Want to know how to price products at the ice cream shop? Come find out!

One of the main challenges in the entrepreneur's routine is pricing products, especially when he/she is inexperienced or has just entered a certain market segment with which he/she is not familiar with. The process, which is most often done by trial and error, ends up costing the enterprise every time the wrong value is reached. This can undermine the chances of a business being profitable.

Pricing products is very simple once you understand how big companies do it. In this article, we'll show you what you need to know to price a product and how to do the calculations for your business.

Ready to learn? Let's go!

Why is pricing products so important?

Before investigating, what are the factors that influence the price of a product? We need to understand why product pricing is so important for the success of an enterprise. Pricing is one of the variables that influence a company's revenue and, therefore, crucial especially in the early years of the business.

A well thought out pricing strategy will enable you to reach your optimal financial goals. Helping you to manage your products at a sufficient volume to keep the business operating and play an important role in customer loyalty.  

Not being able to properly price your products will bring a series of problems along the way, damaging everything from cash flow, coverage of daily business expenses and profits (after all, you will need to compensate for the real value of the product in some way).

Low prices also serve to alienate consumers in some segments, especially if you want to position your ice cream shop among those that produce premium ice cream.

How to price products correctly?

In order not to lose money with your ice cream shop, one of the first management initiatives should be to try to understand all the aspects that make up the cost of ice cream. They will be considered in the final price of the product, so that profits can be made.

In the following topics, you will learn about each of these aspects and understand how they influence the price of an item. Check out!

Put your costs and expenses on paper

The first factor that influences product prices is how much your company spends to produce them. Therefore, all inputs that are used by the business (such as fruit, milk, syrup and any other item that is not produced by the company) must be considered, as well as employee salaries , taxes and utilities. 

Often, companies make a mistake when pricing because they only consider some of these costs, taking only raw materials and ignoring labor. This makes company growth stagnate which could have a hand in dissolving your business should a need for cash flow present itself. To get around this, study your fixed and variable costs and have that number at your fingertips.

Setting The Profit Margin

This is one of the most challenging points for entrepreneurs: knowing your profit margin. After all, each company has a different profit margin, and these margins can even vary from state to state or city to city. So how do you establish your profit margin?

Profit margin is profit divided by revenue, times 100. There is a gross profit margin (bigger) and a net profit margin (smaller). But a profit margin should provide profit for the business, not just the cost of monthly expenses.

Values ​​that are too high can drive customers away, and values ​​that are too low will make it impossible to keep the doors open. So do a lot of research on your local ice cream market until you decide on a profit margin.

Taxes

Taxes are an important part of doing business. Getting an accountant to help itemize your expenses and get the most out of not paying high taxes is paramount to keeping revenue and managing your cash flow.  

Setting up your business correctly with a lawyer so that you are properly set up for your taxes either as an LLC, S corporation or C corp is the most important first step to take when starting your business.

Work on value perception

If you intend to categorize your ice creams as Premium , you should pay attention to this topic. Perception of value is a very simple concept, which explains why the same item can cost very different values ​​in different places or when it is produced for a particular audience. Premium ice cream , therefore, is no longer just ice cream and becomes an experience for which people are willing to pay a little more .

There are many variables in  pricing your ice shop items, so be open to making updates ​​as you learn about your local market and the ice cream industry.

So, did you like learning how to price products in your ice cream shop? Keep reading on the subject and see 5 practices that will help you reduce costs in the manufacture of ice cream!