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Candle Ideas for Summer #1

by Chandler 10. March 2010 00:21

CRAFT SHOWS, FESTIVAL AND CARNIVALS
While in the past your market may not have been these venues, in today’s environment, it may be necessary to start doing these types of shows.  With the exception of the enormous shows, these venues normally have a very low exhibitors cost and can get decent attendance. Many publications are saying that local show attendances are up because people still like to go out and can’t travel as far as they used to. In addition it provide a market for products the larger retailers just do not offer.

These shows also offer the added benefit of getting close to retail cost for your candle. Normally cash or credit cards are provided and you can gain valuable information from the face to face contact with your customers.

Check with the coordinators of these events and find out if they need door prizes. Use this as an opportunity to send candles from orders that were cancelled or overrun. The show organizers will love the door prizes and you can get some publicity from donating the candles. 

The more you can cater your candles to these events the more success you are likely to have. For example if it is a Strawberry Festival, be sure to have your predominate candles scented with all of your strawberry fragrances. If the event is historic in nature, try offering beeswax candles or tapers and other colonial type candles.   

While at the show be sure not to bury yourself behind the counter, be out in front and be ready to answer any questions your customers may have on the product. As tough as it can be for many of us to take time to strike up a pleasant conversation with people passing by, you never know what you may learn. Offer a drawing with a nice prize at the end of the show and have people sign up for the prize. Depending on how you market your candles, capture either the entrant's email address or mailing address (be sure to check out our February 09 issue on Database Marketing for more on this subject). 

Many towns have “Market Days” where they set up an outside area on a regular basis during the summer months and merchants bring home grown products, hand made products and other summer needs.  Be sure to bring some unique candles that may not be found in the traditional retail store.


Avoid Margin Drain in Candle Making (Part 2)

by Chandler 10. March 2010 00:11

In this entry, we are going to highlight the remaining four tips highlighting area's that could become a margin drain without careful examination so that you are sure to maximize your income.

Set the Right Sales Price
Setting the proper price for your candle might be one of the most difficult tasks in candle making.  There are many issues which must be considered.   Naturally we would all like to sell at the highest price but your target audience might not be willing to pay that price.  On the other side there are consumers who feel if you sell the candle too inexpensively there is something wrong with the product.  For initial guidance on developing your prices be sure to check out our June 2007 Englightner.   Some important considerations must be what is your competitor selling the product for?  What is the target audience that your candles are being sold in?  Can you offer some products at a lower margin in hopes that they buy the higher priced items to go along with their candle purchase.   Depending on the market you are selling at you can also run “specials” in that people like to feel like that are getting value in the product.   

Save on Shipping Products
It is always best to try and minimize the number of shipments you make especially when it comes to ordering wax.   Shipping one case each week is much more expensive then 4 cases at one time. Combining additional fragrances you may need later can result in substantial savings.   Also when you can ship by common carrier be sure to “load” as much as possible on the skid.  Many carriers charge flat rates for a skid so the rate is the same if you shipped 500 pounds or 2,000.  Be sure you have all of your products shipped together if you using a common carrier.  

Use Everything
It seems no matter how you do things you will end up with something extra in wax, fragrance and even color. Use your extra wax to make tea lights, fire starters or even tarts. If you have just a little bit of fragrance maybe have a bottle that you start collecting the fragrance.  Have one for all of your florals that you can then call bouquet of flowers. For home baked goods maybe call it Granny’s Kitchen.  Do not discard any of your extra raw materials. They all have some value when put into a finished good. Even if you possibly cannot sell giving them out will get you the attention of someone.

Vendors can be a Resource
Quality companies offer services to their customers that can have value. Make sure you use them. If you have a new candle requiring a different wick check to see if you can get a sample (Sorry for the self promotion but could not resist). Candlewic has always provided free wick samples. Rather than just purchasing books, check out the other resources a vendor has to see if there is sufficient information without having to invest in that book. Be sure to take advantage of promotions of the products you use.   

Since the summer months are a bit slower the summer months are always a great time to review all of your cost and make sure you have kept up with current prices of products and that you review everything to make sure you are doing everything in the most cost effective manner possible.

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Categories: Business Articles | Candle Busines | Candle Making (General)


Tips for Avoiding Margin Drain in Candle Making (Part 1)

by Chandler 10. March 2010 00:03

Candle making has always been an excellent choice for generating income for individuals and families during tough economic times.

There are a number of contributing factors to this:

  • Candle making has a relatively low entry cost.  It is possible with some research and testing to purchase some wax, add fragrance and pour into a container and have a very good quality product.  This candle can then be sold at a local craft show at a pretty nice mark up. 
  • Candles have always been a desirable household item because it can serve in various functions in the home, room freshner, home décor and for ambiance in the evening. 
  • Since home buying is down dramatically and people are not moving, they are trying to accessorize and redecorate their homes on a smaller budget and candles can fit this criteria.

