Is there a formula to follow when pricing a new product?

[brodysmama]

I have a patent pending on a new product that will be ready to sell very soon. It is a simple fabric hair accessory. Lets just say I am purchasing them for $1 a unit completly packaged and ready to go.
I want to sell directly to distributors/wholesalers at a wholesale price and I want to sell online to the end user at a retail price without competing with my distributor/wholesalers end retail price.
Is there a formula used in marking up that maybe I should follow? I imagine a fair retail price for the end user would be about $7-$10 a unit. Any suggestions on how to come up with a decent price for the wholesaler and a decent price for my online store? Are the distributors/wholesalers going to want to double? Triple? the price for retail? And what is fair in my roll as selling online to the end consumer? Do I set a MSRP for all my distributor/wholesalers and then ultimately sell online just above my MSRP?

[ICEMAN2]

Your total cost is about a $ 1.00 a unit, manufacturer.

You sell at a Jobber Price of $ __.__ a unit, in lots of 1,000's of units.

The Jobbers sell at Wholesale prices, to the Stores, etc., at $ __.__ a unit in 144 units or more a store, at a time.

Your online store, sell at a set price per unit, plus S/H.

If you do trade shows, you can offer different Show Specials, etc.

Hope this Helps

Cal

[rogercbryan]

COGS + Marketing + Labor + Overhead = Break Even Price

Then

Break Even Price + Industry Average Markup or Desired Profit within the scope of the industry average markup price = Asking Price

Considering

CVP or Cost Volume Profit
EOS or Economies of Scale

This is the absolute simplest equation you can use to do this. When it comes to an average industry mark up you'll have to do a little research. Getting an equation that allows you to be both competitive and profitable is not always easy.

[Desert_Star_Systems]

As Roger pointed out, I think the most important thing is the 'industry average markup'

[Dan Nichols]

Hi all, arriving at your break even point is mission critical. I find way too many entrepreneurs have no clue what that number is. My formula includes not just what it costs to produce, market and sell the product or service but what it costs to do "my personal life" including savings, insurance, mortgage, family, entertainment, heat, electric, toothpaste (you get the picture) etc.. If I can't support both my business and me doing it - why bother?

This is sort of a blanket one size fits all answer and I recognize that other variables can alter this equation but for 95% of those in business for themselves it is applicable and it assures you can stay afloat. Where this is less applicable is when you have multiple streams of income and have a business already matured and earning money. Then, the other businesses can run on thinner more traditional margins. For example in one business I have I sell dvd's (plug time) Armed Consumer DVD & Website - We Protect and Inform Consumers Before They Hire and used the more traditional pricing model discussed below (cogs+....)

This is coming from a guy that really dislikes accounting. BUT if I encourage anything to my coaching clients in the accounting realm, it is to KNOW the break even point. Which is what you have to earn per month to cover your costs AND Profit. Then sell number of units necessary OR MORE to hit that number. Many people would say you don't need to consider your profit but to me if you can't figure profit into the sale upfront, then why sell it?

Let me add that the advantage to building in your profit is that you will be less likely to short change yourself when selling the product or service. In fact if you have a sales force out selling it, they'll be less likely to "mess up" on that really good deal they cut someone if oyu build the profit into the "base" price. It's a shell game of course but it makes "cents".

OH... there will be a webinar on this too

[brodysmama]

OK, I think I'm on the right track then. Thanks