Year-End Pricing Check for Manufacturers

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Hi, this is Judi Otton with GrowthCast and today I’m continuing my series on wrapping up this crazy, crazy, year that we’ve had. Last week I talked about pricing for restaurants, who have been hit particularly hard this year. This week I’m going to talk about pricing for manufacturers. If you’re a manufacturer, I want you to look at a few things. The first thing that I want you to look at is the current price of your raw materials. Now for cost of goods, and from income tax perspectives, on your financial statements, you may be using one of a very common method for valuing your inventory. FIFO, LIFO , or average, but for this exercise, I want you to look at the current prices because prices are changing quickly. Just run a quick calculation, what is it, if you were using the current pricing for all of your inputs, what would it cost you to produce your product? This will inform any price changes that you want to make going forward. The second thing I want you to look at is what is he costing you to deliver your products. Whether you’re delivering and paying higher fuel costs or whether you’re using commercial shipping and paying higher shipping costs or whether you’re using retail shipping, your shipping costs have most likely gone up. So I want you to factor that in as you look at your pricing and in both of these categories with raw materials and specifically with food, but also with fuel but also with shipping costs, you may want to consider some long term contracts here too. The third area I want you to look at is labor. Another area where costs are rising and I do expect them to continue to rise, at least stay where they are and likely continue to rise. Are there places where you can find efficiencies and perhaps invest, and it may be a substantial investment, invest in automation and reduce your labor burden. Over time, this could really really help your business immensely. So as you think about your pricing for next year, manufacturers, look at those three categories. If you have any questions, feel free to reach out. Next week, I’m going to talk about pricing for service businesses. So if you’re interested in that, subscribe to my YouTube channel, I’ll put a link down down below (https://www.youtube.com/playlist?list=PLOg1moPYQKRyN3rN9JfqXC_cQuht0a7ei) and I’ll see you next week.