[Updated August 2026]
If you are self-employed, you need to know how to calculate the price of your product before you sell it. It’s the most important task along with the cost-benefit analysis you should do.
Many have the idea of selling a specific product that is in high demand and sells like hotcakes. A common issue is determining a profitable price, particularly for original ideas lacking competition, where pricing is uncertain.
This article will show a simple formula to figure out the price of your product.
Content
Previous calculations to determine the price of your product
First of all, you must be clear about the cost calculations of your own company: if you have premises, how much you pay for rent, the cost of purchasing the product, personnel costs if you have workers, etc.
The second, equally important step is doing a little research on how many units of a product you hope to sell. Ideally, you’d “go out on the street” and ask people you think may be users of this product whether they’d buy it.
New product’s price
What interests you most is knowing what price you have to set on your new product to achieve a particular profit. You need to have the following things clear:
1. Desired benefit (B): What you want to get out of the product. If, for example, you’ve invested €10,000 in developing and launching the product, you might want a 120% profit — that is, B = €12,000.
2. Fixed costs of the company (FC): Costs that apply regardless of production activity, such as rent for premises or machinery. In our example, FC = €20,000.
3. Variable cost of each product (VC): The cost incurred in creating every single unit — packaging, transport, raw materials — say, €10 per unit.
4. The units you hope to sell (units): You can estimate this through surveys and market research — for example, 1,000 units.
The formula to set the price of your product
In our example, the price to set for the product is €42, which lets you achieve the profit figure specified above.
Setting the price of your product at this level will allow you to achieve the profit figure that we previously specified.
Frequently Asked Questions (FAQs)
What’s the difference between cost-based and value-based pricing?
Cost-based pricing focuses on your production costs plus a profit margin, while value-based pricing sets the price according to how much your customers believe your product is worth.
How can I calculate the profit margin for my product?
You can calculate it by subtracting the cost from the selling price, then dividing that number by the selling price and multiplying by 100.
Formula: (Selling Price – Cost) / Selling Price × 100
Should I consider competitors’ prices when setting mine?
Yes. Analyzing your competitors helps you position your product correctly and understand whether you can charge more (if you offer added value) or need to adjust your price to stay competitive.
How often should I review my pricing strategy?
It’s advisable to review prices every 6 to 12 months or whenever production costs, demand, or market conditions change significantly.
What’s the best way to test if my price is right?
You can use A/B testing, offer limited-time discounts, or gather customer feedback to see how price changes affect sales and perceived value.
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