I have been absent from the blog page for a while now.  I admit it.  I’ve been “too busy,” which in my house, really means I’ve had a mad case of the “I don’t wanna’s!!!”

And its not that I didn’t want to write.  I did.  Really.  But every idea that entered into my head was stupid.  Or not about soap.  Or been written about a million times before. And I just couldn’t get over the hurdles in my own mind.

And you know what else??  That pile of unorganized whatevers that I’ve been ignoring for the past 6 months really has to be dealt with.  Like, immediately.  I can’t possibly sit down and write anything.

And did you know it’s tax time?  Documents don’t gather themselves… See??  I am too busy!

And so on. And so on.  Ad nauseum…

Today’s post isn’t about soap.  It’s about the unglamorous tasks that come along with starting your own business.  So if you came here to read about soap, hold please.  We’ll get to that.

I thoroughly enjoy posting pictures about beautiful creations I’ve made, upcoming events we’re going to and sharing funny stories of what happened the time I slipped and dropped an entire batch of lip balm on the floor.  (That was funny after it happened.  Because as it was actually happening….. laughter was not the sound coming out of my mouth.)  Anyway.  That stuff goes over really well on social media and its great to be able to share with customers at shows.  But what would happen if I started posting pictures of a super awesome new spreadsheet I just worked up?

I can tell you exactly what would happen.  I would fart a rainbow and Unicorns would come out to celebrate with me because that’s the only fantasy world where “super awesome” spreadsheets exist.

I probably have a few numerically inclined friends who would disagree, but I didn’t see any of them lining up when it was time to track expenses and figure out COGS (Cost of Goods Sold)!

But those things have to be done if you want to run a successful business.  You have to know how much money you’ve spent.  How much it costs you to create a product and how much you need to charge in order to keep creating products.

And although it can be very daunting, there is a certain amount of satisfaction that comes when you know exactly what your costs are.  For arguments sake, we’re going to create a fake recipe and figure out our costs:

We are going to use a regular 42 oz. loaf mold.  We’ll need 33 oz. of oil, and for this completely imaginary recipe, let’s say we buy a package of “Basic Quick Mix” from Brambleberry (my favorite soap making supplier).  33 ounces costs $12.87.  But we can’t forget about shipping.  Shipping will cost $8.50.

Our spreadsheet looks something like this:

Basic Quick Mix 33oz 12.87+8.50 =    $21.37

 

Do you want our soap to have a fragrance?  Or colors?  Of exfoliants? For the sake of this imaginary recipe, lets say we do.  Again, I’ll use Brambleberry so we can see some actual prices.  Lets say we want to make an oatmeal, milk and honey scented soap.  To properly scent a batch that large, we probably want to use around 2 ounces of fragrance. For the sake of argument, lets say we ordered the fragrance at the same time we ordered the oil.  That way, we’ll save a bit on shipping.  Now our spreadsheet looks more like this:

Basic Quick Mix 33oz $21.37
Oatmeal, Milk, Honey 2oz $5.50
Colorant
Additives:

 

I can live without color in my Oatmeal, Milk & Honey Soap, but I think I’ll need oatmeal.  A pound of colloidal oatmeal is gonna run us $9.60, plus a pound will add to our shipping cost by another $8.  We won’t use a whole pound, but lets say we use 4 ounces.

Basic Quick Mix 33oz $21.37
Oatmeal, Milk, Honey 2oz $5.50
Colorant 0
Additives: 4 oz (.25)x(9.60+8)=   $4.40
Total Cost $31.27

 

As of right now, our cost is $31.27 for the entire loaf.  But we never took into account the loaf we needed to buy.  Or the equipment we needed to mix it, or the electricity we used in our kitchen while we made it.  Or our time.  Our dear, sweet, precious, valuable time.

All of those things are called overhead.   And while we don’t factor in the full price of these items each time we make something, a generally accepted percentage for overhead is 25%

31.27 x 1.25 = $39.09 per recipe.

I happen to know that the 42oz loaf mold will produce roughly ten 4oz bars.

Total Cost/number of bars = per bar price.

39.09/10= $3.91 per bar of the above recipe.

So now we know how much it costs to make our product.  And when it’s time to make business decisions about pricing, we have an actual starting point, rather than guessing and hoping for the best.  Kind of exciting, right??

At the beginning of all this, I promised you a front row seat to my journey through starting a business, literally, from the ground up.  I needed to get this post out there to share that’s its not all bubbles and butterflies.  It is, however, extremely worth-while and beautiful.  When a first-time customer comes back the very next week gushing about how much they enjoyed something you created, its pretty awesome. And it makes those unglamorous tasks, like spreadsheets and math, seem like they’re not so bad after all.

If you’re considering starting a business, or if you just started one and you’re thinking, “what have I done?!?”  Hang in there.  You can do it!  Don’t give up and get your costs figured out!  I promise, you’ll be smiling at the end of it!

Hey…. Do you smell a rainbow?  Because I think I just saw a unicorn!  🙂

Have you started your own business??  We’d love to talk about it!  Please leave a comment below!

 

 

 

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