How to Determine the Price of Gift Baskets

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Pricing a gift basket for profit can be challenging, especially to the novice basket designer. The inclination, in the beginning, is to price too low in order to obtain business. But this strategy may prevent you from seeing a profit. You want to price fairly, yet competitively, and present your skill confidently to the market. The tips below are designed to help you make good pricing decisions that will set you up for success.

  • Account for materials costs. It is vital that you keep records of what you spend on inventory. Set up a spreadsheet on your computer, and enter every single expense that goes into making the baskets. These include: baskets, cellophane, bows, filling, tape, labels and the actual gift items you put into the baskets. Continue using the spreadsheet to enter the expenses in steps 2 through 4.

  • Enter your overhead costs when planning to price your gift baskets. If you make the baskets at home, include items such as your business telephone line, fax related costs, printer ink, paper, stamps, business cards and a portion of your utilities and rent or mortgage. If you have an actual store, include rent and utility expenses. And don’t forget to account for the mileage you put on your vehicle, especially if you offer delivery service.

  • Enter your labor expenses. Includes your own and any employees you have. It’s easy to know exactly what you are paying your employees, but owners sometimes neglect to account for their own labor. You want to be fair to yourself, so include a personal hourly wage when calculating labor costs.

  • Account for promotional costs. What are your advertising costs? What are you paying to be listed in the phone book? How much are you spending on web hosting? What about the cost of signs, flyers and table rentals at craft fairs?

  • Establish your “break even” point. Once you have calculated all of the above costs, you will know the minimum price you need to charge for each gift basket without losing money. A simple formula for this is to divide your total expenses by the number of baskets you have created.

  • Finally, decide what profit margin you will be satisfied with. This is the percentage over your break even cost that you will charge in order to see a profit. One useful formula is to triple your labor cost. For example, if labor comes to $12 per basket, you would sell each basket for $36. If this price represents 30 to 50 percent above break even, you’re gift basket pricing is on the right track.

Tips & Warnings

  • Keep a close eye on your competition for hints on how to set your gift basket prices.

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