What Your Prices Say About Your Business Future
Small food business owners often get caught between two choices: making their products cheap enough for everyone to buy, or charging enough to stay in business. While selling at low prices feels good and brings in lots of customers at first, it’s often a path to going out of business.
Why Even Popular Products Can Fail
Many food makers start selling their products because they love what they make. They want everyone to afford their jams, baked goods, or specialty items. However, keeping prices too low to make customers happy is one of the biggest reasons these businesses shut down – even when their products sell well.
What It Really Costs to Make Food Products
Before setting prices, business owners need to add up all their costs. This means more than just ingredients and jars. Every product costs money to make because of:
- The hours spent making it
- Electricity and water bills
- Space to store products
- Gas money and market fees
- Business insurance
- Equipment costs and repairs
- Signs, labels, and advertising
A Better Way to Set Prices
Many food makers double their ingredient costs and call it a price. This method doesn’t work. Instead, owners should figure out how much money they need monthly to keep the business running and pay themselves. Then, they should look at how many products they can make and sell. This helps set prices that make sense for the business.
Getting Customers to Understand Higher Prices
Most customers will pay more for good products if they understand why they cost what they do. When food makers explain their use of quality ingredients and the work that goes into each product, customers usually accept higher prices.
Setting the right prices is about more than just seeing how much profit can be made. It’s about charging enough to stay in business and keep making great products. When food makers charge less, they hurt their own business, making it harder for all small food businesses to charge fair prices. The goal is to find prices that work for the company and its customers.
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Crafted Kitchen operates as an incubator-style shared-use kitchen in the Arts District of Los Angeles. We provide the access, tools and resources small food business owners need to turn their side hustle into a success story. Own you own food business and looking for kitchen space? Let’s talk. Schedule a call today!
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