Business pricing guide

Small-Business Pricing and Break-Even: A Practical Workflow

A price can cover the product cost and still fail to cover overhead, owner time or customer acquisition.

Reviewed 1 September 20265-minute read

Key takeaway

Build price from complete cost, verify the margin denominator, then test whether realistic sales volume covers fixed costs.

Build complete variable cost

Include materials, packaging, transaction charges and other costs that rise with each sale before calculating contribution.

Markup divides profit by cost while margin divides profit by selling price. Use the measure required by the decision.

Compare break-even units with a conservative sales forecast and test cost increases or discounting before finalising the price.

Put it into practice

Calculate the unit sales and revenue needed to cover fixed and variable costs.

Convert cost and selling price into profit, markup on cost and gross margin on sales.

Build a quotation price from direct cost, an overhead allowance and a target profit margin.

Calculate contribution per unit and first-customer contribution after acquisition cost.

Calculate gross profit and profit margin from revenue and total costs.