What to charge once every cost is counted
Most pricing goes wrong before the markup is applied, because the cost base is incomplete. Here is what belongs in it.
Ask a business owner what a product costs them and you usually get the purchase price. That is the beginning of the cost base, not the whole of it — and pricing off it is why a business can be busy, growing and quietly unprofitable.
What belongs in the cost base
- Purchase or manufacturing cost, net of input GST if you can claim it. If you are under composition, you cannot — the GST is a real cost.
- Inbound freight and handling, per unit rather than per consignment.
- Platform fees if you sell online: referral, closing, shipping, storage. The Amazon Seller Profit Calculator models these.
- Payment gateway charges — typically 2% or so, and applied to the GST-inclusive amount you collect, not to your net.
- Returns. A 10% return rate does not cost 10%; you often lose the outbound and return shipping and sometimes the unit.
- Packaging, which people forget because it arrives in bulk.
Margin and markup are not the same
Margin is calculated on the selling price, markup on cost. A 50% markup is a 33% margin. Quoting one and budgeting on the other is a common and expensive mix-up — the margin versus markup guide works through it.
Work backwards instead: decide the margin you need, and let the Selling Price Calculator tell you the price that produces it after fees and GST.
The cost that never appears on the invoice
If you sell on 60-day credit and pay suppliers in 30, you are funding two months of stock out of your own pocket. That has a cost whether or not anyone books it. The Working Capital Calculator converts your terms into days and into rupees.
Check the break-even before you commit
A lower price only works if the extra volume actually arrives. The Break-Even Calculator tells you how many more units you would need to sell — and the number is usually larger than instinct suggests.
Why this is hard without systems
Every figure above exists somewhere in your business. It is rarely in one place. Owners who price well usually have billing, stock and purchase data in a single system, so the true unit cost is a report rather than an afternoon of reconstruction — which is what purpose-built business software tends to be bought for.