For many, candle making can be so fun it is easy to lose focus that you are doing this as a source of income.  In part 1 and part 2 we are going to highlight some of the areas that sometimes do not seem like it should be a "margin drain", but without careful evaluation they could result in not to maximizing your income.  

Establish the Right Scent Load
This can be a very tough subject and one that everyone has varying opinions on.  Without doubt we have written numerous times that fragrance is considered the biggest factor in selling your candles and keeping repeat customers.  The key is finding that right balance of fragrance for your candle without adding more then you need.  Adding more scent than you need will be costly and may not be necessary.  This is commonly referred to as the point of diminishing returns (you are adding more fragrance but it does not result in a better product). For many candle makers the tendency is to add more fragrance because you may think there is not enough.  The best thing to do is test your different formulas with friends and neighbors.  Be sure to evaluate the fragrance in a location other than where you pour the candles.  Fragrances can easily take over the room when you pour your candles and when you then try and smell them your ability to sufficiently evaluate can be compromised.  Also it is very difficult for you to be the own judge of the finished product.  

When smelling fragrances for to long of a time period your senses can become somewhat dull and you become accustomed to smelling them at stronger doses. While it can be hard, let other people help you determine if your candle smells strong enough.

The last four tips are coming in part 2!

 


How to Set Candle Prices

by Chandler 1. March 2010 23:29

 

No matter how you started or operate the business, without a doubt, one of the most important keys to the success of your business is what price you sell your candles for. Many would think this should be an easy formula, but with many factors to consider it is actually a very difficult process and every company/individual will arrive at there selling price for different reasons. The purpose of this article is to help identify the general price range and which markets to consider. No doubt, there are always exceptions and unique circumstances that will have an impact on these guidelines. With the current economic situation, your pricing strategy will be more important then ever.

The first question that needs to be answered is:

How will you be selling your product?

  • retail store
  • craft shows
  • consignment store
  • wholesale
  • other

Each of these distribution channels dictates a generally accepted margin level.

A general guide to follow is:

The closer you are to selling the consumer, the higher the margin you should attempt to achieve.

There are several reasons this logic prevails. (1) You are taking most of the supply chain cost out of the equation, which allows you to make that money. (2) You will have to handle more single transactions, which drives up your cost and time involved. Instead of selling 25, 50 or 100 candles at a time and sending 1 Invoice, you may have to handle each of the transactions individually.

In most instances, in order to make it work, you need a minimum of a 40 percent margin with a maximum, depending on competition, up to possibly 60 percent.

Again, this is ideal but subject to many other factors. One that comes to mind is if you use candles to get people to your store or booth, and they purchase candle holders or accessories, maybe that percentage can be smaller.

The next selling venue to consider would be wholesale. In this selling mode, you produce the candles and sell to another entity that will market the product to the consumer. This allows you to focus on producing a good product and building your brand image and product development. The retailer/website then will sell your product.

Trade shows, trade publications and mailers to the potential customers is a great way to introduce your product. Starting with your local stores is always a great way to get started. You can deliver the product, thus saving shipping cost for the retailer, even manage the inventory and consider some joint advertising. The expected margin selling in this area will truly depend on how you wish to run your business. If you have low overhead and wish to try and get new customers quickly with price, maybe you only have a 33 percent. This is very low and you must really have a control on your cost to do this margin level. However, it is important not to sell them too low because of the many unknowns, i.e. production errors, sudden price increases and lost accounts.

The last selling venue is what we call a hybrid. There are several selling categories I would include in this one, since by definition they may not be a retailer or a distributor. The first one is fundraising, which is a very successful venue for candles. This would be where you produce the candles and have an organization selling your product to help raise funds for their purpose. Unlike wholesale, after the consumer purchases and likes your product, you can start to sell direct to the consumers that purchased candles as part of the fundraiser. Maybe even offer the organization a small commission on repeat orders.

Most times a 40-60 percent margin gives room for both the candle manufacturer and the group to make money at their event.
If you recall, earlier in this article we used the term preliminary cost because from time to time you may have to move off that pricing. If a large enough order comes in, you might want to give further discounts.

Without doubt, one of the most important things to consider when developing your cost is what the competition is doing. The important distinction in this process is to determine what truly constitutes a competitor. In most instances, the candles being sold in grocery stores are not always a competitor because the candle could be of a different quality. The brand name candle company may not be a competitor, because they have the ability to charge more for the name. You need to determine your target market and review the pricing of the candles being sold to those markets.

