Building a wholesale price that works for both sides
Wholesale pricing needs enough room for the producer and retailer to earn acceptable margins. Working backwards from both target margins helps reveal whether the eventual retail price is commercially realistic.
Formula
Wholesale price = unit cost ÷ (1 − producer margin). Retail ex-VAT price = wholesale price ÷ (1 − retailer margin).
Example
If a product costs £12 and you require a 40% wholesale margin, the wholesale price is £20. A retailer targeting 45% margin would need roughly £36.36 ex VAT.
Common mistakes to avoid
- Using markup when a buyer is negotiating in margin terms.
- Ignoring freight, samples, returns, payment terms and minimum-order costs.
- Calculating a theoretical RRP without checking the market price customers will accept.
ProfitMaths provides general calculation tools and educational information. Results are estimates and are not accounting, tax, legal or financial advice.