Determining your selling price of homemade pickled onions

May 15th, 2010 | Add a Comment

Determining a selling price for your homemade products does not require a degree in mathematics. Not even matric maths. In fact, you probably won’t even need a calculator!

A home based manufacturing business making, for example, pickled onions, would have the following scenarios.

A small operation, making 20 bottles a week, to sell at a flea market on the weekend, would have the following costs.

Flea market fee R30
Fuel to Flea market R20
Bottles 0
Cleaning bottles R6
Onions R25
Vinegar R25
Pickling Spice R12
Chilies R5
Labels R2

Total R125

There you are. 20 bottles of pickled onions, at a cost of R125.00 divided by 20, a cost of R6.25 each.

In the manufacturing fields, a mark-up of 80% to 90% is standard. This would give you a minimum price of R11.25, and a maximum price of R11.88. This is a very good price for pickled onions, as I have seen homemade pickled onions selling for R16.00.

Using R11.25 and R16.00 as a high and low price, I would recommend going for an average. In this case it would be R13.63. Set your price at R14.00.

At R14.00 you would be able to keep your price stable for longer, due to fluctuating onion prices.

Your profit per bottle would be R7.75

As your business grows, so would your costs, at 50 bottles per week, you would have to include an assistant for one day a week. This will cost about R60.00, or, R1.20 per bottle.

This is not a train smash, as your profit will be higher. Where your profit was 20 times R7.75, it will now be 50 times R6.55. This is a difference of R172.50. Well worth the expense.

It is likely that in time, you will find one or two stores to purchase some of your product. You can supply to them at your minimum selling price of R11.25 if they take more than 12 bottles. For less than 12 bottles, explain that you cannot give a quantity discount. We are going to assume that there are two stores. One takes 20 bottles a week, and the other, only 8.

You will also have to start buying in bottles, as all the bottles you were getting from friends and family are no longer sufficient. Primary school children will find any number of bottles, and at 20c each, you will get enough bottles. Possibly too many.

You will now need to get your assistant to come in an extra half day a week, for R40.00.

Your calculation will now look like this:

Bottles of pickled onions required per week: 78

Flea market fee R30
Fuel to Flea market R20
Fuel for delivery R20
Bottles R15.60
Cleaning bottles R12
Onions (3 bags) R25
Vinegar R75
Pickling spice R36
Chilies R15
Labels R8
Assistant R100

Total R356

Your cost to make 78 bottles of pickled onions is R356.60, an average of R4.57 per bottle. The price comes down, as you are able to spread the flea market costs out over more units sold.

You will sell:
50 bottles at R14.00
20 bottles at R11.25
8 bottles at R11.88

Your income for the week is R1020.04
Average profit per bottle is (R1020.04 less R356.60) equals R663.44. Divide this R663.44 by 78, and your profit per bottle is R8.51.

How does that sound?

As you can see, the costing is not difficult, and this method is easily adaptable to most businesses.