Two ways to set a price
Most small businesses start with one of two approaches, and the best often blend them.
- Cost-plus pricing. Add up what a unit truly costs, then add a target profit on top. It is simple and guarantees you cover costs, but it ignores what customers will actually pay.
- Value pricing. Set the price by the value the customer gets, benchmarked against competitors. It can unlock higher margins but demands you understand your market.
Margin vs markup
These are easy to confuse and the difference is money. Markup is profit as a percentage of cost. Margin is profit as a percentage of the selling price. On an item that costs 80 and sells for 100:
- Profit = 100 − 80 = 20.
- Markup = 20 ÷ 80 = 25%.
- Margin = 20 ÷ 100 = 20%.
Same money, two different percentages, so always be clear which one you mean. The free margin calculator at /tools/profit-margin-calculator does the math for you.
Common mistakes to avoid
- Forgetting hidden costs like shipping, payment fees, and returns.
- Confusing markup with margin and under-earning as a result.
- Competing only on price instead of value.
- Never revisiting prices as costs change.
Whichever method you choose, review prices regularly. When you sell through Invoice Max Pro, your cost and price live with each product, so you can see margins on every line as you invoice.