# Let's talk business



## jimandpj (Mar 11, 2008)

Just something I wanted to share with everyone...

As our business has rapidly grown, one of the things that has really hurt our profit margin is the magnitude of all the "business costs" that we now deal with because we're growing. I didn't take these into consideration when I just started making and selling soap to add a little extra income. There are just so many of them - credit card fees, taxes, accountants, bookkeepers, inventory, shelving units, organization stuff, new printer, toner, software, photo equipment, better computers, office supplies, discounts for your best customers, higher insurance, paid help, new logo, better website, bulk buying, increased property taxes b/c the county knows you have a business, extra telephone line, etc. etc. And lets not even talk about if you have to add on space or buy a bigger vehicle. We spend more on this stuff than we do on the soap ingredients.

The reason I'm sharing this is because I've spoken off the forum with a lot of people lately about the business side of things. I just wanted to put it here so others could see it too. One thing I've learned is that you need to set your prices at a point that you can still make a profit if you are going to grow. And that means you look less at what your competition is charging and more at what you need to charge. Cutting your prices b/c a competitor sells cheaper or b/c that's all you can get just means that you're going to work yourself into the ground b/c the only way to make up for such a tiny profit margin is volume and that means spending your entire life making soap. There are always going to be people who just want to support their soap hobby and don't care if they are actually losing money, it's just something they do for fun. Don't even try to compete with those kinds of people. Sure, you may lose some sales to them, but that's ok. 

It is really true what they say - that it takes a business 2-5 years to become profitable and that's because you're in this zone where even though you're selling more than you ever thought possible, you are spending obscene amounts of money to do it. 

Anyway, just thought I'd share. Oh, and this forum is so valuable. Alabu is now charging for consulting - $40 for 15 minutes of her time. Vicki and Barb - you could make a fortune. 

PJ


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## momofmany (Aug 18, 2009)

:blush2 Wow PJ, Now I feel bad for bothering you and asking questions! :blush I was just so impressed with your family video and that you were like me, a stay at home mom, and still able to work such a great business. I realize that I will never be as big of a business as you. I am new, I am ambitious, and maybe a dreamer. Maybe I will never get off the ground. But new people need to ask questions without feeling like they are stupid. I'm sure glad I found a wonderful mentor who does answer ALOT of my questions, and does so without making me feel less about myself. Granted ...there are alot of aspects of business that I need to learn more about. And frankly I have read alot of info on the internet but have not had time to "go to the library and read a bunch of business books" yet. :nooo I will say that if I ever get to the point where people like what I do and want to ask me questions regarding it and how I got started and how they can get started ......I will treat them with respect! And your right .........Barb should get paid for her knowledge, if she did she would be a millionaire. But I think Barb just LIKES to help people and share what she knows. Thats pretty obvious with as willing as she is to answer posts on here!!  Have a great day! Lisa Austin (the newbie who asks too many questions!)


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## jimandpj (Mar 11, 2008)

Lisa - you weren't bothering me, and I think the fact that you were asking questions was great! Lots of people ask me questions, and I don't mind answering them. But I think that this forum is a great way for lots of people to learn, so asking me questions on the forum can benefit lots of people.  That's why I asked Vicki questions about her molds on here (instead of in a private message, email, or phone call) - so that everyone can learn.

I also don't think it has to be true that you won't be as big a business as I am. I NEVER thought I'd be this big this fast. But Jim and I worked insanely hard, and by God's grace we've been very successful. That is open to everyone. But I do think step one is to get down making good soap. After that, it's all about making good business decisions.

This forum has given me so much and made my business a reality. I'm not a naturally gifted soapmaker - that's why I value Vicki and Barb (and others) and their amazing ways of sharing such wonderful recipes. What a gift! They have saved me months and months (and $$) in research and development.

I wanted to give back to this forum, and knew I couldn't do it with soap formulas, so I decided to give back with business advice (which is much more my talent). So much so that Jim is now chief soapmaker and I'm everything business related.

The point of my post was that I grossly underestimated the costs of being this big (especially this fast). I set my prices based on what was profitable when I didn't have any of the overhead that I have now. I had no clue how much was involved with growing. I assumed (you know what they say about assuming) that my small-scale business model would transition to larger scale. And it just doesn't. So I was just trying to share that with people and give them something to think about.

It's very easy to give in to the desire to cut your prices to be in line with those around you. I just wanted to caution people against doing that. You need to develop your brand and your market based on the prices that you need to make a profit and not work slave wages. That may mean your growth will be slower, but it's still the better business decision (in my opinion). I've said it before, there is a huge market out there for goat milk soap, but we need to treat it like a premium product, b/c of all the extra that goes into producing the goat milk. It's a lot cheaper/easier to make soap with water. I wish I had started out with higher prices.

And I'm a homeschooling mom - I don't think you can EVER ask too many questions.

PJ


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## jimandpj (Mar 11, 2008)

Does anybody sell something at a higher price than their closest competitors and still do well with it? Or do you find that you just can't compete if you don't lower your prices?

PJ


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## Faye Farms (Sep 14, 2009)

I love these kind of threads and this forum! I've learned so much here. My DH and I have come to the conclusion to set your price at what you need and forget what the competition is selling at. This philosophy is working very well for us and we have been getting the prices we need. Yes, you may have to do a little more selling on your end but if you want a higher price you have to let your buyer know what sets you apart from the others. Now I am talking piglets and calves here but I am finding that it's the same no matter what you sell. There are other soap makers in my area but I haven't found them to be any sort of competition yet. I haven't run into being told my soap is too expensive either so I have the price set at what I want. I am selling enough soap now that I need to expand. Bigger molds, more molds, more drying racks, storage. I would really like to get my soaps in some stores locally. I think I need more sturdy packaging for that though. Not quite sure of what direction I want to go with that. Shrink wrap, muslin bags or boxes.


