Budding Entrepreneurs (Spring 5)
Using your maths skills, you will need to work out at what price your products should be sold. If you sell something for less than it cost you, you lose money. The important starting point therefore is “what is my cost?”. To work this out, download the chart below (or copy it and change it as you need to) and fill in everything you have had to pay for; the better you are at using recycled materials and getting donated items, the lower your cost will be! The more you have to buy, the higher your cost will be. See two examples below and look at the differences. You can download a version of a here.
Your teacher is keeping a chart of what each item costs so for your potting compost, if your teacher paid £4.00 for the bag which weighs 56 Litres, you need to know what your pot of soil weighs to work out how much the potting compost in your pot cost. You may want to create a chart of the approximate weights of the potting compost in different sized pots so you can use this data again and again without having to weigh every single pot, which will take a long time! Also, if you weigh your pots just after it has been watered, will that give you the correct weight?
Now you need to think of how much time and effort you have put into this product; this is usually called “labour”. Since you are doing this for a charity, you do not get paid for your time but you can think of a “value” for your time (but exclude time spent in maths, literacy & IT). So have you spent 5 minutes growing this product, or 15 minutes, or half an hour because you dropped it and had to start from the beginning again…? If you add on an extra 1p for each minute you spent planting, watering etc. approximately how much is your labour cost? Which is higher – your product cost or your labour cost?
Now you have to work out how much profit you can charge over and above your product cost as this profit will be the money you can donate to your charity. What happens to the price if you add 10% profit? And what if you add 20% profit or even 50% profit? Do you think it is too expensive now? What do you think would be a fair price for your product? Think of other things that cost the same as your product … will your customers think it worth the price you are charging so they might buy it, or will they think it too expensive, which means you won’t sell many? Or is it too cheap, so you could charge a higher price, raise more money for the charity and still have happy customers?
You probably want to end up with a range of products so that there are things that are affordable for everyone who comes to your sale, as well as a few more special/complicated/larger items that could be a bit more expensive.