How to Price Your Product or Service

Beginner: What a Price Actually Has to Cover

Price is not a guess, it is a job

A price has three jobs. It has to cover what the thing cost you to make or deliver, it has to pay you for your time, and it has to leave something left over. That leftover is profit, and profit is the whole point of a business.

If your price only covers cost, you have a very expensive hobby. If it covers cost and your time but nothing more, you have a job that fired your boss and gave you all the stress. You want all three.

Learn the words: revenue, cost, and profit

Revenue is the money that comes in from sales, before anything is taken out. If you sell 100 candles at 20 dollars each, your revenue is 2,000 dollars.

Cost is what you spend to make and sell the thing: wax, wick, jar, label, the fee the card processor takes. Profit is what is left after you subtract cost from revenue. Revenue minus cost equals profit. That is the whole sentence.

Three honest ways to reach a number

Cost-plus: add up what one unit costs you, then add the amount you want to keep. Costs 8 dollars to make, you want to keep 12, so you charge 20.

Market-based: look at what similar sellers charge and decide where you sit inside that range and why. Value-based: price on the result you deliver, not the hours you spent. A logo that helps a shop look legit is worth more than the two hours it took.

Most strong prices use all three: cost sets the floor, the market sets the range, and value tells you where in that range you belong.

Do not forget the fees that eat your price

When someone pays you 20 dollars by card, you do not keep 20. A processor usually takes a small percentage plus a flat few cents per sale. On a 20 dollar sale that might be roughly 88 cents, so you keep about 19.12.

That gap feels tiny on one sale and real across a thousand. Build it into your cost before you set the price, not after you are surprised by it.