Once you have your pricing established be sure to review often, raw material pricing changes, your operating cost may increase/decrease or your competition might be doing something which is taking away sales. There have been recent articles that almost anything is open for negotiating be prepared to know what the very minimum you will want to sell your candle

 

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Categories: Business Articles | Candle Busines


Counting the Cost of a Large Customer

by Chandler 10. February 2010 00:25

Is Big Always Better?

It is definitely an interesting time period in terms of the economic situation. Some “experts” are saying that we are on the way to recovery while others say we have a long way to go before things get better. At this point in time it is difficult to truly determine where the answer lies. If the last couple of years has taught companies anything it is that, as a company, you must always be able to adapt to many different situations and conditions, and be able to change quickly.

 For those of you that were fortunate enough to remember the tremendous growth of the candle market from 1995-2002- you will recall almost any type of candle developed could find a market, and there were some truly remarkable and unique candles sold during this time period. Many candle companies grew with leaps and bounds and started building a fairly substantial infrastructure to support the organization. In some instances, new buildings, new equipment and personnel were added. But then 2001-2002 came and the market started to turn downward and many learned very quickly that it is very difficult to reduce any organization and fixed cost in a very short time period.

If companies or individuals are fortunate to see the next growth of the candle industry in the very near future it is a good time to develop a plan that can not only help support this growth, but also not jeopardize the business if things turn bad quickly. In addition if that next “extra large order” comes knocking on your door, is it right to accept it?

There are very few things more exciting to a business owner than getting that call from a large potential customer that would be equal to your entire production for the next 3, 4 or more months. The natural inclination for many would be to look at what their current best price is and then possibly discount a little more off that price. The next step is normally to do whatever else may be necessary to ensure they get the business. This may be the right thing to do if the circumstances are correct, but in most instances when it is such a big departure from your normal part of business, you need to spend a great deal of time assessing if it right for you. The same logic/calculation applies even if you are making candles in your kitchen/basement and in some instances even more factors need to be considered

While the following will not guarantee that at the end of the transaction it was in your best interest, we hope it will help you make an informed decision:

  • Is the new account going to require you to purchase more molds, equipment or add personnel?  This action will require additional funds to be expended and needs to be calculated into the cost of how long or reasonably long they can commit to you.  The longer the commitment they can give you the more you can amortize the new cost.  There are very few companies that will guarantee purchases past a fairly short time period. You should try to get as much of a commitment as they are willing to consider.   Be sure to get as clear of an understanding as they can give on the arrangement. 

  • If you are a home based business: Is the size of the order going to require you to produce in another place other then your existing location? If so be sure to know all of your cost including your own time in terms of travel, wear and tear on vehicle and if you have to engage child care or other arrangements.

  • What type of payment terms are they asking for? If it is 60 days, then you will need to identify what the cost of carrying that type of receivable is. Keep in mind that few vendors these days rarely are more then 30 days. So, what ever you sell them, in the addition 30 days, has to come from somewhere (it is even a great cost if the large customer wants 90 days). Lines of credit, bank loans and other traditional financing all carry cost. Be sure this is part of the equation. Even if the profit is healthy, (which is not always the case if the order is very large) it is still awhile before the amount you make as a profit covers the cost of taking on the new receivable. In addition, you are continually going to be building Inventory which requires you to outlay additional funds. The Inventory number can become deceivingly high with labels, glassware, fragrance, wax and then the need to store the items.
  • If the order is an ongoing proposition, what, if any, notice will you receive when they wish to stop purchasing from you? Larger orders will take longer to produce, but your customer will want product in a shorter time period, so you will constantly be building inventory. If they end the arrangement on very short, or no notice, you will be “stuck” with a great deal of inventory.
  • What is the financial strength of the customer you will be selling to? The worst outcome for any transaction is the company you start to sell to shuts down soon, or for that matter, anytime you start to sell them. In today's business environment few companies, if any, can survive a large hit on receivables.
  • If the customer is already purchasing candles try to find out why they are considering changing suppliers. Getting a good answer on this inquiry is going to be the difficult area to access. The information you are able to secure may help you understand if the situation is then going to be right for you. Maybe their current supplier went out of business, or unwilling to make a shape design they desire, or they did not like the quality of the product.

While larger and new customer transactions are a part of business everywhere, preparing yourself and making sure you have considered all the costs is necessary to make sure it is the best decision for your particular situation.

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Categories: Business Articles | Candle Busines


About the author

Hi I'm Chandler. Thanks for visiting! Illumine is all about helpful projects, ideas, and articles related to candle and soap making and the candle and soap making business.

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