The short answer: price for profit by starting from your true cost, deciding the margin you need to cover expenses and still profit, and then checking that price against what the market and your value support. The most common mistake is pricing off cost alone and forgetting that overheads have to be covered too.
Know your true cost first
Your cost isn’t just the purchase price. Include freight, import duties, and any handling — the landed cost. Pricing off an understated cost is how shops accidentally sell at a loss.
Three common pricing methods
- Cost-plus: add a fixed markup to cost. Simple, but ignores the market.
- Margin-based: set the price so a target margin remains. Ties pricing to profitability.
- Value-based: price on what the product is worth to the customer, not just its cost.
A worked example
An item lands at 700 all-in. If you want a 30% gross margin, the price is cost ÷ (1 − 0.30) = 700 ÷ 0.70 = 1,000. Note: a “30% markup” (700 × 1.30 = 910) is not the same as a 30% margin — mixing these up is a classic, costly error.
Don’t forget overheads
Gross margin has to cover rent, wages and every other expense before anything is left as profit. Price so your net margin — after all costs — is positive, not just your gross.
Pricing mistakes to avoid
- Confusing markup with margin.
- Pricing off purchase price, ignoring landed cost.
- Discounting so often the “real” price is the sale price.
- Never reviewing prices as costs rise.
Price with real numbers
RushFlow tracks true cost and shows the margin on every price, so you set prices that actually profit. See the live demo, or read how to calculate profit margin.