Pricing a Product: The Math Most Sellers Skip

Published June 23, 2026 · 2 min read

Most sellers price by gut feel and lose money on every sale. The full math: true per-unit costs, fees, shipping, and a pricing formula that actually holds up.

Ask a new seller how they priced their product and you will hear one of three answers: "I looked at competitors", "I doubled my cost", or "it felt right". All three are guesses, and two of them lose money on every sale.

Start with true cost per unit, not product cost

Your product cost is not your unit cost. Unit cost includes everything that scales with a sale:

• Product or materials
• Packaging and inserts
• Inbound freight, divided by units received
• Outbound shipping you absorb
• Payment and marketplace fees
• Expected returns and damage, spread across units

A $14 product often has a $24.50 true unit cost once those lines are on the same page.

The formula that holds up

Price = (unit cost + fixed cost per unit) ÷ (1 − fee percentage − target margin)

Where fixed cost per unit is your monthly overhead (tools, subscriptions, storage) divided by expected monthly units.

Worked example

Unit cost $24.50. Monthly overhead $300 at 100 units = $3.00 per unit. Fees: 6.5% marketplace + 3% payment = 9.5%. Target contribution margin: 40%.

Price = ($24.50 + $3.00) ÷ (1 − 0.095 − 0.40) = $27.50 ÷ 0.505 = $54.46

At $54.46 you keep 40% after fees and costs. The guess of "$49.99 because it ends in 99" leaves you at 34.8% — a 13% haircut on every sale, forever.

Etsy / eBay Profit Calculator — Calculate true profit per sale after fees and shipping — AI suggests pricing optimisations.

Why cost-plus gets this wrong

Doubling cost gives $49 and looks generous. But doubling ignores fees entirely: at $49, the 9.5% fee is $4.66, so you keep $19.84 on a $27.50 unit cost — 40.5% before overhead, and under 30% once overhead lands. Cost-plus is a floor, never a strategy.

The three pricing mistakes that compound

1. Pricing to the volume you want, not the volume you have. Overhead per unit falls with volume — but only after you get there.
2. Ignoring fee stacking. Marketplace, payment processing, and ad fees are separate lines and they add up to more than people expect.
3. Discounting instead of raising. A 20% discount needs a 25% volume increase just to break even at a 40% margin.

Test before you scale

Set the price, then re-check the margin at your real ad spend and return rate: profit margin calculator. And if you sell on a marketplace, run the fee maths first with the Etsy and eBay profit calculator.