Top methods for how to price soap include: The 5x Rule, Time and Materials, Price per Ounce or Gram, and “Apples to Apples” Comparison.
4 Winning Soap Pricing Methods
- The 5x Rule
- Fast and easy, but not as accurate as T&M or Price per Ounce/gram)
- Time and Materials (T&M)
- Tied with Price per Ounce as most accurate, but with slightly less effort required
- Price per Ounce (or gram)
- Highly accurate and longest to calculate
- Comparison Pricing (the “Apples to Apples” method)
- The quickest and easiest method, but least accurate based on “hard data”
Properly pricing your soaps was far more complicated 10 years ago. There are so many easy ways to do so now that you can come up with pricing that works quite well with minimal time or effort.
Between the four methods covered in this post, you are sure to find the one that works best for your exact needs.
Heads Up!
Before you decide on your strategy, it is important to note the difference between selling a commodity and a specialized item. Ten or twenty years ago, people purchasing homemade artisan soaps understood they would pay significantly more for the product. Some people would even drive to Amish country or Mennonite regions and buy boxes of organic farm-fresh lye soap at a time.
In today’s more health-conscious society, many new handmade soap companies have popped up. There is no shortage of high-quality homemade soap in any nook of the US, Canada and most of Europe.
Unfortunately, too many newcomers chose to compete on price. The result is that modern shoppers often expect to pay less than the product is worth. This is largely to the use of lower cost ingredients.
Another factor can be making the soap in massive batches of 250 or more bars. There is absolutely nothing wrong that. Bigger batches save time and effort. It’s just important to note why there can be such a large discrepancy in pricing.
I will do whole sub-section on commodity versus artisan right after we cover some pricing basics. First however, how would you like a free Soap Cost Calculator?
Soap Cost Calculator
No matter which method you use below, I have developed a soap cost calculator that can save you a lot of time and tedium. It is a MS Excel spreadsheet and ready to use.
Just plug in your costs and the number of bars you get per batch. Enjoy!
Soap Pricing via The Rule of 5x
The pricing “rule of 5x” just means that you charge five times the cost of goods being sold. BUT it does not only mean the cost of the soap ingredients. Although labor will not factor into this pricing model, you should include every other tangible cost that goes into the final product delivered.
For example, be sure to factor in delivery costs as well as taxes paid for any of your ingredients. You should also be certain to factor in the cost of labels and packaging. And finally, you need to allow for a certain amount of waste.
When you make homemade soap you never use 100% of what went into the pot. There will always be contributing factors such as bad end cuts on loaves. Even the crumbly leftovers from hot process soap adds up quickly.
It may not seem like a big deal, but it is worth it to add in a factor of about 3% to ensure that you cover the losses. I realize that sounds minor. But keep in mind, in this pricing model you are not charging for your time, wear and tear on equipment, shop overhead, business expenses, or insurance.
Here is an actual bar of soap that I have sold based on the rule of 5x:
- $0.92 = Cost of soap goods, including oils, water, lye, exfoliates, and essential oil (includes tax & shipping)
- $0.17 = 24pt cardboard soap box (purchased in bulk 1,000-piece order)
- $0.07 = Label cost including printing (I bulk order mine due to quantity)
- $0.03 = 3% waste compensation (based on total materials cost)
- Total of $1.19 per bar x 5 = $5.95 per bar.
I used organic and all-natural oils as well as the highest quality food-grade lye available. Then I listed details about those ingredients as a special focus. I did not receive a single complaint about the price – and sold a lot of these bars.
Soap Pricing Based on Time and Materials (T&M)
Time and materials pricing is simple in nature. Just be certain you don’t forget anything. Even a minor miss in this type of pricing can lead to significant losses.
Determine Cost per Ounce or Item…
First you need to calculate the costs of every item used. Be sure to include delivery costs and taxes as well. The easiest way to do this is to start by taking the total cost of your oils or other items and divide it by the number of ounces in the package. This will give you your cost per ounce.
Estimate Cost per Batch…
With your cost per ounce of ingredients noted, you can build a simple spreadsheet. It will contain:
- Column 1: Each ingredient or item name
- Column 2: Number of ounces to be used in the batch
- Column 3: Price per ounce
By simply multiplying columns 2 and 3 you will have the total cost of that particular item.
It is easiest to do this based on the recipe so you can instantly know your cost per batch for every soap that you make.
Calculate Cost per Bar…
Once you know your cost per batch, it is a simple matter to divide by the total number of bars in that batch. This will give you a cost per bar.
Just remember it might not always be exactly what you think. This is because you might have undersized bars due to partial end-cuts. You also need to consider that most of the water weight will evaporate out.
If you factor in only the weight of oils and any additives, this will be closest to the final loaf weight.
