay, if we haven't met, I'm Sebastian Garza. I am the co-founder of Garza Beacon Candle Company, where we have surpassed $2.7 million in candle revenue. And I'm the founder of Candle Business Pro, where we help makers go pro. There's lots of resources in the notes below from our free supply guides to our wholesale 101 guide. Lots of free and paid resources out of candle businesspro.com. So feel free to

Cost Of Goods Explained Clearly

SPEAKER_00 1:05

check that out. All right, today we're talking about pricing. But before we get to pricing, we need to talk about cost of goods. So what is cost of goods? You'll often um hear called cogs as well. The cost of goods. Cost of goods is how much does it cost to make goods? How much does it cost to make our candles, our products? Well, we all should be calculating this the same. There's really not any alternative way of calculating this. So let's go through this. For cost of goods, it is everything that goes into making this product. For candles, it's going to be your wax, your oil, your wick, your vessel, your label, your warning label, optional things such as a lid, uh, optional things such as a box. So that's your cost of good for this product. Now, there's going to be some labor. There's going to be some overheads, and we'll talk about those in just a moment. But just cost of good is going to be a hard number for your candles. That's your cost of goods. Our cost of goods is going to be our starting point. That is what we have to figure out so that we can base our pricing on that. Because we got to make sure that regardless of what we're going to price our candles at, that it makes sense. And that's all going to be based on our cost of goods. So again, cost of goods is everything that goes into this product. What is the cost that it is to make this product? So that's your cost of goods. Now, when you are calculating your cost of goods, there are softwares out there that you can use to assist you. Because not only do you want to figure out the cost of everything that goes into this, but there's also going to be some additional fees, such as the shipping, right? When you place a supply order with your multiple suppliers, most likely that you are using, there's also going to be the shipping fees. There might be some tariff fees. There might be some handling fees that go into those purchases. And you want to make sure that you're accounting for all of those because those are all expenses and those are all things that you're going to want to use towards your expenses whenever you do your taxes

Software Tools And Hidden Fees

SPEAKER_00 3:30

for your business. So there's a few softwares out there on the market. And I want to tell you a quick little story here. I had a software company approach me recently, and they asked, Hey, would you be willing to advise us? Would you be willing to take a look at our software and see what we might be missing that candle makers and handmade uh craft makers want in a software? What is lacking out there on the market right now? So there are a couple big players in the space that you may have heard of. Uh, Inventora is one of them, Crafty Base is another one. There's also a lot of very small softwares that are popping up because of the use of AI. People are creating apps, but I would be very, very cautious about any of those because you don't know if you're data secure with any of those. So there are softwares out there. And this software company came to me. It was actually a candle business from someone named Chris that actually runs a candle business, but is also a cybersecurity analyst in tech. I'm probably getting that title wrong. Came to us and said, Hey, would you be willing to go through this software? Would you look at it, see what we're missing? What could we help? What could we continue to build so that we have the best software out on the market? So I looked at it and I said, Yeah, let me let me dive into this. Let me see what you have. When I got into the software, I was floored. It was everything that I have been dreaming of that I wanted in a software to run my business on. I wanted something that would calculate my cost of goods, that would be able to calculate my pricing based on my specific type of model, that would calculate my wholesale pricing, that would make sure that I'm calculating everything for my taxes at the end of the year. So I wanted to be able to run a report that I can just print and hand or email over to my account and say, this is all of the expenses that went into my business. This is all of the revenue that came into my business this year, so that my accounting can just do my taxes very easy. Some of these features are lacking, or the way the algorithm works in these other softwares, they aren't calculating things the way that my accountant wants things done at the end of the year. So I'm diving into the software and I'm in love with it. So I went back and said, look, I believe in this software so much. I don't want to be an advisor for this. I want to invest in this. I want to build this alongside you so that I know and I can watch this thing grow. So I can use it because right now I'm using these other softwares that are very expensive and they don't have all the features that I need to run my small business with. When I say small business, I'm talking three brick and mortar locations, plenty of wholesale accounts as well. So not necessarily just small, but we aren't an enterprise. And some of these softwares, you're paying enterprise costs to have a monthly subscription. And so we're all way overpaying, and we shouldn't be doing that. So I want to come out with a software that is made by makers for makers that understand the ins and outs of what this software needs so that we can calculate our cost of goods the right way. So we understand our pricing the right way. And that is what they started working on. I am now an investor. We have now launched Maker's Manager. Makers Manager is the premier software for not only just candle makers, but small businesses in general that are focused on handcrafted goods. This software is going to calculate your cost of goods, give you what your profit is per candle based on the pricing model that you select inside of the software. You get to control all of that. So I recommend checking it out at makersmanager.com. But let's now talk about pricing.

