How to work out what you should charge
A sustainable price has to cover the real cost of delivering the product or service and leave enough gross profit to contribute towards overheads, tax and growth. ProfitMaths works backwards from your target margin so you can see the price required rather than guessing.
Formula
Selling price = total unit cost ÷ (1 − target margin). If VAT applies, VAT is then added to the price excluding VAT.
Example
If your total cost is £40 and you want a 30% margin, the price excluding VAT is £57.14. At 20% VAT, the customer price would be £68.57.
Common mistakes to avoid
- Confusing markup with margin. A 30% markup is not a 30% margin.
- Leaving packaging, payment fees, delivery or labour out of the cost figure.
- Choosing a margin without checking whether the resulting price is realistic for your market.
ProfitMaths provides general calculation tools and educational information. Results are estimates and are not accounting, tax, legal or financial advice.