The first step in pricing a product should be planning, as I outlined in a previous blog. To price a product properly, you need to know all of the expenses connected with making it, such as raw materials, labor, and overhead. Let’s take a look mold testing air quality.
A prototype and/or what they call CAD (computer-aided design) or mechanical drawings are required before manufacturing or creating your product. Prototyping a small product on your own may be possible, but it’s recommended to collaborate with a product designer or developer if your idea requires engineering. This is particularly true when you’re dealing with a manufacturer that’s located outside of the United States.
Molding or tooling costs must be paid separately if your product requires the use of a mold. Molds are created out of metal and precision-machined to replicate desirable aspects of a product after the design is finalized. The material is then pressed into the mold cavity, where it cools and hardens according to the cavity’s structure. Known as injection molding, this manufacturing method is used to create products. Multiple molds may be required for your product, which might cost thousands of dollars.
To produce your goods, a factory or manufacturer will charge you a unit cost.
Providing artwork for a product’s box or packaging is a requirement. When stating the unit price, most manufacturers add the cost of packing. Except for a bespoke die line, the manufacturer is likely to provide you with a die line that meets your needs. A graphic designer will utilize a die line as a template while creating the artwork for your box. A custom dies line may necessitate additional packaging fees paid to a packaging engineer or graphic designer (if they are capable of creating die lines), as well as branding (logos and logo treatments) and the creation and production of packaging artwork costs to be considered, as well as additional packaging fees.
For the most part, bids will also include the cost of transporting your products from the plant to your consolidator or freight forwarder (FOB Consolidator, or Free On Board). However, for the sake of this essay, I’m going to include it separately.
QC (Quality Control): This cost is also frequently included in the unit price of the finished product. A decision must be taken on whether or not to authorize or refuse the release of a product that has been tested for flaws. An agent or third-party provider often performs QC inspections. It’s important to make sure that the manufacturer adheres to these practices and satisfies your requirements.
It’s important to remember that testing and ensuring compliance are independent expenses. The Consumer Goods Safety Commission (CPSC), an independent US government organization that governs consumer product sales and manufacturing, has particular standards for the majority of product categories. Visit their website to find out what regulations apply to your goods (www.cpsc.gov).
With a written certificate from a CPSC-accepted laboratory showing that the product has completed all mandatory third-party testing, manufacturers of children’s items are obligated to ensure that their products meet all relevant safety standards. For each certification, you must pay a third-party testing facility.
ASTM International (www.astm.org) and ISO, the International Organization for Standardization, are two other non-profit standard-setting bodies (www.iso.org). You don’t want your goods recalled, so make sure you follow these guidelines. In addition to the thousands of dollars you’ll lose since your items will be taken off the shelves, you’ll also be fined a large sum.
In certain cases, you may be required to pay a charge for duty. Find out if your goods are subject to duty and their rate by searching the U.S. Customs & Border Patrol website (www.cbp.gov). An estimated duty rate for a product may be found in the tariff database of the U.S. International Trade Commission. You may also receive help by phoning the local port of the broker with whom you are employed. In addition, the initial shipments of new enterprises are examined, and a charge is levied. Manufacturers are also required to pay for random inspections conducted by homeland security as a precautionary measure.
You must pay a charge to your broker for them to handle the delivery of your items. Your items will often be sent from the port where they arrived at your ultimate destination (such as your warehouse or a third-party one) as part of the broker’s service cost.
If you don’t have a warehouse of your own, you’ll have to pay a third-party warehouse to store, distribute, and in some cases, even fulfill client orders for you. This might pile up over time. As a result, you’ll be charged a storage cost for each pallet as well as an “in and out” charge, which is an additional price for every time your products are handled by the facility. When working with them, be careful to ask about any additional expenses, such as labeling fees, that may apply.
To help you better understand manufacturing expenses, I’ve included some of the most common ones. After that, I’ll talk about how to price a product and figure its profit margins.