How to price a product for profit

1. Count your full cost per unit

Add up everything you pay for each item you sell: the product or materials, packaging, shipping to you and to the customer if you pay it, payment and marketplace fees, and any per-unit labour. Missing a 3% card fee or a free-shipping promise is the most common reason margins are lower than planned.

2. Choose a target margin

Your gross margin has to pay for rent, staff, advertising, software and your own time before there is any profit. Look up typical margins in your industry and decide what you need. Small shops selling physical goods often aim for 40% to 60%.

3. Turn the margin into a price

Price = cost ÷ (1 − margin). A cost of 12 at a 50% margin gives a price of 24. Then round to a price that looks natural, such as 23.99 or 25, and check the margin again.

4. Compare with the market

Look at what competitors charge and what customers get for the money. If your price is far above the market, find a way to lower costs or add clear value. If it is far below, you may be leaving money on the table.

5. Check break-even and discounts

Work out how many units you must sell each month to cover fixed costs. Before running a sale, check the margin left after the discount: a 25% discount on a product with a 40% margin cuts your profit per sale by more than half.

• Full cost per unit includes fees and shipping.
• Target margin covers overheads and profit.
• Price = cost ÷ (1 − margin).
• Break-even units are realistic for your sales.
• Discounts still leave a profit.