You make handmade candles. Let's calculate your margins to see if your pricing is sustainable.
Your Numbers
Cost per candle:
- Materials (wax, wick, jar): £15
- Labor (30 min @ £20/hr): £10
- Packaging: £3
- Total direct cost: £28
Wait, that's already £28, but we said £18 in the calculator. Let's be realistic:
- Materials: £12
- Labor (simplified): £4
- Packaging: £2
- Total: £18
Selling price: £30
Per-unit overhead: £2 (shipping materials, labels, etc.)
Running the Calculation
Cost per unit: £18
Overhead per unit: £2
Total cost: £20
Selling price: £30
Profit per unit: £30 - £20 = £10
Profit margin: £10 ÷ £30 = 33.3%
Markup: £10 ÷ £20 = 50%
What This Means
For every candle you sell:
- £20 covers costs
- £10 is profit (before business overhead like rent, website, etc.)
If you sell 100 candles per month:
- Revenue: £3,000
- Costs: £2,000
- Gross profit: £1,000
But you still need to pay:
- Website hosting: £30/month
- Etsy fees (5%): £150
- Marketing: £200
- Your time for admin, photos, customer service: £300
- Total overhead: £680
Net profit: £1,000 - £680 = £320
That's only £320 for making and selling 100 candles. Is that sustainable?
Options to Improve
1. Raise Prices to £35
- New margin: 42.9%
- New profit per candle: £15
- Monthly profit (100 candles): £1,500 - £680 = £820
2. Reduce Costs to £16
- Keep £30 price
- New profit per candle: £12
- Monthly profit (100 candles): £1,200 - £680 = £520
3. Add a Premium Line at £50
- Same £18 cost (fancier packaging)
- Profit per candle: £30
- Sell just 30 premium + 70 regular: £900 + £700 = £1,600 - £680 = £920
The Lesson
A 33% margin sounds good, but after ALL costs (not just product costs), your take-home might be tiny. Always calculate net profit, not just gross margin.
Use the calculator to test different prices and see the impact on your actual profit.