How to Set a Suggested Retail Price

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The suggested retail price is important both to retailers and consumers.
The suggested retail price is important both to retailers and consumers. (Image: Eileen Bach/Lifesize/Getty Images)

Small businesses that manufacture goods need to set a suggested retail price for the items they sell directly to customers and also to retailers. A suggested retail price is useful for retailers because it is a guide that helps them determine the going rate of an item at other retail stores. Calculating a suggested retail price is very important for small businesses, and suggesting an appropriate price is integral to the success of any business.

Calculate your cost of goods. This includes the amount paid for the products used to make the good, plus any shipping expenses incurred when ordering supplies to make the product.

Take into account the cost of labor. To determine the cost of labor per item, a business needs to determine how long it takes to make each item and how much money it wants to make per hour manufacturing the items.

Total your operating expenses. This includes utilities, office supplies, marketing and overhead costs.

Calculate the minimum amount the business needs to make. Add the cost of goods, cost of labor and operating expenses. The total should equal the amount at which the company is minimally willing to sell its goods, usually equivalent to the wholesale price. The wholesale price is also the exclusive price at which the manufacturer sells its items to retailers.

Take into account the wholesale price and the desire for the retailer to mark up an item to make a profit on the sale. Retailers will typically base their pricing of an item on the retail price the manufacturer has suggested. The suggested retail price should increase the wholesale price by 50 to 100 percent. This takes into account the earnings necessary to cover their operating expenses and make a profit. The suggested retail price formula is cost of goods plus cost of labor plus operating expenses equals the wholesale price. Then, wholesale price multiplied by 50 minus 100 percent equals the suggested retail price.

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