12 October 2008
Common Pricing Formula?
15/10/08 18:26 Filed in: Q & A
Q. Can you explain the most common method used in pricing a gift basket?
A. The most common way is not the most accurate way to determine a profitable margin, nor does it insure one, but it is helpful to newcomers to the trade. Here is the common formula:
Add up the wholesale cost of merchandise, container, and supplies (ribbon, shred, etc.). Double that base wholesale sum. Next, add a labor fee, usually between 15% - 30%. Finally, add the tax and delivery.
Example:
Wholesale cost $20
X 2 = $40
Plus Labor (20%) +$8 = $48
Plus tax and delivery = Final Retail Price
A. The most common way is not the most accurate way to determine a profitable margin, nor does it insure one, but it is helpful to newcomers to the trade. Here is the common formula:
Add up the wholesale cost of merchandise, container, and supplies (ribbon, shred, etc.). Double that base wholesale sum. Next, add a labor fee, usually between 15% - 30%. Finally, add the tax and delivery.
Example:
Wholesale cost $20
X 2 = $40
Plus Labor (20%) +$8 = $48
Plus tax and delivery = Final Retail Price
Cost of Nested Baskets?
15/10/08 13:39 Filed in: Q & A
Q. When baskets come in a set of 3 (or more), and are priced as a group, how do you determine how much each individual basket would cost? Obviously, the largest basket costs more than the smallest.
A. The following set pricing information comes from the Willow Specialties catalog: Sets of three: 25% small
33% medium
42% large
Sets of four: 17% small
22% next up
28% next up
33% largest
Sets of five: 10% small
15%
20%
25%
30% largest
Set of 3 Example:
$10 for a set of 3 nested baskets
$2.50 for the smallest
$3.30 for the medium sized basket
$4.20 for the largest basket)
Sole Proprietor vs. LLC
15/10/08 13:28 Filed in: Q & A
Q. What Is the difference in a Sole Proprietor and a Limited Liability Company (LLC)?
A. As a sole proprietor, your personal and family assets are exposed to legal action;as a limited liability company, only the COMPANY'S assets are exposed. That is, of course, an oversimplification of the structure. Talk to a business attorney before you decide on a structure, because it is costly to change later. Seek more in depth information about business types from the SBA (Small Business Administration). Look for a lawyer that specializes in small business matters.
A. As a sole proprietor, your personal and family assets are exposed to legal action;as a limited liability company, only the COMPANY'S assets are exposed. That is, of course, an oversimplification of the structure. Talk to a business attorney before you decide on a structure, because it is costly to change later. Seek more in depth information about business types from the SBA (Small Business Administration). Look for a lawyer that specializes in small business matters.
Move Into Retail?
15/10/08 13:17 Filed in: Q & A
Moving a Home based Business into a Retail Location
Q. I'm at a crossroads in my business. After operating from my basement studio for 4 years, I have not yet turned a decent profit because I keep investing in more things like Yellow Pages advertising, coupon advertising, a van lease, and now a web site. Now, I’ve found the perfect location for a retail store. The landlord is willing to work with me to move my business into this location, believing, as I do, that this is a prime location for a gift basket business. But, should I be turning a positive profit on my home based business before I consider moving into a retail location.
A. This is a hard question. With my first gift delivery business, like you, I often found myself looking at empty storefronts in the neighborhood. Eventually I rented a tiny space next to a busy, trendy restaurant. Business boomed. Six months after moving into the tiny space, I moved around the corner to a much larger shop. A year after that I sold the business and made a good profit. Taking that step into retail worked for me and it might work for you. But, I would wait until your business is earning enough to comfortably stash some cash before you move. Then, you’ll have money to invest in more inventory, spruce up the shop, advertise your new location, and feel more comfortable making the big plunge.
Q. I'm at a crossroads in my business. After operating from my basement studio for 4 years, I have not yet turned a decent profit because I keep investing in more things like Yellow Pages advertising, coupon advertising, a van lease, and now a web site. Now, I’ve found the perfect location for a retail store. The landlord is willing to work with me to move my business into this location, believing, as I do, that this is a prime location for a gift basket business. But, should I be turning a positive profit on my home based business before I consider moving into a retail location.
A. This is a hard question. With my first gift delivery business, like you, I often found myself looking at empty storefronts in the neighborhood. Eventually I rented a tiny space next to a busy, trendy restaurant. Business boomed. Six months after moving into the tiny space, I moved around the corner to a much larger shop. A year after that I sold the business and made a good profit. Taking that step into retail worked for me and it might work for you. But, I would wait until your business is earning enough to comfortably stash some cash before you move. Then, you’ll have money to invest in more inventory, spruce up the shop, advertise your new location, and feel more comfortable making the big plunge.