(Note: if you haven’t been following my earlier posts, you should start here first)
With a product idea locked down, it was time to research the different ways to create salt scrubs. The good news is that there are plenty of recipes out there. After scouring the web, we settled on a recipe that would keep the costs down and be straightforward to make. With the ingredient list in hand, we set off to shop.
The first stop was Michaels. We were in search of shea butter and containers to hold the scrub. When it came to the containers we had a good conversation about how much each would hold, how much each one cost and how that would impact what Brooklyn would need to charge to turn a profit. Another nice thing about Michaels is they offer weekly coupons that can really help your child save money on the ingredient costs if you are going down a similar path.
Next we headed to HEB to look for coconut oil. This proved to be another great learning opportunity. They had 4–5 different packages and varieties. Some were small, some were large, some were inexpensive, some more so. We discussed the benefits of buying in bulk and how you can easily compare the costs by looking at the per oz price.
With the shopping run complete, we were ready to test the recipes. The first thing we had to do was melt the shea butter. Little did we know there is a right way and a wrong way of doing this. Melt it too quickly and at too high a temperature and the recipe is bound to fail. From the beginning I explained that we had to create some test versions and get feedback from potential customers (i.e., Mom). Attempt one was indeed a failure with the final product coming out too hard thanks to our shea butter ignorance. Test two was a success. However, the feedback was that the product was a bit too oily. We set off to adjust the recipe until we had a winner.
I personally loved this part of the process. Finding product market fit is one of the hardest things an entrepreneur will do. In the process, you absolutely must design around the needs of your customers. Too many startups fail by not engaging real users early in the process. While salt scrubs are far less complicated than software, the same principles apply. Better to learn the lesson now, than one day down the road, when there is much more on the line.
With the recipe perfected, we turned our focus to pricing. The first step was to understand the per unit costs. I created a simple profit and loss spreadsheet that gave Brooklyn an opportunity to capture the costs of the ingredients, estimate how many scrubs could be created and then see the profit she could earn on each sale. This was her first introduction to spreadsheets and the concept of revenue vs. profit. Here is the actual spreadsheet which you can copy and use with your kids.
The other aspect of pricing is value. We had to consider the amount of product being sold and the costs of similar products from retail stores. Ultimately, we settled on $10 for a 4oz jar of all natural salt scrub. At this price and with her costs, she needs to sell 15 units to hit her goal of making $100. In my next post I’ll discuss our sales forecast exercise and other ideas for finding potential customers.