What is an ideal profit margin?

The truth is, we start our businesses to make money. 

When I started my business, I already had some retail experience and was used to buying product wholesale to stock our shelves. So, I went into my own business with a little understanding of how retail margins worked. Figuring out margins when you manufacture your own product is a little different.

When I am creating products to wholesale I want to make 50-60%. This is my ideal profit margin, if I can find products where I make more, I am usually onboard!

Some things to consider when you are coming up with your cost for your product is the actual cost of the product, packaging, and shipping of the item to you. All of these are rolled into the cost for each product.

So, it looks like this: cost of product x 2 = wholesale cost

For example, if it costs $1 to make and package a card, the wholesale cost will be $2.

When I started wholesaling, washi tape had great margins for profit, they just weren't that much money, lol. It would take a lot of washi sales to make a living each year. If you want to read more about the costs to making washi see my blog post here. After I realized how slim my earnings were, I added cards… this is a natural way to go and a very easy point of entry for many starting out in product. You can order low quantities and still make some money. Stickers are similar in margins. 

After a couple of years, I took a hard look at what was working in my business and knew I needed to add a product with a little more earning potential…. hello tea towels! The earnings went from $1.00 or $2 per product sold to $4 for wholesale. That adds up. The same could be said about art prints… after printing, all you would need is a backer board, sleeve, and mailer envelope. They have a good potential for profit.

The real profit comes in if you can successfully wholesale and retail your products. Retail meaning that you sell direct to customer on Etsy, your own website or even Facebook.

 Let's look at the numbers. A simple retail equation looks like this:

wholesale cost x 2 = retail cost. 

That means that card from above that cost $1 to make would retail for $4-5! Those are good margins! Sign me up! Retail takes a lot of work, but you make so much more in profit.

Now when I introduce a new product I always evaluate my earning potential first and the cost to meet a minimum order second. Will it even be worth it? Am I interested in talking about the new product over and over again. We need to create products that we love and love to talk about, otherwise they will be very hard to sell.