Makers Manager And The Pricing Shift

SPEAKER_00 7:53

How do we calculate how much we're going to sell this candle for? How much am I going to sell this candle for? Let's talk about the ways we figure that out. All right, so let's get into pricing. How do I come up with a price for my candles? Well, we just talked about coming up with our cost of goods. We figured out our cost of goods. Let's say this candle here cost me five bucks to make. Okay, so that's my cost of goods on this candle. How much am I gonna price it for? How much are you gonna price it for? Am I gonna sell this for 30 bucks? Are you gonna sell it for 50? Are you gonna sell it for 15? Where do we come up with our pricing? Let me explain to you our strategy for our pricing that has worked well for us. And I think it's one that I would recommend you taking a look at because I have seen a lot of candle businesses come and go. And there's a lot of different pricing strategies. But as a small business that is doing this full time, we have the data that has shown uh what we're doing has worked. And so I want to share with you exactly how we came up with our pricing metric. So we know how much our candle cost us to make. Just bare minimum. This candle, let's just say cost us five bucks. How much am I gonna sell this for? Based on my five dollars, am I going to price it on that? No. And this is where I see a lot of makers. They will come up with their cost of goods and they're gonna calculate that. And then they're gonna just turn around and they're gonna put a 2x or 3x or 4x tag on that. And that's what they're gonna sell their candles for. And then they're gonna go out there and they're gonna put it on their website and they're gonna put it on social media, and they are going to try and sell it at that because they saw that someone told them they should price their candles at say 3x. So if this cost me five bucks to make, I'm gonna sell this to the public at say $15, right? And sure, that's a way of pricing, but it's not based on any strong data that you're going to be able to rely on going forward. And the reason why is because people that are buying your candles would then be just kind of all over the map. And then so you're gonna have people that are gonna say your candles are too expensive, and then they're not expensive enough. They're too cheap. And so they're gonna question the value in your

