Are you ready to launch a candle company?

[TallTayl]

we all get asked all the time how long new chandlers should wait before hanging out their shingle as a new business.  Often heated debates ensue which may end with hurt feelings or bruised egos. Sometimes it appears established candle businesses are just protecting their turf to deter competition. Often the advice is meant to help a new business learn the ropes before making potentially devastating mistakes. 

 

As proud chandlers, we strive to uphold high standards so our potential customer base continues to trust our hand made wares. There’s nothing like bad word of mouth to spook customers back to traditional retail. We have all made mistakes along the way.  Watching someone follow the same potholed path is painful. Everyone means well. 

 

If you are thinking of starting a candle business, ask yourself a few questions to see how far you realistically need to go before you’re really ready.

 

how do your candles compare to the competition? We all like to think we make candles that are “better” than uber popular XYZ brand, but how do we truly measure up? How do our candles stand out in a sea of other people’s wares who hope to sell the same thing? It’s no secret that many of us have tweaked and tweaked and tweaked some more since we started.  When I look back to the early candles I often shake my head.  If I knew then what I know now, oh boy. 

 

Can you quickly and safely reforumlate with supply changes? Not long ago the soy world was turned upside down. Many soy makers dropped out of the market simply because it seemed impossible to make a nice, safe candle with soy waxes that no longer worked. Many of us wax hopped, and hopped again until we found something that was ok. All of that time and testing cost real money, not just to make testers, but in lost sales. When you make a living from candles, that disruption could have been bankrupting. 

 

Can you easily identify and troubleshoot when something is wrong, and fix it? How many times have you discovered your wax suddenly develops cavities or sink holes as it cools?  Or develops cracks as it cures? Or the wax case is super dry?  Or just plain burns different from the last batch of wax? What if your new wicks don’t burn the same as those from another supplier?  The more experience you have, the easier it will be to identify potentially expensive problems and fix them without breaking a sweat. 

 

How does your product age? Vegetable waxes are not stable forever.  Most veg waxes are just hydrogenated vegetable oil like what you find in your pantry. It has a shelf life like shortening. How will a candle you make today look, smell and burn in a year? Paraffin is inert, but not necessarily perfect, especially with some additives. Does temperature and humidity change the candle. Some soy waxes “grow” with time. Some dry out. How does the wicking need change as the candle cures? 

 

How good are you at business? Does it even interest you? If you dislike math, well, I hate to break it to you, but you’ll need to like it a bit more. In order to become profitable you’ll need to calculate your total costs, taxes, licenses, insurance, booth rental fees, etc. and price accordingly so you don’t end up with moths in your wallet. Have a goal and then you can plan to get there. 

 

Do you have the guts to price your product for success? The one mistake we all make is to underprice. If we don’t factor in enough profit our cash flow will suffer.  Cash flow is vital to business stability. Figure out what you need to make in a year to cover your costs, then work backward to calculate how many candles you will need to sell to cover that nut. For sake of easy math, if my insurance, business fees for my state, web site, labels, simple equipment, etc. in my first year was $3,000 I will need to sell how many candles to break even? Let’s say my candles sell for $10, with a cost of goods sold of $3 per candle. I need to sell 3,000 / $7 or 429 candles before I break even, assuming everything goes right. To make $1000 profit to pay myself, I need to sell another 143. At that profit, what am I making per hour? 

 

Would you like to learn  more about calculating your cost of goods sold in a future article? Or about streamlining operations to make your valuable time earn more?

[Quentin]

On 4/10/2019 at 11:39 PM, TallTayl said:

The one mistake we all make is to underprice.

More often than not, when I price out an item, I have doubts as to whether anyone would pay that price for my product. I can't figure out where that feeling comes from, but it shadows me wherever I go. I don't know how most of you price your goods, but I'm using the old "keystone" system which I think may be an outdated model in the age of e-commerce. Figuring the cost, doubling it for wholesale, then doubling that for retail doesn't seem to make sense anymore. Do any of you have any thoughts on this that you would be willing to share? I'm the manufacturer, wholesaler, and retailer. It seems to me that keystone pricing is just not the smart way to go. At first glance, it appears that I'm going to make a huge markup! Woo Hoo, I'm rich! In reality, I think I'm pricing myself out of the market. 

[Sebleo]

Is that what it’s called: keystone?  I don’t recall if I’ve heard that before but that’s pretty much how I crunch my numbers. 

 

Im in the same boat as you with those same feelings. But I’ve had several people tell me recently that they wished my melts didn’t last so long because they’d like to buy more but they don’t need to yet. Sooo, that makes me feel better about my pricing. 

[Jenni Wix]

Looking at cost x 3 and labor.  It does seem expensive especially when I head to the candle isle somewhere.  But then I remember I'm offering something hopefully unique and gift worthy,  I compare with both local and prices of similar finds on etsy, and find what I want to ask for is reasonable.  

[TallTayl]

Cost plus pricing models always leave money on the table.  This goes for small start ups to giant conglomerates. 

 

I have found success going backward. For instance:

i know other sellers in my target market sell a 9oz straight sided jar with black lid candle With coconut wax and fragrance oils successfully for $20 each. 

 

Example hard costs would be 

$.79/Jarwith lid

$1 wax

$1.50 for fragrance

$.50 labels

$3.79 simplistic cost of goods sold. 

 

X2 wholesale would be $7.58. My profit without labor is a mere $3.79.  The retailer would double usually, so they would underprice it at 15.16, with a profit of $7.58

 

x3 would be a retail price of $11.37, profit of $7.58

 

meanwhile a competitor prices the same exact candle retail at $20. Their profit is $12.42

their wholesale price would be expected about half of $20. Profit on the wholesale transaction is now $6.21

 

Which pricing model leaves tou enough wiggle room to actually fund your small business and pay yourself? 