Account for Packaging…
Next you will add in the costs of labels and packaging. Again, don’t forget to include taxes and delivery fees. With regard to the labels, you should also factor in a small amount to cover the ink or toner costs. Full-color glossy label printing can become quite expensive, so it is best to have discovered.
Figure Cost of Labor and Overhead…
Of all of your pricing, this will be the only subjective consideration. You need to base your cost of labor on what you feel your time is worth. Of all aspects in pricing handmade products, this is the most difficult. The best way to handle this is to give yourself an hourly rate and use that as your baseline.
For example…
If you want to make $20 per hour, and you can make one batch of 12 bars per hour, you would need to charge $1.67 per bar for your labor alone. If your materials costs came to $1.19 per bar, then the combined cost per bar would be $2.86 per bar.
But is that right? No!
You do more than you think…
Don’t forget the time that you spent ordering and storing the materials. You also have time built into calculating and testing your recipes. There are also the hours you spend handling marketing and advertising as well as running your business. Then there is the cost of overhead. You should charge yourself rent even if you are just working out of your kitchen part time.
“Make Batch” Defined
Please note that “make one batch’ includes setup, heating and combining oils, making lye solution, combining ingredients to achieve saponification (the bio-chemical soap making process that happens when you combine lye water with oils), cleanup, then cutting, labeling and packaging once the soap has cured.
Assuming you do multiple batching, 12 bars per hour/per batch is a fair estimate. Hot process will take longer. Melt and pour will take less time.
Time Costs Revisited
Now let’s refigure the amount of time it takes to make soap. All things considered; you will likely spend less than half of your time actually making soap. Once you are in business, doing the actual soap making usually accounts for only about one third of your time. I know! Crazy, right?
As our number of working hours spent making soap is only about 40% of the time spent working, we would need to adjust our hourly rate from $20 to $50. This just means we are only factoring in time for actual soap “making” and are charging more per hour to compensate.
Now that same bar of soap costs $4.16 in labor. When we add the $1.19 in hard costs, we now have a cost per bar of $5.35. If we tack on some overhead costs, we will be at about $5.75 to $6 per bar depending on your “rent”.
Pricing Methods Compared: 5x versus T&M
The pricing using the 5x method came out nearly identical to the Time & Materials method. This was based on earning $20 per hour and having an in-house shop that you “rent” from yourself.
Closer to the mark would be about $22 per hour using the 5x method.
Put another way, if you worked 40 hours per week making soap 40% of that time, you would earn a salary of about $44,000 US annually. Again, based on charging just under $6 per bar as in our example.
Pricing Soap by Weight
Pricing your soap by weight is a quick and easy way to come up with accurate pricing with very little effort. Of course, you have to do all of the upfront work of calculating the price per ounce, or gram, for each soap type that you sell. But once that is done, selling your soap is as simple as coming up with the price per ounce/gram and weighing each bar.
The most accurate way to do this is to follow the instructions above for pricing based on time and materials. From there it is easy to take the weight of an average bar and determine cost per ounce with some quick division. Let’s do one together.
Example:
If the fully cured bar of soap weighs 5 ounces and you are selling it for $5.95 the cost per ounce equals $1.19. (595 cents / 5 ounces = 119 cents per ounce)
This is the same principle used when purchasing goods at a deli or buying fudge by the pound. The idea is simple enough and very easy to implement. There are, however, a few things to be aware of when you use this method.
Cold process soap will continue to get a bit lighter as any remaining water evaporates from the bar. Even after four weeks of proper curing, you will still probably lose another 5% or so of the weight over the next several months. It will make for a more solid bar, just be aware that if this is sitting in a shop waiting to be weighed, you will lose 5% of the value.
Soap’s Unique Weight Factor
If you plan to sell your soap in person you are better off to already have the bars precut. This is not like a deli order. If you let people come up and say give me 4 ounces of soap, it will be very difficult to cut a bar that is exactly 4 ounces. Unlike shaving a bit of additional deli meat to make up the weight, most people do not want little soap shavings added to their bar.
If you have a Whole Foods store in your area, drop in to see if they sell homemade soap. The one closest to me has a whole section with a digital scale. You simply weigh the bars that you want and then place them in a paper bag along with the label displaying the weight. This works out quite well.
Pricing Based on Comparison Shopping
A fourth method to develop pricing for your handmade soap is simply to make a comparison of your soap to other soaps available. There will not be difficult to figure out the price that the market will bear and price your soap accordingly.
I do, however, urge you not to try to undercut the competition. All this does is start a bidding war that takes money out of your pocket and that of your competitors. This never works out well in the long run.
To get the most accurate understanding of your profit margin you should go through the time and materials exercise. This will help you determine your cost per ounce of soap.
You can easily determine the cost per ounce of any other soap because having the net weight of soap on the label is a legal requirement.
Once you have your suggested price per ounce and the competitor’s actual price per ounce it is a matter of seconds to do a comparison.
