What does a price have to cover?
See the price a target margin implies, what a markup does, or the margin a price gives you, with the difference between markup and margin made clear. An estimate from your numbers, not a pricing recommendation.
What one unit costs you
What the price has to carry
Set the price
This price clears the overhead but leaves $2,000 for you, short of the $5,000 you need. At 400 units, a price of $48.97 would pay you in full; at this price it takes 550 units a month.
- Revenue, 400 units
- $16,495
- After unit cost and fees
- $8,000
- After $6,000 fixed costs
- $2,000
- After your $5,000 pay
- -$3,000
| Price | Per unit | Margin | Left after your pay |
|---|---|---|---|
| $36.08Floor: covers cost and overhead, pays you nothing | $15.00 | 42% | -$5,000 |
| $48.97Pays you $5,000 in full | $27.50 | 56% | $0 |
| $41.24Your target | $20.00 | 49% | -$3,000 |
| If you | Price | Units | Left after your pay |
|---|---|---|---|
| Keep it as is | $41.24 | 400 | -$3,000 |
| Raise 10%, lose 10% of customers | $45.36 | 360 | -$2,360 |
| Raise 10%, lose 20% of customers | $45.36 | 320 | -$3,320 |
| Cut 10%, win 10% more customers | $37.11 | 440 | -$3,960 |
| Cut 10%, win 25% more customers | $37.11 | 500 | -$3,000 |
With 49% of the price as margin, a raise survives losing customers: a 10% raise still beats today unless it costs more than 17% of them. A discount has to win far more sales than it gives up.
An estimate from the numbers you entered, not a pricing recommendation. The floor is the price at which costs are covered and the pay-you price the one at which your pay is covered too; customers decide what a price is worth, and what volume does at a price is the only answer that counts.