# Cost of goods



## mx5inpenn (Feb 13, 2017)

I've been working on reducing my cost per bar in anticipation of selling in the next year. My cost of materials has been $1.30-1.50 per bar as a hobbyist picking oils up at the grocery store. Pricing things in larger quantities from suppliers, I've got that down to about $.75-.95 with 7# bottles for most items. I know I could reduce it more with 40-50# containers, but that just isn't feasible starting out from my point of view. 

I'm wondering how this cost compares to others, and also if my perspective on larger quantities is incorrect. My main reasons for thinking it might not be feasible are storage and cost-return. I could make room to store large containers,  just would probably be in the garage. For cost-return, its a good sized chunk of change to put out for a beginning business with no idea when I would see a return. Also there is then the worry of wasting oils that aren't used quickly enough. 

I'd appreciate any input y'all can provide!


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## cmzaha (Feb 13, 2017)

My first questions is how you are making a fragranced bar of soap for $.75-.
$.95 per bars. I sure cannot do it. Cost of goods would include colorants, Fragrancing is a biggie, every oil and additive including purees, milks, salts etc, labeling, packaging, then we get to insurance, booth space, electricity, car gas etc...and the list can go on. I have never been able to get a bar under $3 or much under, which I sell for $7 and purchase in bulk


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## CTAnton (Feb 13, 2017)

I made a bunch of soaps for a woman who wants to felt them. nothing special....70% olive oil(Costco) coconut oil(bulk) and castor oil(bulk). I ran the numbers like I had never done before...2 loaves fragranced, the third fragrance free. By doubling my costs I came up with just shy of $3.00 per 4.5-5.0 oz. bar....and thats without labeling and packaging!


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## Stacyspy (Feb 13, 2017)

I don't have my exact numbers handy- they're out in the shop... I get excellent deals on oils and lye from our local Amish, but once I add the FO cost, it brings me to about $1.25 a bar...and that's only if I don't use any milk, salt, sugar, or oils other than OO, CO, lard, and castor. My regular go to recipes average out to $1.50- $1.75 per bar.


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## Kamahido (Feb 13, 2017)

I make my unscented bars for $0.63 each. My normal "fragrance" bars are $1ish (depends on additives and scents). Cost of fragrance is huge!


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## cmzaha (Feb 13, 2017)

Stacyspy said:


> I don't have my exact numbers handy- they're out in the shop... I get excellent deals on oils and lye from our local Amish, but once I add the FO cost, it brings me to about $1.25 a bar...and that's only if I don't use any milk, salt, sugar, or oils other than OO, CO, lard, and castor. My regular go to recipes average out to $1.50- $1.75 per bar.


Also without packaging I would guess...


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## mx5inpenn (Feb 13, 2017)

Sorry, I said cost of goods in the thread title and cost of materials in the body. Cost of materials is what I am looking at. 

I tend to fragrance fairly lightly at 3%. At $2.50/oz, it works out to $3.75/6# batch or $.19/bar. 

I rarely use colorants in even half of my batch, so I don't use a lot of mica, about a tsp in most batches. The most colorant I've used is for dragon's blood, but I only use mica in a small portion with ac in the rest, which is cheaper. Two types I will carry as staples due to popularity have no colorants. 

Most of my soaps only have sugar as an additive. OMH has all 3 of it's namesakes, but no colorants, so that helps a bit with it's cost. Salt bars are the only ones I use salt in. The only other additive I use is a vanilla bean that cost $.50, also in a batch with no colorants. 

I use a high percentage of lard in most of my recipes. If there is a cheaper oil, I don't know what it is! I haven't run the numbers on a vegan recipe yet because I'm still testing those, but they will have higher cost due to the oils.

I did forget about packaging, mostly because right now I don't typically use any. I'm leaning toward a cigar band, which is one of the cheapest options.


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## Stacyspy (Feb 13, 2017)

cmzaha said:


> Also without packaging I would guess...



Packaging is the bane of my existence...lol... Right now, I'm using a shrink wrap band, a 2x4  vellum sticker on the front, a vellum address size label on the back, and my inkjet printer. I haven't actually figured the pricing, but I'm pretty sure it's temporary until I come up with something I like more.