Build Pricing Around One Customer

SPEAKER_00 10:11

candles. So, how did I come up with our pricing? We need to have our pricing based upon a customer, one customer. Your whole brand should be based upon one customer. You need to have a customer avatar, a specific person in mind that is gonna buy your candles, and then everything you do in your brand should have that one person in mind. One person, just one person in mind when you have a brand. Now, of course, I open up my brand to anybody that wants to buy my candles, but I'm not making candles for everybody. I'm making candles for one person. So I had that one person in mind. For us, just to give you a quick overview of who that person is, the person buying our candles that we are focused on getting business from is someone shopping at women boutiques that are generally gonna be right at middle of the road to higher income, definitely not luxury. Um, they are gonna be school teachers, nurses, you know, that middle class that uh is gonna be aged between, I'd say 40 to 55, 60. Um, definitely 40 is 40 is gonna be on the floor on the lower side. Uh, and the reason for that is that is going to be whom is shopping at the stores that we actually want our candles in, that we are approaching with wholesale. These are generally going to be um women that maybe have kids, but they're already out of high school, that they are there on to college or out of college now. So they're gonna it's gonna lean into the 40s versus under. The reason for that is because once they on average will have their kids kind of out of the house, that's a lot less of an expense. And that's when we have seen, um, just from our own siblings and our own family members, that's when a lot of people will start to spend money on themselves. That's why the women's boutiques that focus on those age ranges do really well. Because that's when people are, instead of buying their clothing at, say, discount retailers, and nothing against those, but instead of buying their clothes at, say, Walmart or Kohl's or Old Navy or any of the discount retailers, now they're spending a little bit more money on themselves. They're they're practicing a self-care routine. They're buying some more expensive cosmetics and perfumes and candles. They're spending more money on themselves. And the reason why I go after that um person is because they're gonna spend enough money to where I can make a good profit on my candles. I can't make a good profit on my candles selling these for $10, $15. I'd have to sell a ton of these at $15, a ton of these at $15 to be able to make a living, to be able to open up our brick and wonder stores. Uh, I wouldn't be able to do these at $15, I wouldn't be able to do this wholesale, right? And that's a big part of our business. So have your one customer in mind. And it doesn't matter who that is, but keep in mind that if that customer, that person that you have in mind, is not spending a decent amount on a candle, if they are buying only $15 or less candles, you're gonna have a really hard time being successful. And the reason for that is you're gonna have to be able to just sell a ton, a ton of candles. Go to Walmart and you see a $10, 30 ounce candle and you're like, what the heck? I can't even make that candle for that cost. How can they sell it for that? Well, it's because that company is making probably 50 cents, 75 cents a candle, but they're making millions of those candles and they're selling multiple millions of those candles. That's why at 50 cents, 75 cents profit, they can do it. I can't live off of that. I just can't. I've got rent, I got life. Chad has a Starbucks addiction. So we have to we have to sell some candles, right? So who you have in mind as your one customer that you're gonna focus your pricing on needs to at least be spending, I would say a healthy would be $20. But here's the way we do our math.

Research Stores And Set A Target

SPEAKER_00 14:54

You go into the locations where you envision your candles being. So we went to all these different boutiques and we saw the common theme. The prices of those candles are between $25 and $35. Again, we're not going high-end and we're not going discount. $25 to $35 is where we were seeing the prices landing in those stores that we wanted to be in. We go into those stores and we see, okay, they're between $25 and $35. So we got to kind of decide within there. Now, how do we compete with these candles? What do they all have in common? Are we having the main um characteristics of the candle in line? Meaning size, type of ingredients, packaging, uh, presentation. Is it in line? Can we compete with the candles on those shelves? If so, we're in a good spot. We just need to decide on price, and our candles can go on those shelves. So you have to be confident in your candles competing in those stores. Then you can maybe decide to have a differentiator in there. When we were going into all of these women boutiques and looking at the pricing, we found, hey, yeah, our candles can definitely be on those shelves. They're about the size, they're between, you know, eight and 12 ounces. So we're not doing, we weren't doing the 17-ounce bath and body works or the 20-ounce uh Yankee candles. We weren't doing that. That's not what's selling in the stores that we're wanting to be in. We go into these stores, we see what they're pricing their candles at, we say, yeah, we can compete. We are confident that we can put a candle on that shelf in that store. Okay, how can we, and this is a little off topic, but how can we compete, but also bring something fresh? And that's why with our brand, we decided to go with bright, colorful labels versus when we were going into these shops four years ago, everything was like very minimalistic, uh, white labels, uh, nice labels. Um, but you know, they were white labels with some uh some fine script fonts on them. And we thought, hey, yeah, let's go into these shops, but let's change it up a little bit and let's give them something fresh. And so that's the approach that we did. Okay, so back to pricing. We decided, hey, okay, we need to make a candle. We want to sell in these stores for $26. That's what we saw as a price point that would compete with all the other candles that were in the shops and would be a number that we were confident that we could get these stores to be able to resell them to their customers at. So $26 is the number. That's the number. So whether your number is 20, 25, 30, 35, 40, doesn't matter what your number is, but find that number. My customer, my my ideal one customer is going to spend $26 for my candle. Now you have to make that candle that you're gonna sell at that price, working backwards for as cheap as possible

