How to Calculate The Price For Your Tea
Our calculator is designed to be simple and easy to use. It covers:
- your base costs of time
It also allows you to input a desired profit margin on top.
We hope this calculator helps you make more money for your tea business.
Please input below:
More Tips On Pricing Your Tea
How To Price Your Tea
One of the most challenging aspects to starting a tea business is determining how much to charge for your tea.
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 tea, it's critical that you first identify all of your costs and consequently mark up your tea so you can factor in a profit.
The actual cost of your tea 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 tea, you'll want to create goals for revenue + how much profit you want your tea 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 tea 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 tea fits best in the marketplace.
All of these factors play an equal part in pricing your tea, 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.
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.
Examples of a successful tea business:
. Matcha.com ($4.68M/year)
Andre Fasciola (from Tucson, Arizona, USA) started Matcha.com almost 7 years ago.
Hi! My name is Andre Fasciola and along with my business partner Dr. Andrew Weil, M.D we founded matcha.com. We source and sell some of the highest quality matcha available. Our line of ceremonial grade matcha teas (are) some of the most sought after grades of matcha tea outside of Japan. Each grade of matcha is carefully selected by hand by our 5th generation tea master.
We are (now) the largest supplier of ceremonial grade matcha in the US. A distinction that speaks to our commitment to preserving the traditions of matcha’s ancient culture, and at the same time educating our American customers about all things matcha. From how to make great matcha to how to distinguish between imitation matcha (yes, there is such a thing) and high-quality matcha. Our monthly revenue is $100K.
. Plum Deluxe Tea ($900K/year)
Andy Hayes (from Portland, Oregon, USA) started Plum Deluxe Tea over 10 years ago.
I’m Andy Hayes and I’m the founder of Plum Deluxe, an online purveyor of delicious loose leaf teas.
We now have one of the largest tea subscription boxes and are about the pass the 7 figure mark in annual revenue.
. VIRTUE Tea ($108K/year)
Alex Balcer (from Nelson, Nelson, New Zealand) started VIRTUE Tea over 5 years ago.
Hello everyone, we’re Andrea Legg and Alex Balcer, founders of VIRTUE Tea in the beautiful Kootenay ski town of Nelson, BC.
Even though our business has been seriously impacted by COVID, online sales have tripled! I believe this to be from customers turning more to online shopping but also looking for quality tea and matcha. We now ship our tea and matcha to Yellowknife in the Canadian’s Northwest Territories, all over Canada in the US from New York to California.
Hey! 👋I'm Pat Walls, the founder of Starter Story.
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