Selling wholesale: How much Profit must I have to be worthwile?

[donbenson]

I have a slightly unusual small plastic souvenir in a package I'm selling small quantities for to a tourist shop.
I want to expand to other stores but I'm wondering if it is worth continuing
I have this item custom manufactured in the USA.
Right now I don't have the means to achieve minium large quantities to get it made in China and I don't really want to deal with Chinese manufacturers at the moment. I don't have enough orders yet and there are other issues entailed.

I sell this small plastic souvenir to one store so far and there are potentially lots of other stores that might buy it.
I've approached some of these stores and they won't pay more than $1.00 for my product despite whatever retail price they sell it for.
That's what I currently sell it for.
My manufacturing costs are .56+ cents so when I sell it to them say 20-40 pc (minium order)
my profit is only .44 cents on the dollar my question is is this even worth doing ?
Suppose I can't bring costs down. I'm not certain how to judge if this is worth doing what is considered viable business?
Lets say hypothetically you have a product, round it off, that costs .50 to make.
Small quatities are selling at a store but a large number of stores is possible (but probably limited by the nature of the product to just your city) What is the minimum above a production cost of .50 to make it a worthwile plan? What is the minimum acceptable price that you as a wholesaler would charge the store?
Should I put my energies into something else?

thanks

[IADS]

It is only worth while if you can get many other shops, and expand your offerings with other products. Maybe get a website to also sell online. Go national with the site. But from the math you either need more places to sell or more products to sell.

[nealrm]

A profit of .44 per dollar is a pretty high profit margin. The big question is how much you are making per hour. If you can sell a min order once per hour, you would be making an hourly rate of $17.60 or just over $35,000 per year. If you can sell 2 min orders per hour, you are over $70,000 per year. Don't forget there are other expenses that have to come out of that decides just the manufacturing cost.

So the question that needs to be answered is "How many of these can you sell each week and will that put you at the income level you want". No one can answer that question but you.

[Harold Mansfield]

So the question that needs to be answered is "How many of these can you sell each week and will that put you at the income level you want". No one can answer that question but you.

And that's exactly it. I assume that dollar stores have a very low profit margin, not to mention operating expenses, but they make it by offering a variety of low cost items so that it's worth coming there to buy many of them at once.

There are plenty of low margin items out there. The key is does this one work for you? Is there enough volume to make it worth while? There is no formula for that without knowing your sales figures, expenses and target income.

[donbenson]

thanks for the replies.

my product is city oriented not national.

I only think I would sell average 3 pieces a day per store

Say I had 20 stores. 3 x 20 = 60 pc sold a day

60 x .44 = $26.40/ day

I have a new display I made which looks good. Let's say that doubles sales 26.40 x 2 = $52.80/ day



But wait other costs not considered, such as delivery, me on foot at least $5.00 a day, my labor packaging this thing, hidden costs etc.

what if it only amounts to .30 ? O.k. I doubled to 6 per store per day x 20 stores = 120 pc x .30 = $36.00/ day



$ 36-53/ a day Is it worth it ? or should I put my energy into a higher value product?

[nealrm]

First, it doesn't matter how many the stores sell each day, it matter how many you sell to the store. I doubt they are only going to buy a single item at a time.

Second, it only matter how much time you put into it. $35-53/day is great if it takes you 10 minute a day, ok if it takes you 1hr, and very bad if it takes you 8 hours.

You are asking us to make a decision that YOU should be making.

[donbenson]

First, it doesn't matter how many the stores sell each day, it matter how many you sell to the store. I doubt they are only going to buy a single item at a time.

Second, it only matter how much time you put into it. $35-53/day is great if it takes you 10 minute a day, ok if it takes you 1hr, and very bad if it takes you 8 hours.

You are asking us to make a decision that YOU should be making.

To the storeI am dealing with I imposed a minimum of 40pc (big store)
They bought 80 pc last order
But they are only selling a few a day (although March is a low sales season for them) But most of these stores are much smaller

So if I had 20 stores I have to assemble the packages. I haven't estimated yet, maybe 50 an hour. Then I have to go around the city and deliver to stores ( imposing a minium perhaps 20-40 pc.)
So at given store that lasts them 10-20 days

[IADS]

As I said earlier, as is, it does not sound like is worth your while as a single product line. If you don't believe that you can go national or online then you should expand your product line. Most successful businesses (not all) have more then one product. They sell multiple products under one brand name.

[billbenson]

So you are making $12k to $20k a year. Not much. But it is a starting point that is profitable. My question is can you use that to sell other stuff or develop multiple profit streams with basically the same amount of time spent on your part. If the answer is yes, I'd say it's worth perusing. It's kind of like the saying, it takes money to make money. Once you have a profitable business its easier to grow it.

[Fulcrum]

I would highly recommend getting the manufacturing cost down under half the wholesale cost. Keep in mind that this value will also need to include a value for your time (wage). Once you know this value, you will need a 55-70% margin on wholesale sales for this product. I would also up the minimum order to 50pcs and offer price breaks at 100, 500, 100, 1000, 10000, etc. Do not let your customer tell you what your product is worth - 99.999999999999999% of the time it will be for far less than it's actual value.

Also, don't be scared to charge for delivery. Fuel costs alone will eat up most of your gross profit if the rest of your overhead is minimal.

Finally, get out there and sell, sell, sell, and sell some more. A very simple marketing plan for you is to visit 2 new stores per week while following up, with either a visit or phone call, with 4 other probable customers during the same period. Devote the rest of your time to getting your costs down and efficiencies up.

Good luck, have fun, and remember it's "all about the money" (to quote Kevin O'Leary from Shark Tank).