Work Backward Without Losing Value

SPEAKER_00 18:03

while maintaining the value that that customer is going to expect. So, what do I mean by that? You running a business need to make your products of the highest standard and the value that your customer expects, but you need to make that as cheap as possible, right? So, how can I make this candle as cheap as possible and still provide the value that that customer expects? The customer buying my candle for $26 does not expect me to stick a label on here and handwrite the cent name on there, right? I wouldn't spend $26 for that candle. That's just me. Can you handwrite your scent name on your candle? Sure. And I've seen, I've seen lots of people that do that, especially out at out of markets, and you know you're gonna see people that are just starting up and they're gonna handwrite. There's nothing wrong with that. But my customer that's spending $26 is not buying that candle. They're buying a candle that has a perceived value that warrants my price. So, what is that dollar amount that they're gonna spend for your product? And what do you have to provide them so that they will open up their wallets and give you that amount of money? My customers want a sleek, decent um vessel, nothing fantastic about this vessel. It's just a straight-sided Libby jar. Um, they they don't want a mason jar. For some reason, I feel like mason jars, um, which probably are the same or more expensive than this, they sometimes have a perceived lower value, which is kind of interesting. It's not the modern, modern straight-sided. And you can go with a very nice boozy ceramic um or glass container that's a lot larger than this that costs four or five dollars for that vessel, right? This vessel costs me like a buck and a quarter. You have to match the value that your customer is expecting. So my customers expect a decent vessel, they want nice packaging, they want nice um labeling. Um, you can throw in things like a lid or a box. Does your customer expect that? If I'm buying a $25 candle, I don't expect a box. If I'm buying a $100 candle, which I would never do, but I would expect a box. That's why you look at brands like Dipt and Volspa, the candles that sell a votive candle for $75 and it comes in a little box, right? I would expect a box. That's just extra packaging, right? It's just like when people buy Tiffany jewelry, right? And it comes in the little blue box. Like that's their trademark. And so that is just as valuable as what's inside the box sometimes, right? People freak out because of the blue box, and everyone knows Tiffany blue. They know that color. Or if you see someone with uh Louis Vuitton, Louis Vuitton, and you know, the designer handbags and leather goods and now clothing and everything else, like they have their orange box and their orange bags that their products go inside. People see that it is associated with uh, say, prestige, but they warrant a higher price, and there's a whole packaging that goes with it. With our candles, we're not putting them in boxes, not this one. Now, with my without line of candles, it comes in a gorgeous big tube box that we have that in. But those candles, they start out at $46 for that brand. It's the same stuff going into the candles with minor changes, but it's a whole different customer. Okay. So we know who our customer is. You got to figure out who your customer is first. Find out what they're going to spend on your candle so you can be confident pricing it at that. And then work backwards. Make that candle for as inexpensive or cheap as possible. Do the math. Does it make sense? So $26 for this candle is what I'm going to sell this for, is what I do sell this for. And I've sold $2.5 million worth of them at $26. And I make this for now, it's like six and a quarter. I used to say $475 all the time. Cost of goods have gone up, which is another reason why our software, the maker's manager that I uh talked about earlier, it will show you and track how your cost of goods have gone up or if they go down. But looking at that and putting all of our data in there, we see how our cost of goods have just kept going and going over time. It's incredible. So I have to remember that these aren't 475 candles anymore. These are costing us six and a quarter to make now. So at six and a quarter, I'm selling these for $26. Am I making enough to cover all of our expenses? Well, yes, I'm making enough to cover all of our expenses, but there's going to be those other expenses that go into this that I do not

