Find The Selling Price Calculator

Easily determine your product's selling price based on costs and desired profit margin.

Selling Price at Different Profit Margins

Desired Profit Margin (%)	Selling Price (Before Tax) ($)	Profit Amount ($)

How the selling price changes with different desired profit margins, keeping other costs constant.

What is a Selling Price Calculator?

A Selling Price Calculator is a tool used by businesses to determine the optimal price at which a product or service should be sold to cover costs and achieve a desired profit margin. It takes into account the cost of goods sold (COGS), additional costs (like overhead or shipping), any sales commissions, and the target profit margin to arrive at a selling price. Using a Selling Price Calculator is crucial for ensuring profitability and competitive pricing.

Anyone involved in pricing decisions, such as business owners, product managers, sales managers, and financial analysts, should use a Selling Price Calculator. It helps in setting prices systematically rather than relying on guesswork. A common misconception is that simply adding a percentage to the cost (cost-plus pricing based on cost) is enough, but using a Selling Price Calculator that bases the margin on the selling price is often more accurate for achieving target margins, especially when commissions are involved.

Selling Price Calculator Formula and Mathematical Explanation

The core idea is to find a selling price that covers all costs and leaves the desired profit. When the profit margin and commission are based on the selling price, the formula is:

Selling Price (SP) = (Cost of Goods Sold (COGS) + Additional Costs (AC)) / (1 – (Desired Profit Margin % / 100) – (Commission Rate % / 100))

Let's break it down:

1. Total Direct Costs: This is the sum of COGS and Additional Costs (AC).
2. Denominator: 1 - (Desired Profit Margin % / 100) - (Commission Rate % / 100) represents the portion of the selling price that is available to cover the COGS and Additional Costs, after accounting for the desired profit and commission, both of which are percentages of the selling price.
3. Selling Price (SP): Dividing the Total Direct Costs by this denominator gives the selling price required to meet the profit and commission targets based on that selling price.
4. Profit Amount: SP * (Desired Profit Margin % / 100)
5. Commission Amount: SP * (Commission Rate % / 100)
6. Selling Price After Tax: SP * (1 + (Sales Tax Rate % / 100))

Variables Table

Variable	Meaning	Unit	Typical Range
COGS	Cost of Goods Sold	Currency ($)	0+
Profit Margin	Desired Profit Margin on Selling Price	%	0-99
Additional Costs	Other costs per unit	Currency ($)	0+
Commission Rate	Sales commission on Selling Price	%	0-99
Sales Tax Rate	Sales Tax Rate	%	0+
Selling Price	Calculated price before tax	Currency ($)	Calculated

Practical Examples (Real-World Use Cases)

Example 1: Small Retail Business

A small boutique buys handmade scarves for $20 (COGS). They estimate additional costs (packaging, share of rent) per scarf at $3. They want a 40% profit margin on the selling price and pay a 10% commission to their sales staff. Sales tax is 5%.

• COGS = $20
• Additional Costs = $3
• Desired Profit Margin = 40%
• Commission Rate = 10%
• Sales Tax Rate = 5%

Denominator = 1 – (40/100) – (10/100) = 1 – 0.4 – 0.1 = 0.5

Selling Price (Before Tax) = ($20 + $3) / 0.5 = $23 / 0.5 = $46.00

Profit = $46.00 * 0.40 = $18.40

Commission = $46.00 * 0.10 = $4.60

Total Cost = $20 + $3 + $4.60 = $27.60

Selling Price (After Tax) = $46.00 * (1 + 0.05) = $48.30

Using the Selling Price Calculator, they would set the pre-tax price at $46.00 to achieve their 40% margin after commission.

Example 2: Software as a Service (SaaS)

A SaaS company estimates the variable cost per user per month (server, support) to be $5 (COGS equivalent). Additional allocated costs (marketing, R&D per user) are $10. They aim for a 60% profit margin on the selling price and have a partner commission of 20%. No sales tax for this example.

• COGS = $5
• Additional Costs = $10
• Desired Profit Margin = 60%
• Commission Rate = 20%
• Sales Tax Rate = 0%

Denominator = 1 – (60/100) – (20/100) = 1 – 0.6 – 0.2 = 0.2

Selling Price (Before Tax) = ($5 + $10) / 0.2 = $15 / 0.2 = $75.00 per month

Profit = $75.00 * 0.60 = $45.00

Commission = $75.00 * 0.20 = $15.00

The Selling Price Calculator helps determine the monthly subscription should be $75.00.