 

Overhead to run a business is not cheap. Equipment, taxes, packaging, R&D, etc. are not free. 

 

@Quentin the reason behind why we question ourselves is boiled down to one word: confidence. Or rather lack of confidence because we are new. What I learned through time and experience is “my” people usually respond favorably when I truly believe in myself and my products.  They are happy to pay the prices because they already know they will love whatever it is I made.  I spent the time and $ to complete development work to ensure that the product is worthy of their faith. That relationship is what builds the base to launch you into your next phase. 

[Quentin]

2 hours ago, Jenni Wix said:

Looking at cost x 3 and labor.  It does seem expensive especially when I head to the candle isle somewhere.  But then I remember I'm offering something hopefully unique and gift worthy,  I compare with both local and prices of similar finds on etsy, and find what I want to ask for is reasonable.  

So you're saying you take your cost, multiply by 3, then add your labor at the end of the process?

[Quentin]

2 hours ago, Sebleo said:

Is that what it’s called: keystone?  I don’t recall if I’ve heard that before but that’s pretty much how I crunch my numbers. 

Keystone is an old term. I don't know the origin of the name. I'm speculating that in the retail world of yesteryear, it was a code word for manufacturers, wholesalers, and the end retailer to communicate prices without their "victims," the consumers, figuring out what the real game was. You could make the analogy that it's like the language that doctors use to fill out prescription forms so that only the pharmacist and the physician understand it. Or so they think.

[Quentin]

1 hour ago, TallTayl said:

the reason behind why we question ourselves is boiled down to one word: confidence. Or rather lack of confidence because we are new.

I think that's a big part of the problem. It's what's going on between my ears that needs fixing.

[Jenni Wix]

yes, @Quentin 🙂

[Forrest]

Well this is great, I read this, and thanks to having outstanding teachers, I'm good on all the candle questions, plus I've owned a business and would know what I'm getting into. But thanks to that article you posted I've realized that I don't want to give up my hobby, I don't want it to be a business. Maybe one day, but not now. This is the place where you can learn everything you need to know about starting a candle business, and why you shouldn't.

[TallTayl]

One bullet missing, how much capital do you have to live off while launching? It takes time and money to launch. How much can you afford to spend until hit your stiride? 

 

With any business (and selling hobby craft is a business), it helps to work backward to get a sense of just how much you need to sell to break even. Sometimes the numbers are easy to swallow.  Other times it’s staggering. 

 

Was a patron at the midwest horse fair last weekend. It was unseasonably cold, windy and rainy so loads of people were inside.  The vendors inside usually don’t see much action in nice weather, but seemed to sell LESS this year with the crowds keeping potential customers from ever seeing their wares. Aside from the resellers of clothing, tack, boots, etc. nobody was selling much. Booths were piled sometimes 9-10’ high with merchandise that nobody could get to. 

[candleshiba]

On 4/10/2019 at 9:39 PM, TallTayl said:

Would you like to learn  more about calculating your cost of goods sold in a future article? Or about streamlining operations to make your valuable time earn more?

 

Only a year late to replying to this thread but YES !

[Forrest]

He had everything he wanted
Until it all
Turned out to be a job

Neil Young

[BusyBee]

3 hours ago, candleshiba said:

 

Only a year late to replying to this thread but YES !

There are two parts of cost which are material cost & fixed overhead cost.  *There would be many hidden and unexpected overhead cost.

 

Candle retail pricing strategy should be based on material cost.  If you are home based, then you will need to charge at minimum of 4X the material cost in order to be profitable and grow your operation.  If you own small shop, then it should be 6X material cost in order to make it work.  As you grow bigger, it would be 8X to 20X. 

 

Material cost should include the shipping cost to get ingredients to your work place, and it should be based on at least box prices and lbs for FOs not small quantity purchased price.  Price of wax, wick, FO, container, label, dye or any additional chemicals, shipping cost to receive and any other box or shipping out materials would be considered material cost.

 

But, most important factor is to determine the best priced candle in your targeted market first.  If your target market's best selling is priced at $20 candle, then divide $20 by 4 or 6 depends on your situation.  If you are home based, then your goal for material cost should not exceed $5 in this case.  If you find that best selling candle price is $20 for your targeted marekt and your material cost is only $3, then ignore this rule and price your candle at $20.  Retail price of your targeted market is a lot more important!

 

You might want to calculate the material cost based on bulk purchase also.  It would be okay to start from about 3.5X if you know if you can bring down the cost by purchasing little bit more in bulk.  For example; 1 lb FO vs 10 lbs FO purchase can bring down a lot in cost. 

 

Right now, it would cost me $3.92 to make my candle getting from supplier located in 20 minutes from me.  If I buy them in bulk, then I can bring down my cost to about $3.13.  But, if I calculate the cost for storage space(We have ridiculous rent price here.) and electricity to keep FO and wax cool in hot Southern California summer, it is actually cheaper for me spend $3.92 as needed bases.  So, my candle pricing is based on $3.92 material cost.

 

 

[candleshiba]

1 hour ago, BusyBee said:

You might want to calculate the material cost based on bulk purchase also.  It would be okay to start from about 3.5X if you know if you can bring down the cost by purchasing little bit more in bulk.  For example; 1 lb FO vs 10 lbs FO purchase can bring down a lot in cost. 

 

Thank you for sharing your insights! Curious at what point did you (or others) gain the confidence to buy supplies in bulk? If you're a newbie trying to establish your business and you're only making sales here and there, you're likely to be buying supplies on an as-needed basis (for example, I'm still buying slabs of wax and the shipping costs suck). Ideally that cost comes down when I buy in larger quantities, but the prospect of buying lots of wax without knowing whether you'll actually sell it of is...nerve wrecking 😅