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## cmzaha (Feb 13, 2017)

mx6inpenn said:


> Sorry, I said cost of goods in the thread title and cost of materials in the body. Cost of materials is what I am looking at.
> 
> I tend to fragrance fairly lightly at 3%. At $2.50/oz, it works out to $3.75/6# batch or $.19/bar.
> 
> ...


Yes, I was going with the Thread Title
You may want to reconsider fragrancing lightly at 3% when selling. If you stick with that scenario you are risking ending up with a lot of un-sellable soaps. 9.5 out of 10 customers like heavy fragrance. In an open air market they cannot smell light fragrances. Packaging and labeling costs more than one would think. Cigar bands fall off during packing and un-packing, when the soaps shrink and open soaps get very dirty and markets. Many of my customers have mentioned they will not purchase bare soaps. Vegan soaps can be no more expensive if you use 100% palm shortening or homogenized palm oil. When you start selling in markets you will find people asking for many diffenent things. Many are suprised when I have what they are looking for. Just something to think about. People ask for kelp, clays butters, oatmeal, no palm, no coconut, no olive and this is just a tiny list. Variety is the key to success when selling


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## Susie (Feb 13, 2017)

cmzaha said:


> Yes, I was going with the Thread Title
> You may want to reconsider fragrancing lightly at 3% when selling. If you stick with that scenario you are risking ending up with a lot of un-sellable soaps. 9.5 out of 10 customers like heavy fragrance. In an open air market they cannot smell light fragrances. Packaging and labeling costs more than one would think. Cigar bands fall off during packing and un-packing, when the soaps shrink and open soaps get very dirty and markets. Many of my customers have mentioned they will not purchase bare soaps. Vegan soaps can be no more expensive if you use 100% palm shortening or homogenized palm oil. When you start selling in markets you will find people asking for many diffenent things. Many are suprised when I have what they are looking for. Just something to think about. People ask for kelp, clays butters, oatmeal, no palm, no coconut, no olive and this is just a tiny list. Variety is the key to success when selling



This is marvelously helpful, Carolyn!  Loaded with vital information!  Thank you!


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## cmzaha (Feb 13, 2017)

Susie said:


> This is marvelously helpful, Carolyn!  Loaded with vital information!  Thank you!


Sorry I strayed off the main topic, but thankyou, hopefully it helps some. I see people that do not even take enough inventory to make booth space and I just walk past shaking my head. Booth space here averages most markets will run in the $50 range for a 4 hr market.


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## The Efficacious Gentleman (Feb 14, 2017)

I think that you should already be thinking in terms of total cost rather than just materials, as one of the biggest costs is time. 

The cost of a bar includes the time taken to make the soaps, clear down afterwards, cut, rack and wrap the soaps. You should also include a portion of the location costs for all that, too - rent, power, heating, water. 

Time is a "low hanging fruit" for reducing costs. It doesn't take twice as much time to make a batch twice as large as you plan to, which reduces the cost per bar considerably.


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## cmzaha (Feb 14, 2017)

The Efficacious Gentleman said:


> I think that you should already be thinking in terms of total cost rather than just materials, as one of the biggest costs is time.
> 
> The cost of a bar includes the time taken to make the soaps, clear down afterwards, cut, rack and wrap the soaps. You should also include a portion of the location costs for all that, too - rent, power, heating, water.
> 
> Time is a "low hanging fruit" for reducing costs. It doesn't take twice as much time to make a batch twice as large as you plan to, which reduces the cost per bar considerably.


Problem is so many hobby soapmakers do not worry about all the above, which is included the the cost of making the soap. I see soapmakers selling soaps for 4.50 per bar. There is no way they are making money they are just trading for supplies and doubt it supports the supplies. I make some specialty bars that I sell for $10 to help balance the bottom line. It is a lot easier to lower a price versus raising the price


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## mx5inpenn (Feb 14, 2017)

cmzaha said:


> Yes, I was going with the Thread Title
> You may want to reconsider fragrancing lightly at 3% when selling. If you stick with that scenario you are risking ending up with a lot of un-sellable soaps. 9.5 out of 10 customers like heavy fragrance. In an open air market they cannot smell light fragrances. Packaging and labeling costs more than one would think. Cigar bands fall off during packing and un-packing, when the soaps shrink and open soaps get very dirty and markets. Many of my customers have mentioned they will not purchase bare soaps. Vegan soaps can be no more expensive if you use 100% palm shortening or homogenized palm oil. When you start selling in markets you will find people asking for many diffenent things. Many are suprised when I have what they are looking for. Just something to think about. People ask for kelp, clays butters, oatmeal, no palm, no coconut, no olive and this is just a tiny list. Variety is the key to success when selling



Thank you for taking the time to address these things! I hadn't thought about the lighter scents being an issue outside. I don't plan to do many outdoor events, but not none! I do tend to prefer stronger scents to begin with, such as dragon's blood and vanilla, so that may make a difference. Lighter scents like citrus I use 5% for.

