How to price a product so you actually make money

Pricing is where a lot of small businesses quietly lose money. Set it by guesswork or by copying a competitor and you can end up working hard for a margin that barely exists. The fix isn't complicated — it's just a bit of arithmetic done in the right order. Start from your costs, add the profit you want, then make sure the fees don't claw it back.

Step 1: know your true unit cost

Add up everything it costs to produce and deliver one unit: materials, the packaging, and your time (yes, your labour is a real cost — price it at an hourly rate). Then add a share of your overheads — the rent, tools, software and other fixed costs spread across the units you expect to sell. That total is your true cost per unit, and pricing below it means paying customers to take your product.

Step 2: margin vs markup (they're not the same)

This trips up almost everyone. Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A 50% markup on a £10 item gives a £15 price — but that's only a 33% margin. If you want to keep 50% of the sale price, you need to price at £20, a 100% markup. Confusing the two is how businesses think they're making 50% and discover they're making far less. Decide which number you actually care about (margin is usually the honest one) and price to hit it.

Step 3: don't forget the fees

The price that looks profitable on your own site can turn into a loss on a marketplace, because Amazon, eBay and Etsy each take a cut — a referral or final-value fee, payment processing, sometimes listing and regulatory fees and VAT on top. If you sell across channels, the same product often needs a different price on each one to keep the same take-home. (We cover the detail in marketplace fees explained.)

Step 4: sanity-check against the market and your break-even

Now look outward. Is your price credible for what you sell and who you sell to? Premium positioning can justify a higher price; a race to the bottom rarely ends well. Also work out your break-even — how many you must sell to cover your fixed costs — so you know the floor you're working from.

Let the tools do the arithmetic

Rather than wrestle with margin-vs-markup by hand, use our free product pricing calculator: enter your costs, choose a margin or markup, and it gives you the price, the profit per unit and your break-even. When you're ready to sell on marketplaces, the combined pricer takes the price you want to keep and works out what to list at on Amazon, eBay, Etsy and your own site — side by side — so you can see where the same product earns you the most. Spoiler: it's almost always your own site, where there's no marketplace cut at all.