Set a Price That Covers Your Costs and Pays You
Build a simple pricing sheet, work out your monthly profit and check whether a discount makes sense. Includes formulas and worked examples you can adapt today.
Who is this for
For shop owners, independent service providers and freelancers who need a practical way to price their work.
What you'll get
- Build a cost estimate that includes packaging, fees and your own working time.
- Find the sales volume needed to cover costs and reach your profit target.
- Test a discount before committing to extra work for less money.
1. Build your cost sheet
Choose one offer: a gift box, a café lunch or a clearly defined design package. Create the following rows in Google Sheets or Microsoft Excel. Either tool can handle the arithmetic, but neither knows which expenses you forgot.
- B1: Selling price per order, after any discount.
- B2: Variable cost per order. These costs come with each extra sale: stock, packaging, delivery you pay for and payment fees.
- B3: Monthly fixed costs. Include rent, fixed salaries and subscriptions that remain payable at your planned sales volume.
- B4: Expected monthly orders. Use recent sales and your actual delivery capacity.
- B5: Target monthly profit. Enter what you want left after the costs included in your sheet.
Give your time a cost. For a project, multiply delivery hours by your chosen hourly pay and include that in B2. If your monthly pay is already in B3, do not count the same work twice. Divide annual subscriptions by 12 for a monthly planning figure.
2. See what each sale contributes
- B6: Contribution per order, meaning the amount left to cover fixed costs and profit. Formula: =B1-B2.
- B7: Monthly sales revenue. Formula: =B1*B4.
- B8: Planned monthly profit. Formula: =B6*B4-B3.
- B9: Orders needed to break even. Formula: =B3/B6. Round up to a whole order.
- B10: Orders needed for your profit goal. Formula: =(B3+B5)/B6. Round up again.
Worked example: an online shop charges $40 per order, spends $24 fulfilling it and has $800 in monthly fixed costs. Each order contributes $16. At 75 orders, revenue is $3,000 and planned profit is $400. The shop needs 50 orders to break even and 100 orders to earn $800.
If B6 is zero or negative, more orders cannot cover your fixed costs under this model. Review the price or fulfilment cost first. This break-even formula assumes a single product or service. Reference: [SBA break-even guide](https://legacy.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs/break-even-point).
B8 is a planning result based on the costs you entered. It is not net profit if taxes, interest or depreciation are missing. Depreciation spreads an asset's cost over its useful life. If you collect VAT or sales tax, ask your accountant how to keep those amounts separate from revenue and costs.
3. Turn the calculation into a pricing decision
- Calculate a price for your target volume: =B2+(B3+B5)/B4. In the example, earning $800 from 80 orders requires a $44 price, assuming the $24 order cost stays unchanged.
- Compare three comparable offers. Check what the customer receives, including delivery, support and turnaround time. Write one sentence explaining the value of your offer at the proposed price.
- Run the discount numbers. Cutting the original $40 price by 10% leaves a $36 price and $12 contribution per order. Maintaining the previous $400 monthly profit now requires 100 orders instead of 75.
- Recalculate percentage-based fees at the new price. Add any staffing or equipment costs triggered by the extra volume.
- Try the price on a defined offer for a week. Record enquiries, paid orders and total contribution. Treat a quiet week as limited evidence, and continue tracking before making a permanent decision.
Markup and margin use different denominators. Buying something for $20 and selling it for $25 gives a 25% markup on cost, but a 20% margin on sales. If that $20 excludes overheads, the 20% figure is not your net profit margin.
Go further with the AI Builders community
Take your pricing exercise to the Azerbaijani AI Builders community at https://abcommunity.org/resurslar for real examples, peer feedback and discussion. Share your result with customer details and sensitive figures removed. Ask others which cost assumptions they would challenge.
FAQ
Should I match a cheaper competitor?
Put their price into your sheet before making a decision. Then compare package size, delivery and support. If matching it makes the offer unworkable, consider a smaller package or a clearer reason to choose yours.
How should a freelancer estimate monthly capacity?
Subtract admin, sales and unpaid meetings from your available hours. Divide the remaining delivery time by hours per project. With 72 delivery hours and 12 hours per project, your capacity is six projects. Use a lower sales estimate if demand is uncertain.
Why can I show a profit and still run short of cash?
Customers may pay later than your suppliers. Stock purchases, equipment and loan repayments can also use cash differently from how they affect profit. Keep a separate weekly list of expected receipts and payments, then check the next four weeks for a shortfall.
More resources
A workbook combining audience research, a 30-day plan, budget/KPI, a simple business plan and an AI ROI calculator.
Plan the month, record money coming in and going out, and see what remains. Copy the template into Google Sheets or Excel and replace the example amounts.
A four-week checklist to test demand, build a small paid offer and work towards your first customers. Includes simple tracking prompts and a clear end-of-month review.