I like cigar bands for the simplicity and not using plastic. The other thing I was considering was shrink bands, because of the dirt, dust, grimy hands, and icky noses. I'll have to price and order some tomorrow to try out.

I do think I have a decent variety of options, without going overboard from the start. I technically will have several vegan soaps, but will only market 1 that way. All of my soaps meet the palm free, 3 will be vegan, 1 olive oil free, 1 with oatmeal, 1 with beer, 1 with lots of ac, 2 with butters. I will need to order some babassu to play with for coconut free in addition to castille. I was planning 8 staples plus 2 limited time/seasonal. 



The Efficacious Gentleman said:


> I think that you should already be thinking in terms of total cost rather than just materials, as one of the biggest costs is time.
> 
> The cost of a bar includes the time taken to make the soaps, clear down afterwards, cut, rack and wrap the soaps. You should also include a portion of the location costs for all that, too - rent, power, heating, water.
> 
> Time is a "low hanging fruit" for reducing costs. It doesn't take twice as much time to make a batch twice as large as you plan to, which reduces the cost per bar considerably.



Thanks Gent! I focused on the materials initially because I can't see doing this as more than a hobby if I can't reduce my material costs enough to make it worth the effort. I know the average price of a 4-5oz bar in my area is $6 and that means being able to make it for $.75 in materials to fit most of the models I've seen. I do plan to up my batch sizes over the next several months. One batch at the current size doesn't take me much time anymore since I masterbatch lye and oils for a couple recipes. When its something I've made the same way numerous times, its well less than an hour total time involved. I'll be able to reduce that more purchasing larger quantities because I will be able to mb more at one time.


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## Susie (Feb 14, 2017)

I am straying a bit from the subject, but do y'all use a specialized computer program to figure all the costs and such?


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## The Efficacious Gentleman (Feb 14, 2017)

Susie said:


> I am straying a bit from the subject, but do y'all use a specialized computer program to figure all the costs and such?



I use Excel for now, but I am building an Access database to track things better.  That said, I think $100 for Soap Maker 3 Pro is probably a better investment than the time it's taken me!


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## Susie (Feb 14, 2017)

That is exactly what I needed to know, thank you!

ETA:  It is on sale!

https://thenovastudio.com/product/soapmaker-software/


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## penelopejane (Feb 14, 2017)

The Efficacious Gentleman said:


> I use Excel for now, but I am building an Access database to track things better.  That said, I think $100 for Soap Maker 3 Pro is probably a better investment than the time it's taken me!



Soapmaker 3 is excellent. Pretty easy to use (though would be a breeze if you set it up from the beginning rather than putting all purchases in months after you started!!). 

It also has a soap calculator in the program (the SG ratios are a bit different to soap calc so you have to play a bit to work out what lye concentration you want for your mix). 

When you enter your recipe it automatically calculates lye etc and tells you how much it cost including packaging or anything you want. 
It automatically tracks supplies and sold or discarded batches. 

There is an online users group with a great knowledge of the program and access to the developer himself. 

No I'm not related to the owner but I really appreciate the program. Not just for people who sell but for people who want to track costs.


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## cmzaha (Feb 14, 2017)

Susie said:


> I am straying a bit from the subject, but do y'all use a specialized computer program to figure all the costs and such?


I use a simple accounting ledger and use pencil and paper, since I was always to lazy to setup quickbooks for it, and other reasons...


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## Susie (Feb 14, 2017)

Math and I are not friends.  Ledgers give me the cold sweats.  I need all the help I can get.


