Many of us turned into accidental entrepreneurs (myself included!). Bread baking, knick-knack making, t-shirt printing, and (my favorite) candle pouring are just a few of the side businesses that have been considered by many. If you lucked into hand-pouring your way into having a growing, glowing homemade candle business, you likely have a few questions about your new endeavor.
To determine how to price your homemade candles, consider these factors:
- What is your cost for materials and supplies?
- How much will it cost to produce and fulfil an order (overhead cost)?
- What is your net goal profit from the sale of each candle (profit margin)?
- Who is your target market?
If you’ve turned your passion for warm, waxy, scented pots of happiness into a business, you want to make sure that you’re turning a profit (in addition to making the world a better-smelling place!). This article has been written with you in mind!
We’ll cover all the basics of pricing your homemade candles, from breaking down your costs to setting an attainable profit margin to finding your target market. So, light a candle, grab your favorite mug of coffee, and let’s get started!
Getting Back to Basics: Understanding Costs
Before you can price your candles the right way, there are a few things you need to fully understand. You have to know precisely how much it costs to produce a candle before you can set a reasonable price. Knowing and understanding your costs is CRITICAL! The smallest of expenses can significantly impact your bottom line.
There are three main types of costs you need to know how to calculate:
- Variable costs are the expenses that will change depending on the number and size of candles produced.
- Fixed costs remain the same regardless of the number or size of candles you make.
- Total costs are the sum of your variable and fixed costs.
Crunching the Numbers
Knowing how to correctly calculate your costs will enable you to establish your bottom line (the least amount of money you need to earn to cover the costs of making your AMAZING candles!). Without knowing your bottom line, you’ll never know what sales price will help your business grow to its fullest potential.
How to calculate variable costs
You’ll need to know how much it costs to produce each candle. This number can be found by adding up the costs of your materials for the production of each candle. These costs should include everything that will become the property of the buyer, like:
- Fragrance oils
- Any additives/embellishments (coffee beans, dried flowers, glitter, gems, etc.)
Here’s how to calculate the cost of your wax for each candle:
- Knowing the total weight in ounces of wax for the specific candle you are making. We’ll call this number W.
- Determine the total weight in pounds of wax purchased. We’ll call this number T.
- Determine the total cost of the wax. Be sure to include any shipping costs. We’ll call this number C.
- Cost of wax = W x C ÷ T ÷ 16
Let’s just go over a generic example to make finding wax costs a bit easier:
You’ve purchased fifty (50) pounds of soy wax (T) from SoySam and paid $75 total ($60 for wax and $15 for shipping) (C). Your beautiful botanical candles require eight (8) ounces of wax (W).
To calculate the cost of wax for each botanical candle, it would look like this:
8 x 75 ÷ 50 ÷ 16 = 0.75
Each botanical candle uses $0.75 worth of wax to produce.
Yes, it’s a tedious process to calculate your variable production costs. You’ll need to know the purchase price and volume of all the supplies included in your candles to properly break down the variable costs.
How to calculate fixed costs
Your fixed costs are those expenses that do not change regardless of the size or scope of your candle order. They can include:
- Online fees (if you utilize an online platform, like Etsy, or establish a private website)
- Labor costs
- Shipping costs
- Marketing/advertising costs
- Payment processing fees
- Insurance costs
- Equipment costs (melting pots, electricity, etc.)
- Building rent
The fixed costs will remain the same for each and every job you perform. You can calculate them on a daily, weekly, or monthly basis. Knowing these fixed costs can allow you to better understand what all goes into creating your beautiful candles.
How to calculate your total costs
Once you have calculated the variable costs for your candles and your fixed expenses, you can combine the two to find out your total cost. Your total cost per candle can also be referred to as your overhead costs.
Let’s Get Pricey!
Successful candle store owners can tell you how much each element of a candle costs. What’s so important about that, huh?
If you don’t charge at least the same amount as the total cost needed to produce the candle, you’ll lose money! And let’s be honest. Sure, you want to share your penchant for sweet-smelling waxy goodness, but there is a reason you’re selling your candles. You’d like to make a bit of money!
Don’t make the mistake of lowering your pricing in a sad, desperate attempt to make a quick buck. Extremely low-cost candles leave people with the impression that you’re using sub-par, poor-quality ingredients (ew!).
Here are a few pricing guidelines (now that you know the total cost of production for each candle):
- Wholesale orders: Total cost of production x 2
- Direct sales: Total cost of production x 3
- Set a markup percentage based on costs; 25-50% profit margin is a great starting range
There’s more to pricing than a formula. Another important factor is perceived value, or the value people place on your brand. Even if your total expenditures remain the same, the higher your brand’s perceived worth, the more you may charge.
Aiming for the Right Target
There are more than seven billion people on Earth. Do you expect to sell to them all?
Selling your candles is kind of like dating. Do you just wait on any ol’ person to say “yes,” or do you have some sort of idea of who you’d like to go out with before you’ve ever met them? I’m guessing you sway a bit toward the latter choice, correct?
It’s all too easy to get caught up in the numbers and focus solely on profit, but you have to remember that every product has a niche market. It’s vital that you define who you wish to sell your candles to. Instead of trying to market to everyone on the block, you should focus on a specific group.
Who you focus your marketing on ties in closely with your brand identity as a homemade candle maker. Those buying your candles (and where exactly you are selling them) are directly proportional to your price point.
Once you’ve decided who you are selling to and what exactly you are selling (I know it’s candles, but WHAT KIND?!?!), you’re ready to begin pricing your candles and setting yourself up for success.
Snuffing Out the Flame
However, you choose to price your homemade scented candles, you need to make sure that you know your variable costs, fixed costs, total costs, your profit margin, and your target sales audience. Remember that the price of your candles is a direct expression of the amount of confidence you have in your hand-poured product.
Continue to examine and alter your pricing in the future to ensure you’re making a profit. Never undervalue your candles’ quality by underpricing them. Prioritize quality and distinctiveness over inexpensive cost. You’ve put in a lot of effort to produce a unique product. Customers are prepared to pay more for candles with a compelling brand story tied to the product’s value.
Can a homemade candle business be profitable?
A homemade candle-making business can undoubtedly be profitable. Considering that there is a low barrier to entry in terms of cost and no shortage of people wanting candles, the ability to grow a profit from candles is seemingly sky high!
How much, on average, do candles cost?
The retail price of a candle can range from $2.00 for small votives to over $30 for a large jar or pillar candle. There are even candles whose prices exceed $200! (You bet your bottom dollar I’m never lighting the wick on that one!!)
Looking to start your own candle making business, check out my startup documents here
Please note that the contents of this blog are for informational and entertainment purposes only and should not be construed as legal advice. Any action taken based on the information provided in this blog is solely at your own risk. Additionally, all images used in this blog are generated under the CC0 license of Creative Commons, which means they are free to use for any purpose without attribution.
Meet Shawn Chun: Entrepreneur and Candle Business Fan.
I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online candle business resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a candle business owner at a craft fair, farmers market, retail location or anywhere else I see myself. I know how hard the struggle is to obtain and retain clients, finding good employees all while trying to stay competitive. That’s why I created Candle Business Boss: I want to help candle business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.