Overhead Discounts And Wholesale Math

SPEAKER_00 23:06

calculate in my cost of goods. So these are some other things for you to consider. When you want to go into a market, that's going to cost you. It's a table fee, there's an application fee, the travel fee, all of the stuff to do a market. Are you going to want to open up a, say, a brick and mortar store? Are you going to want to hire someone to help you with label design? Um, are you going to want to do wholesale? These are all going to be additional expenses that need to go into your business. And if you only do the standard that some people talk about of like 3Xing your price of goods, that would turn my say $6 candle into being $18. But once you take out that overhead, my payroll, my rent, um, and potential opportunity of doing wholesale, I'm not making enough money. You're also going to want to think about how is your business going to want to do your pricing as far as promotion? Do you want to be able to run a discount? Do you want to be able to capture someone's email address when they land on your website by having a pop-up that says, hey, 25% off your first order? That is huge for customer growth. It's huge. Doing fundraisers, I talk about fundraisers all the time on this channel. That's 25% of our revenue there, but that's huge for the growth of our business overall. So if you just price your candles at say 3x or maybe even 4x, that might not be enough to be sustainable and to scale your business long time or long term. So figure out what your pricing is going to be. Make that candle for as cheap as possible based on what your cost of goods calculator is going to tell you. Then you can decipher is that price going to be reasonable? So for us, $26 for this candle, which means for wholesale, wholesale pricing is always going to be 50% of retail. Always. Now, there'll be some people that'll say, oh, I charge 60% or I charge only 40% of retail. 50% is the keystone metric. It is the standard. They want to be able to mark that product up 100%. So if my retail price for this candle is $26, the store will not buy this candle from me for more than $13. So keep that in mind if you want to do wholesale. Wholesale has been great for our business. We continue to grow that. Is that a model that you want to do? And if so, then you have to make sure that you're marking up your prices enough. So $26, half of that is my wholesale price, which is $13. And then I am making this candle for about $6.25. Is that enough to warrant my business model? Is it enough to warrant doing wholesale? Is it enough that my $26 is sustainable for my business? Um, for us, it is. For you, that might be more than enough. Or for you, that might not be enough. Is making that, say, $6 a candle in profit going to be enough for you to do a wholesale? If it is, fantastic. If it's not, then we have to change our model. You're gonna have to raise your prices. Now, what happens if your price is not enough, but your customer won't pay more? If this candle costs me $10 to make and I'm selling it to the public at $26, I'm still making $16 on this candle. So I'm doing okay. But that would be if I'm just doing it through my website online only. I don't, I'm not running ads. I don't, I don't have any overhead, I don't have any payroll, I don't have rent, I don't want to do any discounting on my website. And I certainly don't want to do any wholesale at those margins, right? So if it's $10 to make this candle and I'm selling it for $26 because that's a customer that I had in mind, it would be sustainable for a solo person to run a small business without much growth potential, ideally. Um, or it will just take a very long time because you're gonna be saving up a lot of that revenue to reinvest back into your business. So what do we do? We need to price our candles accordingly. If that $26 that I'm using as our example isn't enough, then we need to we need to charge more for that. Now, when you push back and you say, yeah, but my customer's not gonna charge $30, or my customer's not gonna spend $30, I can only charge $26 to that customer.

When Price Fails It Is The Customer

SPEAKER_00 27:58

Now we decide we have a customer problem. The customer that I had in mind might not be the customer that's sustainable for my business long term. Hopefully, a light bulb went off for you right there. The customer that you have in mind might not be the customer that you actually want or can sustain growing a business based on. We have lots of customers that are amazing people that if I was building a business for them, to have them more in mind and to be more targeted towards them, I might make a $20 candle. But that can't be my focus because that isn't going to bring in enough revenue for us to be sustainable and grow our business. My customer has to spend at least, say, $26. When I just launched my brand new brand, which is called Without, we are investing more into the packaging. We are investing more into the marketing of that business. That customer has to be able to spend $46 on those candles. I didn't charge $46 for those candles just to be greedy and put more money in my pocket. There's going to be a trade-off. I'm charging more money, but there's a lot more expenses that are going into that. The candle itself is closer to $10 than it is to this candle. That's six, six and a quarter. Um, the wax that I'm using, the oils that I'm using, there's custom vessels made, the packaging is a lot more expensive. And the marketing to get that customer is going to cost us even more. We need to have pristine social media that's going to cost us more because it's outside of our skill set. So all of those costs dictate what our spend is going to be, which also dictates what we can charge. Now, if the customer we have in mind won't spend $46 for that candle, then we got to find a different customer. Or we got to find a different product to sell to them. I can make this candle for less money. Uh, I can take the lid off. That just saved me a buck, a buck and a quarter right there. Instead of having custom printed labels for us that are really nice and they pop in color and things like that. These cost us about 45 cents. I can print some labels at home that I could probably print for a nickel. Um, no, yeah, maybe not that cheap. I probably 15 cents I could print some labels myself for now, just if I'm buying them in bulk. But the quality is not going to be there. It's not going to be the quality that the person spending the $26 on my candle is going to want to fork over to get my product. So I want to encourage you to take a look at your pricing, especially if you're in your beginner stages of your business and you're really kind of not sure who that customer is. If you don't know who your customer is, you got to figure that out first. What are people willing to spend for candles? Are your candles geared towards a specific person, a specific um niche? Who is your customer going to be? Who's going to buy your candles? How much are they

