May 01, 2007

Determining Your Candle Making Costs

Determining Your Candle Making Costs

As a candle maker it seems we have to wear many hats and be an expert in many aspects of business.  One day we find ourselves trying to be a chemist and figure out how the wax performs with the fragrance.  The next day is trying to be a perfumer keeping up with the latest trends in new fragrances.   The following day you are filling the role of a Production Manager trying to figure out how to make more candles in a day.  With all of these duties I am convinced that it had to be a candle maker that developed the saying “Burning the candle at both ends”.

With all of the above functions it is understandable that many people do not spend enough time developing a sound pricing structure for their products.  In this edition of the Enlightner we will help you understand all of the associated cost of this process but the actual selling price or “profit” you wish to make is influenced by other factors which vary from business to business.   

Understanding all of your cost is very important. This is especially true in light of all the changing developments even in the past couple of days or even months.   By now you have probably read that postal rates are going up this week.  Do you have products shipped to you via Post office? Do you offer free shipping and use the post office? Both will have an impact on your business going forward.

The question many people ask is where to start.   The first step is to calculate ALL of your cost.  If you have access to a spreadsheet begin listing all of these costs and keep them up-to-date so you can track potential pricing issues early in the process.   It is recommended you work closely with your accountant on this project to be sure you have identified all of your expenses.

Variable Candle Making Costs
With your candles there is the obvious cost of your wax, fragrance, wicks, containers and color.   In these costs be sure to calculate the freight inbound.   These items represent the larger portion of your cost but there are many other smaller expenses which sometimes are not always thought of when developing the cost.  These include, but are not limited to, the labels you use (as you may have found 4 color labels can be expensive) and the carton and/or packing material used to ship the candles.   Did you run out of a component and need special overnight shipping to finish the project? Be sure to reflect this in your cost.   The above expenses are referred to as your “Cost of Goods” or in some instances "variable cost" as they will change based on how many candles you produce. 

Fixed Candle Making Costs
The next category is your fixed cost or what is commonly called “overhead”. This category includes rent, utilities, labor, insurance, advertising, credit card fees, catalogs, advertising and many others that may or may not exist with all candle companies.   For those that run their business in a home, garage or basement, identifying fixed cost may be difficult. However, be sure not to shortchange these costs because if you elect to set up an operation outside of the home it is hard to absorb all of these costs in your cost structure. 

If you are the only employee, then be sure to add a cost for your labor.   Again do not underestimate this charge because it will not help in the long run.   When identifying your labor cost be sure to calculate time spent picking up items, running to the post office or UPS store or anything that takes you away from other time.

Identifying all of your fixed costs can be difficult, especially with utility costs that change based on cold winters, hot summers, snow removal and other costs. However be sure you are charging enough. You need to get as close as possible to these cost.

Incidental Candle Making Costs
The final category is incidental cost or what I would call “cost of doing business”.  These are much more difficult to identify especially for start up companies.  Typically these include, but are not limited to, returns, promotions, testing of new products, trade show cost, samples sent to customers, donations to non-profits and other costs that may not fit into the 2 above categories. 

Unfortunately, it is not an easy task to put your hands on all of your cost but if you elect to sell candles it is important to understand how all these cost can have an impact on your business.   In future issues we will be identifying how to find the right “market” for your products.

 

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CHANDLER'S CORNER

In the past couple of weeks the number of air bubbles on my container has increased. Why is this happening?

With summer rapidly approaching moisture and humidity definitely becomes an issue with candle making. As moisture and humidity develops, preheating your container and adjusting pouring temperatures becomes critical.  You should try heating your container a little hotter and pour your wax at 8-12F higher then you normally do.  If you preheat your container hot enough you may not have to pour hotter.



May 2007

Featured Project:
What To Do With Extra Wax

No matter what type of candle you make, there is always that little bit of extra wax that remains. Many companies have put this extra wax to good use. Here are some of the best ideas that we have heard for this extra wax.

Decorative Floaters
Candlewic offers an extensive line of floaters that include some exciting shapes such as hearts, fish, maple leaf, star and sun. The same could be as above where they can be made with a wick or even as a decorative piece.

Hint: Many companies will use this as a unique shape to show potential customers how their fragrances will smell in the wax.

Tarts
Tarts are always a favorite of candle buyers.  It is a great way to test a fragrance from your company and with all of the new styles of tart warmers it is great way to use your excess wax.

Tea Lights
One of the growing trends in candles is the scented tea lights. With the advent of the plastic tea light cup the tea light has become very popular to scent and color. Tea light cups are also available in metal.

The first way to make a tea light would be to take the wax and carefully pour directly into the tea light cup, insert the wick and it should be ready to ship within minutes. The nice thing about pouring into the cup you can pour at any temperature.

The other way to pour tea lights is to purchase the mini Tea Light Mat (M-58) which will make 15 tea lights at a time. You simply pour the wax onto the mat and the wax will fill into each of the cavities. Each cavity has a pin and when the candle is completely set up pull each of the pins and the candles should release from the mold. Simply insert a prewick assembly through the candle and slide it into the tea light cup.

When using the plastic tea light cups, it is imperative that you test burn your wicks to ensure they are not too large. Only cotton core wicks should be used with plastic tea light cup.

 

Hard to believe!!

Days Until...
  •Thanksgiving - 190
  •Christmas -  223
  •Hanukkah -   202
  •End of the Year – 229

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