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## NubianSoaps.com (Oct 26, 2007)

I had to raise my prices this year, it isn't reflected on my website yet. But most of those who soap in my area I taught how to soap, either from this forum with questions answered by email etc...or soap classes. Soap classes make me a tidy sum each year, and I always get the question as to why I teach them...I know what the question means, aren't I taking business away from myself. The answer is no. I have a niche market with my unwrapped bars others repackage and sell, and stores. Most never go after real stores, sure they have their soap in feed stores etc...but not high volume areas. Most women, thankfully for me, so over think everything and don't have drive, ambition or really confidence to even think they could get into a chain or large store. So yes I will teach you to make soap, but I can't teach you the business end of it, you have to learn that part yourself, and why so many gals fail in the end. Most say they are happy to simply make soap for friends and family...I think most are afraid to take it any further than that. Someone on this forum who soaps, I just got a store in your town, in your town! She had never heard of goat milk soap before, yet she advertises in a national magazine, and does home shows...that is crazy! But you don't do stores  I do and it's her second order of 50 bars since Christmas. 

My CPA gal sets my prices, she knows my goals and the amount of money I am spending and need to spend to get bigger by the end of summer. The nice thing is that with a local sell out it looks like I won't be paying full price for some things I need, including paying less than 1/4 of what new ovens and dry cabinets (proofers) would have been. Vicki 

Vicki


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## Faye Farms (Sep 14, 2009)

Vicki, would you be willing to share what big stores it is possible to get into? Do you have a sales rep or do you go after your own accounts? PJ, do you sell in stores as well or just attend shows?


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## jimandpj (Mar 11, 2008)

Up til now we've been focusing on retail. We're in a bunch of stores, but they have always found us. Once the website is up and we raise our prices, the next thing to focus on is the wholesale business. The new website will have a section for wholesalers to order on. We'll be figuring out display units and promotional materials.

It is possible to get into any big stores.  But if they are large enough to require barcodes, than that is another issue you need to deal with. You're your own best sales rep until you grow to the point that you can't keep up with everything. 

Vicki - great find on the used equipment. That helps so much! All of our curing trays we got free from somebody throwing them away. Love it when that happens! What is your new pricing structure? I never even thought to ask my CPA about it - very smart.


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## LLB101 (Sep 29, 2009)

its super easy to get barcodes.
just google "make barcodes" and you'll get a ton of links. I've used a few different ones for different things, just look at what they offer and pick one that's easy to meet your needs.

one hint, do take the first ones you print to a local store you're friendly with and ask them to scan them to make sure they are readable. It'll come back as "item not found" in their inventory of course, but you are just checking that its readable by the scanner. Sometimes I've had to tweak the print settings to get a readable one, rarely but worth checking before you print a lot.


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## Faye Farms (Sep 14, 2009)

Lacia, good to know. I'm by no means ready for bar codes or big stores but I'll file it away for later.


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## Kalne (Oct 25, 2007)

This has been a timely discussion for me. I got a new wholesale customer today and this is the first that wanted my lotion and body butter. And honestly, I wasn't interested in wholesaling those. So I sat down and figured how much time it takes to make a batch and what hourly rate I would want to make for doing it. Then I determined the actual cost of the products, including packaging and incidentals. I set my minimum purchase where it needed to be for me to make that hourly rate after cost. I wasn't sure they'd go for it because it's more than 60% of my retail price and I didn't know if they'd want to purchase that much at a time. But I was not willing to make it for less. They left with full wholesale orders of soap, lotion, body butter, and lip balms. And they paid cash.


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## LLB101 (Sep 29, 2009)

Congratulations!!!
Its a great feeling to do business and take care of ourselves in the process. They were happy, it was a win/win for all.


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## Faye Farms (Sep 14, 2009)

Kathy, that's awesome!


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## jimandpj (Mar 11, 2008)

Good job, Kathy! Way to go!

SherrieC and I were talking about one of her competitors who makes laundry soap and the competitor says it isn't really profitable. And it isn't - at her prices. Me, I charge double what that lady does b/c that's the price at which it is worth it for me to make, stock, and sell. If it doesn't sell at that price, fine, I won't make it, but I'm not lowering my price to sell an unprofitable item or one that I really don't want to deal with. 

PJ


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## NubianSoaps.com (Oct 26, 2007)

I got a bar code printer off Uline, it was less than $400, then I found a $100 one at a resturant supply house, so sent Uline's back to them. I can get the labels at my local Office Max. I know stuff like this sounds daunting at first, but there is always some simple solution for it. There are places to buy point of sale packaging, that you don't have to have $1000 up front or buy in lots of 500 or 1000. And nearly all the stores I am in, have me in their baskets or on their shelf displays.

Each year there are big conventions, in which you set up your tables with what you make, you set some up casually and some in your point of sale boxes, just like they were on the shelves and you stand there and give out brochures, and tons of samples, they walk around with bags of samples so your stuff has to really stand out...this is where places like TSC and vitamin world, Target, it is where JC penny's found Sephora, where Cracker Barrell found Dionisis. What I have had great luck with is sending or giving product to buyers, you can't get a chain this way unless you know someone, but you can get retail stores be it one store or several owned by the same person. One major one is in Tennessee in the fall of each year. Vicki


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