This article was originally published on Confident Cannabis, and appears here with permission.
There’s a fine line all cannabis businesses have to strike when it comes to pricing their products for Wholesale. If you price your products too high, you risk driving away customers. On the other hand, if you price your products too low, you can miss out on potential profit. Neither side of this equation is ideal, so let’s take a closer look at how to price cannabis products the right way.
Choose the Right Approach
There are two popular pricing approaches that are worth considering before choosing how to price your cannabis products.
With the Cost Approach, you’ll break down all of the costs that were necessary to create: acquire, and prepare a cannabis product for sale. You’ll take the following costs into account:
- Excise Tax (around 24% of wholesale cost)
- Local Taxes (rate varies across cities)
- Federal and Statement Taxes
- Variable Costs (such as budtender wages, packaging and labeling costs, and marketing expenses)
- Fixed Overhead Costs (such as rent, utilities, and POS software)
When using the Cost Approach, you’ll want to take note of what your “break-even” point is. Your break-even point is the price where you’ll make enough to cover the costs necessary to acquire the product. Knowing what your break-even point is can make …