How to Use This Selling Price Calculator

1. Enter COGS: Input the direct cost of producing or acquiring one unit of your product.
2. Set Desired Profit Margin: Enter the profit margin you want to achieve as a percentage of the selling price.
3. Add Additional Costs: Input any other costs per unit, like shipping or overhead allocation.
4. Input Commission Rate: If you pay a sales commission based on the selling price, enter the percentage here.
5. Enter Sales Tax Rate: If applicable, enter the sales tax percentage to see the final price for the customer.
6. Review Results: The Selling Price Calculator will instantly show the Selling Price (Before Tax), Profit Amount, Commission Amount, Total Cost, and Selling Price (After Tax).
7. Analyze Breakdown: Look at the pie chart and table to understand the components of your selling price and how it varies with different margins.

The results help you make informed pricing decisions. If the calculated selling price seems too high for the market, you might need to adjust your desired margin or find ways to reduce costs.

Key Factors That Affect Selling Price Calculator Results

• Cost of Goods Sold (COGS): Higher COGS directly increases the selling price needed to achieve the same profit margin. Efficient sourcing and production can lower COGS.
• Desired Profit Margin: A higher desired margin significantly increases the selling price. Market conditions and value perception will limit how high this can be.
• Additional Costs: Overhead, shipping, and packaging costs add to the base cost and push up the required selling price.
• Commission Rates: Higher commissions reduce the amount left for profit and covering costs, thus requiring a higher selling price if the margin on selling price is to be maintained.
• Market Demand and Competition: While the Selling Price Calculator gives a cost/profit-based price, you must consider what the market will bear and how competitors price similar products. Check our guide on pricing strategies.
• Value Perception: If customers perceive high value, you might be able to set a higher profit margin and selling price.
• Sales Volume: While not directly in the per-unit formula, expected sales volume affects how fixed costs are allocated per unit (under additional costs). Higher volume can reduce per-unit fixed costs.
• Payment Terms and Financing Costs: If you offer credit, the cost of financing that credit might be factored into additional costs.

Frequently Asked Questions (FAQ)

What is the difference between markup and margin?

Markup is the percentage added to the cost to get the selling price (e.g., 50% markup on $10 cost = $15 selling price). Margin is the percentage of the selling price that is profit (e.g., $15 selling price with $5 profit = 33.3% margin). Our Selling Price Calculator uses margin based on selling price.

Why is margin on selling price important?

Many financial metrics and commissions are calculated based on sales revenue (selling price). Basing your margin on the selling price gives a clearer picture of profitability relative to sales. Learn more about profitability metrics.

How do I find my COGS?

COGS includes direct material costs, direct labor costs, and manufacturing overhead directly attributable to production. See our understanding COGS guide.

What if my combined margin and commission are 100% or more?

The Selling Price Calculator will show an error or an infinitely high price because it's mathematically impossible to have a 100% or greater margin and commission combined based on the selling price while also covering costs.

Can I use this Selling Price Calculator for services?

Yes, for services, COGS would be the direct cost of delivering the service (e.g., labor, materials used). Additional costs could include a share of overhead.

How often should I recalculate my selling price?

You should review and potentially recalculate your selling prices whenever your costs change significantly, market conditions shift, or you update your pricing strategies.

What if the calculated selling price is too high?

If the price is uncompetitive, consider reducing your desired profit margin, finding ways to lower COGS or additional costs, or re-evaluating the product's value proposition.

Does this calculator include fixed costs?

You can include a portion of your fixed costs in the "Additional Costs per Unit" field by estimating your total fixed costs and dividing by the expected number of units sold over a period.

Related Tools and Internal Resources

• Sales Commission Calculator: Calculate commissions based on different structures.
• Cost Analysis Guide: Understand how to analyze and reduce your business costs.
• Profitability Metrics Explained: Learn about different ways to measure your business's profit.
• Pricing Strategies for Businesses: Explore various methods for setting prices effectively.
• Understanding COGS: A deep dive into calculating the Cost of Goods Sold.
• Business Finance Basics: Fundamental financial concepts for business owners.