Get a Deep Understanding of All Your Costs
Before deciding how much to charge, you have to understand exactly how much it costs you to produce the products or services you sell. Our guide to maximizing your profit margins explains all this in detail, so we recommend you read and apply that now.
Once you understand all the costs (per product, operational and hidden) incurred by your business, you have a starting point for pricing decisions
Your business, The Blue Widget Co., works out costs as follows:
Cost per item: $2
Operational costs: $10,000 a month
Hidden costs: $5,000 a month
Widgets sold a month: 10,000
Cost: $10,000 (operational) + $5,000 (hidden) = $15,000
Per unit cost: $15,000 / 10,000 units sold = $1.50
Total cost: $1.50 per unit + $2 (raw material costs per item) = $3.50