Reviewing your COGS (Cost of Goods Sold – what it costs you to make the product you sell) is a bit like deep cleaning your house. You need to do it and you know you need to do it, but you don’t do it enough.
Because Patchouli Essential Oil has had a well-documented, meteoric price increase for 2008. What used to be purchased for $30-$40 per pound is currently selling for $182 per pound. Why is this? Supply and demand for the year – there was more Patchouli Essential Oil purchased on contracts by the big perfume houses than the producers made.
Scarcity = price increases. I keep hearing that this situation will start to stabilize in September but in the meantime, we undertook a survey to see what our customers were doing to work with and around the Patchouli issue.
The results were fascinating:
81.2% of respondents used Patchouli Essential Oil regularly
Of those Patchouli users, 16% were raising their pricing and 22% were changing formulations (switching to fragrance oil, using different base notes).
The rest of Patchouli fans were keeping their price stable and losing money in the hopes that the pricing will come down. This post is for the 62% of you that are holding on and not increasing prices or changing formulations of your Patchouli based products.
This is an opportunity to discuss general pricing practices in business. How exactly do you price your products? More importantly, are you pricing high enough to sustain a stable and profitable future for your business?
The reasons you are in business can be any number of things, some deeply personal and intangible. One reason we should all share is a desire to be successful. I often remark that
“I am so lucky to have my job because it’s practically my hobby.”
It’s what I would do naturally even if I wasn’t getting paid. Or would I?
The truth is that when I put in a 60 hour work week, I need something tangible to show at the end of the week for my efforts. That something tangible – the easily measurable thing – is money, profits. While profit need not be obscene, the longevity and stability of my business requires them for investment in the future, for infrastructure costs and to ensure job continuity for my staff.
In these uncertain economic times, it’s more important than ever that you price for the future. In the face of unrelenting layoffs and dismal financial market news, you need to be in control of your destiny with your small business. Your small soap business may be the rudder on your family’s financial ship, steering you to safety over the next few years of economic turmoil in the US.
That’s why you shouldn’t sit by idly and hope that Patchouli prices come down. It is imperative that you review all of your costs on a regular basis to ensure that your profit margins are protected so you can plan for a stable future for yourself, your family and your business.