How to Price a Product: Cost-Plus vs. Market Pricing
Pricing feels like guessing until you split it into two questions: what does it cost me, and what will buyers pay? Here's a simple way to answer both and land on a price.
Step 1: Know your full cost per unit
Add up everything one unit costs you:
| Cost | Example |
|---|---|
| Materials / product cost | $6.00 |
| Packaging | $1.00 |
| Platform + payment fees (on the sale price) | ~10% |
| Shipping you absorb | $0.00 |
| Your time (0.25 hr × $20) | $5.00 |
| Overhead share (tools, ads, subscriptions) | $1.00 |
Without fees, that's $13.00 a unit. Fees come out of the sale price, so add them last.
Step 2: Cost-plus price
Pick a target margin and divide: price = cost ÷ (1 − margin − fee %).
With $13 cost, a 40% margin and 10% fees: $13 ÷ 0.50 = $26.
Cost-plus gives you a floor. Below it, every sale loses money or pays you less than you planned.
Step 3: Market check
Look up 5–10 similar products where you sell. Note the low, typical and high prices, and what the higher-priced ones do better (photos, materials, reviews, bundles).
- Market well above your number? You may be underpricing. Try the higher end.
- Market below your floor? Lower costs, add value that justifies more, or rethink the product.
Step 4: Pick, then test
Set a price between your floor and the market high, sell for a few weeks, and track real profit per unit after fees and returns. Adjust in small steps.
Common mistakes
- Leaving out your time
- Forgetting fees come off the sale price
- Copying the cheapest competitor
- Never revisiting prices when costs rise
If you want a spreadsheet to start: the Product Pricing Calculator ($7, Excel and Google Sheets) works out cost per unit from your materials, adds labor and packaging, and shows a price at your target margin, plus the fees, profit and margin for any price you type. Once you're selling, the Side Hustle Income & Expense Tracker ($7) shows your real profit after fees so you can see if a price is working. A notebook works fine too.
Honest note: I make these templates and sell them under Cedar & Ledger, so I'd earn from a purchase. General information only, not financial advice.
Try the free break-even calculator (profit per sale and sales needed) →
Try the free markup vs. margin calculator →
Try the free price increase calculator →
Related template: Product Pricing Calculator. Also see: Side Hustle Income & Expense Tracker
See all Cedar & Ledger templates
Frequently asked questions
What does this guide cover?
Work out full cost per unit, set a cost-plus floor with a simple formula, check the market, then test and adjust. Worked example included.
What are the steps?
1) Know your full cost per unit; 2) Cost-plus price; 3) Market check; 4) Pick, then test.
Is there a template for this?
The Product Pricing Calculator ($7, Excel and Google Sheets) works out cost per unit from your materials, adds labor and packaging, and shows a price at your target margin, plus the fees, profit and margin for any price you type. I make it and sell it under Cedar & Ledger, so I'd earn from a purchase.
Is this financial advice?
No. It's general information with example numbers only, not financial, tax, legal or medical advice. Use your own numbers and check anything important with a qualified professional or the official source.
Also see: Html business template