Markets Feedback And Final Takeaways

SPEAKER_00 31:14

spending candles for? A tip here for you. When you're doing markets, and I highly recommend everyone do markets, especially when we're first starting out, you got to do markets to see what people think about your products. If they all love my products, they say it looks amazing, they smell amazing, everything about my product they love, and they're not buying my product. Well, I either have a pricing issue to why they're not buying it, or I have a customer issue. And sometimes you might have a customer issue when it comes to your markets because we have done markets where we have just crushed it and the markets were really small. There was not very many vendors there, not a lot of attendees, smaller towns, but they spent money. And then we've also done massive markets that are two-day markets, and that was not a clientele. They were not spending $26 on a candle. So don't base your prices on just random markets that you do. Remember, have a customer in mind first and then pick markets that you think that customer would go to, that they would shop at. And we're first starting, just do every market you possibly can. That's what I'd recommend. Get out there. It's all about repetition. It's all about getting in the steps, right? And doing as many as possible so that we can learn so much. Because doing markets, you're learning so much more than just pricing. You're learning a lot more about interaction and engagement and what people like and what they don't like and what sense are going to work and what they're not going to work. Um, but that's off topic here. Back to pricing. Figure out how much I can sell this candle for? Who's the customer? What are they going to spend? How can I make this for as cheap as possible while providing the value that they still expect? And is it sustainable for my business to do other avenues besides direct to customering? You can have a very good business that's direct to customering. Don't even worry about trying to do wholesale. That is totally fine. And you see a lot of that maybe on Etsy. If you go onto Etsy, you'll see candles being sold for 12, 13, 14 dollars. And they've sold thousands of them. And you're like, I can't do wholesale at those prices. And you're right, you can't. But that's okay if you don't necessarily need to do wholesale. You can find other means of selling your candles. And having a discounted product or a less expensive product is okay. Don't assume you have to charge what we charge to be successful because you certainly don't. You just have to sell enough candles at the price point that you set to be sustainable and to pay all of your overhead. Again, there's not a set structure. There's not a 3x or 4x. But to give you an example of what ours is, 4x is my minimum. I do not have anything that is less than 4x. When I say 4x, I mean four times the cost of good. I do not have any products that are less than the price of the cost of goods. I do have some that are up in 6, 7, because some things, such as room sprays, I sell those for $16 because that's what my customer will spend for the room sprays. But that room spray only costs me like $2.10 to make. I'm not going to reduce a price I charge someone because my cost of good is really low. I'm going to capture all the revenue I possibly can on that product because that's what my customer is willing to spend for the value that I am giving them at that price. That also allows me to do discounts, um, you know, do gift sets, so many things that we can do when we charge enough in our business. So hopefully this has helped you get your pricing in order and your cost of goods figured out. Check out Makers Manager. It is in its new stage. I would love for you to come and see it, test it out. It's going to be the best software out there to calculate your cost of goods and your pricing based on the metrics that you choose. It is going to keep all of your inventory in one location so that you always know how much wax you have, how many vessels you have, how much fragrance you have, all of that. So check out makersmanager.com to learn more. Also, if I can help you with anything when it comes to your pricing, just leave a comment below. I'll hop in there and do the best I can for you. Thank you so much for tuning in. Talk to you next week.

unknown 35:41

Bye.