How to Determine The Price For Your Business/Service:
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How To Price Your Furniture
One of the most challenging aspects to starting a furniture business is determining how much to charge for your furniture.
When businesses under-price their product, this can be extremely detrimental to their bottom line and reputation.
Often times, businesses under-price their products to drive demand and volume, but that last thing you want is for customers to view your product/service as "cheap." Additionally, this can have a big impact on the type of customer you attract, which can be difficult to recover from.
On the other hand, when businesses over-price, this tends to be just as damaging to the business.
When customers buy, it's likely that they will explore the internet and look at other competitors to ensure they're getting the best value + deal. This is why it's so important that you research your competition and understand where you land in the marketplace.
Here are some factors to consider when pricing your product:
Understand your customer
It's important that out of the gates, you identify the type of customer you want to attract and how much they're willing to pay for your service. One great way to do this is by surveying your customers. Here are some important items you'll want to takeaway:
- Customer demographic: Age, gender, location, etc.
- Buying habits of your customer: What they buy + when they buy
- Level of price sensitivity with your customer
All of these segments will help you identify the type of customer you're attracting and how to price your product accordingly.
Understand your costs
When pricing your furniture, it's critical that you first identify all of your costs and consequently mark up your furniture so you can factor in a profit.
The actual cost of your furniture may include things like:
- The actual cost to make the product (ie. raw materials, supplies, manufacturer).
- Shipping + overhead fees
- Operating costs to run your business
You may want to consider creating a spreadsheet with every single expense involved in operating/owning your business. This will give you an idea as to what you need to generate in order to at the very least, break-even and will help you price your products to factor in a profit.
Create revenue goals
When determining the price of your furniture, you'll want to create goals for revenue + how much profit you want your furniture business to make.
This process is simpler than you may think:
- Think about your breakeven cost (by completing the above step).
- Create a revenue goal based on your break-even cost
- Evaluate the # of items you plan to sell in a given period (make sure this is a realistic number)
- Divide your revenue goal by the number of items you plan to sell
This figure will help determine your estimated price per product in order to meet your revenue goals.
Evaluate your competition
The last piece in determining how to price your furniture is by simply looking at your competition.
The best way to do this is by finding like-minded businesses that offer product(s) with similar perceived value. Then, you can compare prices of the different businesses and determine where your furniture fits best in the marketplace.
All of these factors play an equal part in pricing your furniture, so it's important you evaluate each one individually to come up with an accurate price that will help optimize your business from the start.
More Tips On Pricing Your Furniture
Lauren Costanza, founder of Bluminary provides us with a detailed spreadsheet of all of her costs associated with running her business:
I knew this would be a self-funded adventure, and I set aside $3,000. During the first three months, I had a detailed spreadsheet where I tracked where the money was going and what was going toward products versus researching and developing new products.
The spreadsheets involved columns and rows of numbers to craft a budget and gain an understanding of how much would need to be invested at each stage of the process - from gathering supplies to building a website, and shipping materials.
Thanks for reading. We wish you success in your business endeavors.
Examples of a successful furniture business
8. Branch Furniture ($6M/year)
Greg Hayes (from New York, New York, USA) started Branch Furniture over 3 years ago.
Hi, my name is Greg Hayes. I’m the CEO and co-founder of Branch Office Furniture, but you can just call us “Branch.” We’re taking a new approach to the office furniture industry, selling our line of desks, chairs, and other essentials directly to businesses and saving them thousands of dollars along the way.
With Branch, we’ve brought together the best of both worlds. We saw an opportunity to produce high-end office furniture and sell it directly to our clients, applying D2C principles to an antiquated B2B industry littered with middlemen. The result is a series of desks, ergonomic chairs, storage products, and conference furniture sold at between one-third and one-half of the price of comparable quality products, with space design, delivery and installation included. We also offer a trade-in program, so you can add and exchange furniture as your team grows and needs change. Since launching our first products in Q1 of 2019, we’ve done over $1M in sales, including nearly $400k last month!
9. Suffolk Latch Company ($840K/year)
Carl Benson (from Clare, England, United Kingdom) started Suffolk Latch Company about 15 years ago.
I’m Carl Benson, the founder of Suffolk Latch Company. We are an online store specialising in traditional and hand forged ironmongery.
We are on an upward growth curve and, despite a turbulent economic climate, we are experiencing 20% increase on turnover compared to last year.
10. Humphreys ($444K/year)
John Humphreys (from Austin, Texas, USA) started Humphreys about 5 years ago.
My name is John Humphreys and I started Texas Rover Company which has recently been rebranded as Humphreys. Humphreys is a lifestyle industrial design brand, which creates classically inspired leather, wood, and metal products. Another arm of the brand is Humphreys Build, which focuses on architecture and design projects.
Company sales grew and the brand has been realized. Now, in addition to these products. the company is focusing on design, build and custom furniture.
11. Modern Workspace ($161K/year)
Wes O’Donnell (from Norton Shores, Michigan, USA) started Modern Workspace about 9 years ago.
Hi, my name is Wes O’Donnell and I run several eCommerce businesses. I am a professor of marketing, a keynote speaker, a military veteran and a business coach.
I have run "normal" businesses, but I have had the most success in eCommerce. Beyond dropshipping at Modern Workspace, I have also made money from a niche directory site BestMichigan.org and a traditional blog Warriorlodge.com that generates revenue from Google Adsense. In fact, my blog Warrior Lodge currently generates about $500 per day in ad revenue.
12. SunHaven ($0/year)
Michael Hillel (from Los Angeles, California, USA) started SunHaven about 5 years ago.
My name is Michael Hillel. I am 27 years old and was born and raised in Encino, CA where I still live and run my business.
While we operate primarily in the e-commerce space, we also work with a few brick and mortar stores. Some of our most notable retail partners include Wayfair, Overstock, TJ Maxx, HomeGoods and Hayneedle.
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