How to Price a Product
for your Dog Bakery Business

Pricing products for dog bakeries is a science--and an art.

Believe it or not, you can lose business (and money) if your products are priced too low. And you can lose customers if your products are priced too high!

Your product pricing needs to be just right!

1. First, determine the cost of the dog treat ingredients that you use. For example, let's say that a 5 lb bag of unbleached white flour costs $2.50.

2. Second, determine how many “units” your bag of flour contains. So, measure how many cups of flour in a 5 lb bag. You find that there are 3.5 cups per pound of flour, or 17.5 cups of flour in a 5 lb bag.

3. Divide 17.5 (cups of flour in your 5 lb bag) into $2.50 (cost of your 5 lb bag of flour) to get $ .14 per cup – the cost per cup of flour.

4. Lastly, determine the amount of flour that you usually use. And then determine how much each unit costs. For example, a cup costs 14 cents. If you are only using ½ cup, that would cost 7 cents.

• Ingredient – list (down the page on the left ) the name of each ingredient that you use.

• Unit – list the amounts that you use. For example, for “unbleached white flour”, you might list the following: 1 cup, ½ cup, ¼ cup.

• Cost – Determine what each of the listed amounts of flour would cost and list them next to the unit (1 cup, ½ cup, ¼ cup).

Dog Treat Ingredient Cost List

I know this is a tedious process, but you will only have to do it once. You need to know exactly how much each product costs in order to keep an accurate accounting. And keeping an accounting of your costs and expenses, is one of the most important steps in how to price a product for your dog bakery.

Keep your Ingredient Cost List where you can consult it regularly.

How to Price a Product
Using Your Ingredient Cost Chart

You will only do this once, but I suggest that you keep the cost sheets for each dog treat that you sell in a loose leaf notebook, so that they are handy. This chart will help you again and again in how to price a product.

Take one of the recipes that you plan to use. Let's use Chicken Chompers as our example. Here's what you need to include for this analysis:

• List the ingredients in the recipe and the cost for each. You will get the cost for the ingredients from the list that you made above.

• Total the costs of the ingredients. This is your ingredients cost for 1 batch of Chicken Chompers.

• Units per recipe – How many Chicken Chompers do you get when you make a batch? Let's say you get 3 dozen – 36 Chicken Chompers.

• Cost per Unit – Let's say that it cost you $1.50 to make a batch of Chicken Chompers. If you divide $1.50 by 36 (Chicken Chompers per batch), you get $ .042 – your ingredient cost for 1 Chicken Chomper.

You're not quite done yet.

Let's say that you decide to package the chicken chompers in bakery bags (cost, $ .20 each) and that you will sell them by the half dozen. (With smaller dog treats, you might consider selling them by weight—a real time saver for you as it eliminates counting out dozens of small dog treats!)

So, 6 Chicken Chompers x $ .042 (cost of each Chicken Chomper) = $.25 per half dozen dog cookies(your cost). Add $ .20 (cost of bakery bag) to that and you get $ .45.

Figure some amount for labor and overhead expenses and add that to your $ .45 and you now have the cost of 6 Chicken Chompers. Let's say that you end up with a cost of $1.00.

Market Research Helps
in How to Price a Product

Well, it's important that you not charge a price that is too high—or too low! Too high, and you won't make enough sales. Too low and customers will undervalue your bakery dog treats.

So how do you do that? Market Research! Become familiar with the pricing used by others, the prices that customers in your target market are willing to pay--and keep your prices somewhere in the same range.

Don't assume that someone else is actually selling their products--just because they are in business.

Make sure they are doing well by visiting their store or investigating in some other way. You need to determine prices and price your products yourself.

The Final Step
in How to Price a Product

You decide to price your Chicken Chompers at $ .50 each, so you will charge $3.00 for a bag of 6 Chicken Chompers. You determined above that 6 Chicken Chompers costs you $1.00 to produce and send out the door.

Your profit on 1 bag of Chicken Chompers is $2.00. Since you get 6 bags of 6 Chicken Chompers from 1 batch, your profit on a batch of Chicken Chompers is $12.00.

So, as you can see, how to price a product for your dog bakery is not a 5 minute job. And you should not do it impulsively.

However, if you take the time to do this right, you will be using a business-like approach and you will make a healthy profit, based on actual facts and figures—not assumptions.

It is critical that you do this if you want to start a real business—not just play around with a hobby. Your efforts will pay off!

Learn more about pricing from this excellent dog bakery start-up guide.

How to Price a Product to Starting a Home Business

How to Price a Product to Best Dog Treat Recipes

Photo by Luis Miguel, Munoz-Najar, flckr

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