Budgets, Payments and Pricing

When it comes to setting up your own business, there are a lot of factors to consider. Most importantly is managing your money. From budgeting your expenses to deciding on your retail price, this blog will take you through how to manage your money when starting up your own candle or home fragrance business.

Budgeting

We suggest creating a budget for your first two months in business, so you have a basic idea of what to expect and don’t have any nasty scares. You’ll need to estimate the cost of supplies, equipment, and overhead. You should also budget in a wage for your time and effort as a business owner as well; after all, this is for you. There are a whole host of budgeting tools online that can help you with sorting your numbers or if you’re feeling confident you could create your own spreadsheet on Excel!

Pricing

In the beginning, it’s best to keep your product line small and manageable. Think about the candles and scents you like, what’s most popular with your friends and family, and also what fits your chosen target market.

When pricing your products there are a variety of different types of pricing strategies you could use. However, there's no one guaranteed formula-based approach that suits candles and other home fragrance products. Usually, pricing your products involves considering certain key factors, including pinpointing your target market, tracking how much competitors are charging, and understanding the relationship between quality and price.

This may sound a little daunting in the beginning but don’t worry. To simply put it, when setting up your initial pricing you need to add up all of the costs involved in bringing your product to market and set your profit margin on top of those expenses, that’s it.

A good starting point is the below formula which has been tried and tested over the years:

Cost of Raw Materials (inc. packaging) + Your time / Labour x 2-2.5

ie: Materials £2 + Your time £2 = Selling Price £8 - £10

Why this pricing approach works

The most important element of your price is that it needs to sustain your business. If you price your products at a loss, or an unsustainable profit margin, you’re going to find it challenging to grow and scale.

There are also other important factors that your pricing needs to account for, like how you’re priced compared to your competitors, and what your pricing policy means for your business and your customers’ expectations.

Pricing isn't a decision you only get to make once. In the early days testing the market with different price points is critical and will be very helpful in guiding you as to where your products fit into the market.

Taking Payments

After you have set up your platforms and sorted your pricing structure,  you need to choose how you will accept payments. The most popular online payment service is Paypal as it can be added to multiple platforms and also used alone through its independent app and site.

There are many other online payment services to choose from such as Google Pay, World Pay, and Stripe etc. However, if you are solely accepting payments through social media PayPal is the most recommended form of payment that people are familiar with and trust.

Once you’ve set up your business and started taking payments you will then need to register with HMRC as a sole trader by the end of the new tax year, this means you’re self-employed.