Price Calculator — Free Online Pricing Tool

How to Use the Price Calculator

This price calculator helps you determine the selling price that achieves your target profitability. Whether you think in terms of margin (profit as a percentage of selling price) or markup (profit as a percentage of cost), this tool handles both approaches and shows you the complete picture.

1. Enter your cost price. This is the total cost to acquire or produce one unit of the product. Include all direct costs: purchase price, shipping, handling, materials, direct labor, and any other costs directly attributable to the product. For manufacturers, include raw materials and direct production labor. For retailers, use the wholesale cost plus freight. The more accurately you capture all costs, the more reliable your pricing will be.
2. Select your pricing method. Choose "Target Margin" if you want to set the price based on a desired percentage of the selling price being profit. Choose "Target Markup" if you want to add a specific percentage on top of your cost. Most financial professionals and investors think in margin terms, while retail buyers and purchasing departments often think in markup terms. Both are valid; the key is consistency across your business.
3. Enter your target percentage. For margin, common targets range from 20% (commodity products) to 70% (software and luxury goods). For markup, typical values range from 25% (wholesale) to 200% or more (specialty retail). The calculator shows both the margin and markup regardless of which method you choose, so you can always see the complete picture.
4. Review the selling price. This is the price you should charge to achieve your target. Note that this is the pre-tax, pre-fee price. If you sell through a marketplace, on credit cards, or collect sales tax, you may need to adjust upward to maintain your target net margin after those costs.
5. Analyze the full breakdown. Review the profit amount per unit, the margin percentage, the markup percentage, and the pie chart showing the proportion of the selling price that covers cost versus profit. This comprehensive view helps you understand the pricing dynamics from multiple angles.

Experiment with different target percentages to find the sweet spot. A higher margin means more profit per unit but may reduce sales volume. A lower margin drives volume but requires selling more units to achieve the same total profit. The optimal balance depends on your market, competition, and business strategy.

Understanding the Pricing Formulas

Pricing from cost involves two primary formulas depending on whether you use margin or markup as your target. Understanding both ensures you can price products accurately regardless of which convention your business or industry uses.

Where each variable represents:

• Cost = Total direct cost to acquire or produce one unit
• Margin% = Target profit as a percentage of the selling price
• Markup% = Target profit as a percentage of the cost
• Selling Price = The resulting price to charge the customer
• Profit = Selling Price − Cost

Step-by-Step Margin-Based Example

A coffee roaster wants to sell a bag of specialty coffee at a 55% margin. The cost per bag is $8.50 (beans, packaging, label, roasting labor). Calculate the selling price:

1. Apply the margin formula: $8.50 / (1 − 0.55) = $8.50 / 0.45 = $18.89
2. Calculate profit: $18.89 − $8.50 = $10.39
3. Verify margin: $10.39 / $18.89 = 55.0% (correct)
4. Calculate markup: $10.39 / $8.50 = 122.2%

The roaster should charge approximately $18.89, which they might round to $18.99 using psychological pricing. At this price, 55% of every dollar of revenue is profit, and the markup is a healthy 122% of cost.

Step-by-Step Markup-Based Example

A hardware store wants to apply a 65% markup on a power tool that costs $120 wholesale. Calculate the selling price:

1. Apply the markup formula: $120 × (1 + 0.65) = $120 × 1.65 = $198.00
2. Calculate profit: $198.00 − $120.00 = $78.00
3. Calculate margin: $78.00 / $198.00 = 39.4%
4. Verify markup: $78.00 / $120.00 = 65.0% (correct)

The store would price the tool at $198.00 (or $197.99 for psychological appeal). The 65% markup translates to a 39.4% margin, meaning about 39 cents of every revenue dollar is profit.

Practical Pricing Examples

These real-world scenarios show how different businesses use margin and markup targets to set prices, and how the choice of pricing method affects the final price and profitability.

Online Course Creator

Rachel creates an online course. Her costs include video production ($3,000), platform hosting ($50/month), and marketing ($500/month). She plans to sell 200 courses in the first year. Fixed cost per course: ($3,000 + $50x12 + $500x12) / 200 = $48.00. Variable cost per student (support, payment processing): $5.00. Total cost per student: $53.00. At a 75% target margin: Selling Price = $53 / 0.25 = $212.00. She rounds to $199 for psychological pricing, yielding a 73.4% margin. If she sells 300 courses instead, the fixed cost per course drops to $32.00, total cost to $37.00, and the same $199 price now yields an 81.4% margin. Scale dramatically improves margins for digital products.

