This chapter may do more to ensure your success than any other in the book. Proper pricing— how much you charge — can mean the difference between success and failure, just paying for your seeds and supplies and making enough for a vacation or to pay off some big bills.
We'll explore not only how to set prices for your produce, but how to convince your customer that your produce is worth the top figure that you're asking.
You will probably be surprised to learn that the prices you can charge may vary by as much as 100 percent. That's because we're talking about the difference between wholesale and retail prices. One is about twice as much as the other.
These are the prices at the end of a whole chain of gradual increases along the way. For example, the farmer who grows the wheat for a $1 package of dinner rolls receives about a nickel for his plowing, planting, growing, and harvesting. Part of that nickel, too, must cover the cost of his land and equipment, and his employees' salaries. The person who transports, stores, and sells the wheat gets a dime. And along almost every step of the way the price doubles to pay various middlemen. By the time that wheat is processed into flour, sold to a bakery, baked, packaged, and delivered to your supermarket, the cost has gone up to fifty cents. When you, the consumer, pay $1 for the rolls, you've provided jobs for a complete chain of free enterprise, and you've paid some local and federal taxes. Although it may seem that some along the way are getting more than they deserve, no one is making a huge profit. You might think that $1 is too much for the store to charge. But when you deduct overhead, salaries, spoilage, and leftovers, the store ends up making less than 10 percent profit, which is about average for most businesses. In fact, everyone along the line probably makes about the same profit percentage.
In the fresh produce business, the grower or farmer gets a higher percentage. This is because the basic commodity is not converted into another product, as is done with wheat.
Here is a typical breakdown of each dollar of the greengrocer's business: the grower gets ten to fifteen cents for the produce. The buyer, a jobber, who ships and sells the produce to a wholesaler, gets twenty-five cents. The wholesaler sells to a retailer at fifty cents— and the consumer buys the produce for $1.
Take an example of a small lettuce farmer in southern Texas. He sells his few acres of produce to a jobber who buys from many other farmers at the ten- to fifteen-cent level. The jobber combines his orders and ships to a regional wholesale house at twenty-five cents. That house buys from other jobbers, and can offer its customers almost anything in any quantity. The wholesale house distributes the produce for fifty cents to retail outlets. The customer often feels that someone is making too much because he's paying too much. But this isn't usually true.
Some try to beat the system by cutting out one or two of the middlemen. That's why co-ops are organized, why many farmers form their own jobber service, or, at the other end, why some small retailers buy directly from a jobber and eliminate the regional wholesalers. What you'd like to do with your cash gardening business is eliminate all of the middlemen and charge your customer retail prices. If this sounds impossible, read on.
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