You should also factor in considerations such as quality of ingredients and level of artistry put into the bar. But with all things being equal, comparing prices per ounce is highly accurate.
Comparison Shop Soaps
Whether or not you use comparison-shopping as a way to price your soap, you should always use it as a sanity check.
One of the most common mistakes that people new to the soap business make is underpricing or pricing themselves out of the market. Either one is easy to do because pricing can be so subjective.
Underpricing
If you have been doing soap making as a hobby for a while, you are more likely to underprice your goods at first. This is what I did, and I have heard from countless others that they did the same.
Because soap making is a passion for us, it is a labor of love. As with any hobby, we did not get into it for the money. If somebody offers to pay you for doing something you love, that just seems too good to be true. This mindset is the trap that many of us fall into.
Remember that people are paying you for your knowledge, skills, and the talent you have developed. You might have forgotten because it happened so gradually, but the first time you made soap probably was not a walk in the park. I’m also willing to bet you may have had a couple lye burns and bad batches over the years.
Your experience and the skills that you gained from that experience is a large part of what people are paying for. They are also paying for the talent that you have in designing the soap that makes it the best it can be.
Pricing Yourself Out of the Market
Notice that I did not say “overpricing”. This is because your soap is probably worth every penny that you want for it. Unfortunately, if you are selling to a market that is not willing to pay that price, your sales will suffer.
Being priced out of the market normally comes from two different perspectives.
First, the person making the soap believes they should be earning a greater per hour rate of pay. This may be due to success they have had as a professional craftsperson or because they made a significantly larger salary in their previous career.
Another common occurrence is that people will pay extremely high prices for the soap ingredients and expect their customers to pay that premium. While this makes perfect sense, and is absolutely the right way to do it, you have to be certain your target audience will bear that additional cost.
If a potential customer is standing in a boutique and holding your bar of soap in one hand and a nearly identical bar of a competitor’s soap and their other hand, they will do some quick math. It will not take long to decide to go with the bar that is 25% less expensive.
This may not always happen, but it is certainly something to consider.
This provides a perfect segue into discussing the difference between a commodity-based bar of soap and a handcrafted masterpiece…
>>> Get the Inside Edge
There’s another article on this site that you should check out if you want more ideas on making your soap stand out from the competition. 5 Genius Ways to Make Your Handmade Soap Standout will share ideas from actual marketing experts.
Commodity Soap versus Specialized Soaps
Understanding the difference between a commodity and specialized product is extremely important for proper pricing. Be certain that if you wish to price your soap as a specialized handcrafted product, you keep the following in mind.
Ingredients matter. Those willing to pay a higher price for soap are looking for ingredients with a quality commensurate with the final cost of goods. This might be as simple as using organic coconut oil and avoiding palm oil that is harvested in an environmentally damaging way. It could also mean using only the highest-grade essential oils.
I am not saying this to encourage you to change your soap recipes. I am just letting you know that to charge a higher price for your soap, people expect the highest quality standards.
This is What Matters Most
Presentation matters. By this I mean that presentation will play a very strong role in product perception. You will want your soap to look the part of whatever your product is intended to represent.
For perfectly rectangular bars, this may mean beveling the edges. For rustic bars this may mean intentionally leaving the top portion shaped more like a natural landscape. Give your customer what they expect – and more.
Make It Special
Clear, high resolution photographs are an important part of making the best possible presentation of your soap. Some of my best images came from staging the soaps on a picnic table, stone wall or having it’s natural components displayed with it (such as lavender blossoms with lavender soap). Experiment!
Packaging is also another consideration when trying to perfect the presentation.
This part is highly subjective so keep in mind that you should start by going with what feels right for the bar. This may mean using an expensive soapbox or simply wrapping it with twine. Trust your instincts because that is what helped you develop your unique soap.
Communication matters. Whether you use words, photos, or both – it all boils down to communication. If the customer does not understand the value they are getting for their money, they are not likely to buy.
It’s important to note that very few buying decisions are based on need. Nearly all buying decisions are emotional. They are based on fulfilling a want. The customer desperately wants to buy your soap, they just need a good reason to do so.
It is as simple as this… Your customer can go into the grocery store and buy a three pack of reputable big brand soap that smells nice and gets the job done for the same cost as just one of your bars. By telling them how much better your product is, you are giving them the permission they need to buy your soap.
>>> Get the Inside Edge
Once you have made and priced your homemade soap masterpieces – it’s time to sell them. We have plenty of helpful information right here on this site to get you started. Where and How to Sell Handmade Soap is a great place to start!
In Closing
Pricing your handmade soap is one of the most critical factors in successfully selling it. Take the time you need to follow the pricing method you feel is best suited to your needs. Do not rush this part of the process and you are that much closer to success.
Happy soaping!