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## penelopejane (Feb 14, 2017)

You have to use different suppliers to get the best price. 
You have to choose the cheap FOs and EOs. 
You have to use sensibly priced speciality oils. Meadowfoam is phenomenally expensive here but OO not too bad so work out what is sensibly priced for you in your area.


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## penelopejane (Feb 14, 2017)

You lucky thing we never get free freight and it can be a trap. 
I do know what you mean though, I have one supplier I can drive to and I pay a little extra because it's cheaper than adding freight. 
Is there another soaper in your area you can share supplies with? 
Stick with shea and avocado if you want to keep costs down. 

By far the greatest cost is FOs and EOs that takes research. Some are cheap but you use 3x as much as more expensive ones!


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## Susie (Feb 14, 2017)

I don't know where you live, but if it is in the US, you may want to Google "restaurant food suppliers" for your area.  It may be that you can get your cost down by buying OO, CO, Lard, etc from them.  Then you can make other choices on everything else.


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## SheLion (Feb 14, 2017)

Randy, this is not aimed personally at you but the quoted part of your post hit a personal nerve. I do not sell soap (not yet) but I do sell (occasionally, anyway) handmade jewelry. In the artisan world, people that do not account for their time in the cost of their products, which is usually hobbyists that want to fund their hobby, undercut all the other makers out there that make it their primary business. Because when people see handmade soap for $4, they'll think that all the other soapers charging $6, $8, or $10 a bar are overpricing their products. But in fact, the $4 bar is underpriced because you're not accounting for labor, which is a big cost. However, someone that makes and sells soap for a living must pay themselves (because bills have to be paid and soap is not legal tender) so they have to include labor.

Bottom line, once a hobbyist decides to start selling, it becomes a business and should be treated as such and they shouldn't work for free.


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## Susie (Feb 14, 2017)

I am trying to find a fair price for my time.  I may follow this example:

[ame]https://www.youtube.com/watch?v=FqVNU9eN9DU[/ame]


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## mx5inpenn (Feb 14, 2017)

Susie said:


> I am trying to find a fair price for my time.  I may follow this example:
> 
> https://www.youtube.com/watch?v=FqVNU9eN9DU



Thanks for sharing! I've been worried about the material costs primarily, but knew the point was coming where this would have to be decided too. When I sold canned and baked goods, I wasn't as fair to myself as I maybe should have been. I was happy with what I made, but was told by a few major customers (regular orders in the $400-600 range) that I really should be charging more. I don't want to charge under or over a fair price.


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## cmzaha (Feb 14, 2017)

SheLion said:


> Randy, this is not aimed personally at you but the quoted part of your post hit a personal nerve. I do not sell soap (not yet) but I do sell (occasionally, anyway) handmade jewelry. In the artisan world, people that do not account for their time in the cost of their products, which is usually hobbyists that want to fund their hobby, undercut all the other makers out there that make it their primary business. Because when people see handmade soap for $4, they'll think that all the other soapers charging $6, $8, or $10 a bar are overpricing their products. But in fact, the $4 bar is underpriced because you're not accounting for labor, which is a big cost. However, someone that makes and sells soap for a living must pay themselves (because bills have to be paid and soap is not legal tender) so they have to include labor.
> 
> Bottom line, once a hobbyist decides to start selling, it becomes a business and should be treated as such and they shouldn't work for free.


I am constantly selling against people that sell their soaps for $4-$5 and it just wants to make me scream....can't they do simple math. I have had potential ask me why my soaps are $7 with a few $10 soaps and I tell them, I need to make money and I make great soap that is formulated to give a soap that will give them approx a month use, larger bars etc, them I give them a sample and see what happens. People that undercut do a great dis-service to all of us selling. I do this for supplemental money not just for fun, even though I love it. Even my avocado soaps are going have to start going as a specialty soap. In the last three years my 5 gallons of Avocado Oil have gone up from $98 to $147. Pure Olive Oil has gone up to $104 5 gallons, fortunely I prefer Canola HO over Olive oil at a cost of $27.50 for 35#'s. Good soap is not cheap to make


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## SheLion (Feb 14, 2017)

cmzaha said:


> ...People that undercut do a great dis-service to all of us selling....



Exactly! And in the end, it hurts everyone because there will always be someone that sells cheaper. There are customers that value quality and understand that quality costs money but they are few, and getting more scarce it seems. 

