How to Price What You Sell
Pricing is where costs, customer value and business strategy meet. A price copied from a competitor can be dangerously low if your costs are different, and adding a simple percentage to material cost can ignore much of what it takes to run the business.
Know the direct cost
Start with costs directly connected to the product or job: ingredients, materials, packaging, direct labour, merchant fees, shipping and other variable costs.
If those costs are not known, the business cannot know what remains to cover overhead and profit.
Your time is a cost
Owner-operated businesses often underprice because the owner’s labour is treated as free. Time spent producing, quoting, driving, cleaning, purchasing and communicating with customers is still part of delivering the product.
Overhead has to be paid by something
Insurance, bookkeeping, software, utilities, advertising, rent, equipment and professional fees may not belong to one particular sale, but the business must generate enough margin to pay them.
Markup and margin are not the same
A markup is calculated from cost. Gross margin is calculated from the selling price. Confusing the two can produce a lower price than intended.
For example, a 50 percent markup on a $100 cost creates a $150 selling price. The resulting gross margin is about 33 percent, not 50 percent.
Understand the market
Cost establishes what the business needs. The market determines what customers may be willing to pay. Compare genuinely similar products and services, including quality, convenience, guarantees, experience and service.
Do not compete only by being cheapest
Small businesses often lack the purchasing power and scale of large chains. Competing solely on price can become a race the smaller operator cannot win.
Reliability, expertise, local service, customization and transparency can all create value.
Include waste and uncertainty
Food businesses experience spoilage. Contractors encounter rework and travel. Makers have defective products. Farmers have unsold produce. Pricing needs enough room to absorb normal losses.
Discounts still have a cost
A ten percent discount does not necessarily reduce profit by only ten percent. If margins are already narrow, the effect on profit can be much larger.
Know why a discount exists and what behaviour it is intended to encourage.
Review prices
Supplier prices, wages, fuel, insurance and merchant fees change. A price that worked two years ago may quietly become unprofitable.
Review pricing periodically using current costs rather than waiting until the bank account forces the issue.
Calculate the break-even point
Once the business understands contribution from each sale and its recurring overhead, it can estimate how many sales are required before the business begins covering all of its costs. Break-even analysis turns a vague sales target into something operational.
For a service business, the scarce resource may be billable hours rather than units. If an owner has only a limited number of hours available each month, the required hourly return matters just as much as the quoted price of an individual job.
Price custom work before saying yes
Custom orders can hide quoting time, design changes, small material purchases, setup, travel and customer communication. Record the actual time and cost of several jobs and compare them with the original estimate. That history makes future pricing much better.
Know when to stop selling something
Revenue is not automatically good revenue. A popular product that consistently consumes more labour and overhead than its price supports can weaken the business. Sometimes the right decision is to increase the price, redesign the offer or stop selling it.
Sources & Further Reading
Reviewed: September 2026
This article provides general educational information and is not legal, tax, accounting, financial, insurance or professional advice. Requirements and platform rules can change. Confirm requirements relevant to your business with the appropriate authority or qualified professional.
The PureFarmFresh approach
Running a small business already requires wearing enough hats. Our goal is to explain the practical framework, distinguish rules from marketing advice, and point business owners toward reliable sources so they can make informed decisions for their own operation.