Custom Furniture Maker

James builds custom dining tables. Materials for a standard 8-seat table cost $800, and he estimates 30 hours of labor. He pays himself $35/hour ($1,050 labor) and has $500/month in shop overhead allocated across 4 tables per month ($125 per table). Total cost: $800 + $1,050 + $125 = $1,975. With a 45% target margin: Selling Price = $1,975 / 0.55 = $3,590.91. He prices at $3,595. His per-table profit is $1,620 ($3,595 − $1,975). This pricing ensures he earns his $35/hour labor rate plus an additional $1,620 per table in business profit, which covers taxes, savings, and business growth investment.

Food Truck Operator

Linda operates a gourmet burger food truck. Her food cost per burger is $3.80 (patty, bun, toppings, condiments). She targets a 72% gross margin on food (common for food service). Selling Price = $3.80 / (1 − 0.72) = $3.80 / 0.28 = $13.57. She prices at $13.50 or $14.00 depending on the item. At $14.00, her actual food cost margin is 72.9%, and her per-burger profit is $10.20. However, after labor (3 staff at $15/hour serving 30 burgers/hour = $1.50/burger), truck payment ($0.80/burger), permits and fees ($0.30/burger), and fuel ($0.20/burger), her net profit per burger drops to $7.40 (52.9% net margin). The high food margin is necessary to cover all non-food operating costs.

Tips and Complete Guide to Product Pricing Strategy

Setting the right price is one of the most impactful decisions a business makes. Price too high and you lose customers. Price too low and you leave money on the table or fail to cover costs. These strategies will help you find the optimal price point for your products and services.

Start With Your Floor Price

Your floor price is the minimum you can charge without losing money. Calculate it by dividing all costs (fixed and variable) by your expected sales volume. This gives you the break-even price. Any price below this loses money on every sale. Your selling price should be at least 15-20% above the floor to provide a meaningful profit margin. Knowing your floor prevents panic discounting during slow periods. Even a 5% margin on slow-moving inventory is better than selling below cost, provided you have covered your fixed costs through other sales.

Research Competitor Pricing

Before finalizing your price, survey competitor offerings. You do not need to match competitor prices, but you need to understand where your product sits relative to alternatives. If competitors charge $50-$70 for a similar product, pricing at $150 requires clearly communicated premium features. Pricing at $30 may signal low quality even if your product is comparable. Position your price within the market range, then justify your specific price point through quality, service, brand, convenience, or other differentiators. Price is a signal of value, not just a cost recovery mechanism.

Test Price Sensitivity

Small pricing experiments reveal how price-sensitive your customers are. Try A/B testing different prices (if your platform supports it), testing higher prices on new customer segments, offering limited-time price increases to gauge reaction, or gradually raising prices by 3-5% and monitoring volume changes. Many businesses discover they can raise prices 10-20% with minimal volume impact. The customers you lose at a higher price are often the most price-sensitive, highest-maintenance ones who contribute the least to profitability.

Account for All Costs in Your Pricing

Many businesses underestimate costs, leading to prices that look profitable but actually lose money. Beyond the direct product cost, factor in: packaging and labeling, warehousing and fulfillment, payment processing fees (2.5-3.5%), marketplace commissions (8-15%), returns and warranty costs (5-15% for e-commerce), marketing cost per acquisition, customer support per order, and proportional overhead. The fully-loaded cost is often 40-60% higher than the product cost alone. Price based on the fully-loaded cost to ensure true profitability.

Common Mistakes to Avoid

• Pricing based on cost alone. Cost-plus pricing ignores what customers are willing to pay. A product costing $20 might support a $100 price if it solves a valuable problem. Conversely, a $50 cost product may only sell at $60 if competition is fierce. Cost sets the floor; the market sets the ceiling.
• Racing to the bottom on price. Competing solely on price is a losing strategy for most businesses. It erodes margins for everyone in the market and attracts the least loyal customers. Compete on value, quality, service, or convenience instead, and use price as just one element of your competitive positioning.
• Ignoring the margin-to-markup conversion. Confusing margin and markup leads to significant pricing errors. A 50% markup is not a 50% margin; it is a 33.3% margin. Always verify that your pricing method matches your profitability target by checking both metrics.
• Not adjusting prices for inflation. Costs rise over time with inflation, but many businesses leave prices static for years. An annual review of pricing versus costs should be standard practice. A 3% annual cost increase with flat pricing erodes margins by 3 percentage points each year.
• Discounting too frequently. Regular discounts train customers to wait for sales rather than buy at full price. If you must discount, use limited-time offers with clear deadlines, bundle discounts (buy more, save more), or loyalty discounts for repeat customers rather than broad price cuts.