Pricing handmade goods is an art as well as a science. It causes consternation pretty much universally, no matter the product.  But a person that correctly figures in costs such as labor and overhead (rent, utilities, insurance, etc.) will never be able to sell as cheaply as a person that just figures (or guesstimates) their material cost and multiplies by x for wholesale and y for retail.

And what amazes me is that the people that don't include labor in their pricing would never work for free at their 'day' job. Go figure.


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## SheLion (Feb 14, 2017)

Susie, that is a good example. I only take issue with her not including the overhead costs (rent, utilities, etc.) because those are still real costs that come out of your pocket. It's the difference between gross profit and net profit, which anyone that goes into business should understand. Personally, that cost is included in my jewelry pricing, though I just use a flat percentage and call it a day. 

Ideally, pricing should be a mix of the three, with the cost based being the lowest you sell for. But if the market bears more, sell for more because there is a very real subconscious idea that lower price equals lower quality in people's brains. I have a silversmith friend that wasn't selling much of her jewelry, despite it being-to her-fairly priced. At her next show, she marked her prices UP and made more sales because low priced jewelry=cheap junk to a lot of people.


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## cmzaha (Feb 14, 2017)

I do spend day making larger batches than hobby size and I Do Not skimp on ingredients. Granted I have to charge more and the ones that do not like it they move on. I will not lower my standards


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## The Efficacious Gentleman (Feb 15, 2017)

Randy, if you sell to the public even as a side business, why is the time less valuable? Granted, you would be making soap anyway, but there is no material difference in the soap and the value of your time if you make a batch as a side business or full time. 

Think of it from a customer perspective - one day they buy soap from you for $x and the next day it costs $y - the difference? You suddenly decide that you will include all of the costs of time correctly as you want to go full time at it. There is no difference in the product itself, so many customers will go elsewhere. 

Not to mention, if everyone who soaps as a hobby price only to cover costs, full timers will have to stop being full timers! "So what?" someone might ask. Well, many of the trailblazers ARE full timers. They make, they sell and we all benefit from their experiences. And then we cut the rug out from under them because we, for some inexplicable reason, want to under price our soaps. Then they can't soap full time and blaze less of a trail because of it. 

Then all soap is priced as materials + a little bit of time because no one can soap full time. Someone comes along who has a much cheaper source than you for materials and suddenly you are struggling to justify your prices - then it's you who isn't even covering the cost of the market from the daily takings (let alone from the actual profits of the day!) and unless you can lower your costs, you can't even sell as a side deal. 

Under pricing leads to no good thing - not for the businesses nor the customer. A downward spiral to the lowest cost does not engender development and innovation, rather cost cutting and a cheapening of the product.


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## PuddinAndPeanuts (Mar 9, 2017)

SheLion said:


> Exactly! And in the end, it hurts everyone because there will always be someone that sells cheaper. There are customers that value quality and understand that quality costs money but they are few, and getting more scarce it seems.
> 
> Pricing handmade goods is an art as well as a science. It causes consternation pretty much universally, no matter the product.  But a person that correctly figures in costs such as labor and overhead (rent, utilities, insurance, etc.) will never be able to sell as cheaply as a person that just figures (or guesstimates) their material cost and multiplies by x for wholesale and y for retail.
> 
> And what amazes me is that the people that don't include labor in their pricing would never work for free at their 'day' job. Go figure.




I hear what you're saying about hobbyists undercutting prices, but I at least partially disagree with you.  For sure- hobbyists in many circumstances are doing themselves a disservice by undercutting prices; that's true for all the reasons you both have listed and more.  BUT- there's a fair percentage that don't need to make top dollar, and will never ever be selling for the purpose of earning a living. They are there to: help pay for supplies, use up product to create a reason to make more, get an ego boost when people ooh and aah over their stuff, and as a social outlet. For sure- them undercutting market value hurts my business; I don't like it. But that's not their problem- nor should it be.  At the end of the day, we are in a market driven society. I chose to make a business doing things I love, and I made that decision knowing well that a portion of my competition will not be profit driven.  It sucks, yes- but it's what I signed up for with open eyes.

In the end- MOST hobbyists make us look **** good in comparison.  And those that kick butt? I don't know- I guess all I can do is wish them luck and envy them the financial position they're in where they don't have to make it as profitable as possible.


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