How to price your products for profit (simple method for shops)
Many shops price by copying competitors and quietly lose money on every sale. A simple, cost-based method makes sure every product earns you a real margin.
Step 1: Add up the true cost
Not just the purchase price: include freight, packaging, wastage and a share of rent and salaries. Pricing on purchase cost alone is why many shops feel busy but broke.
Step 2: Add your target margin
Decide the margin each category should earn and add it on top of true cost. Fast movers can carry a thinner margin; slow or specialist items should carry more.
Step 3: Factor in GST correctly
Be clear whether your price is inclusive or exclusive of GST, and show it consistently on invoices. Confusion here eats margin and creates disputes.
Step 4: Check against the market
Now compare to competitors. If you are far above, justify it with service or quality; if far below, you may be leaving money on the table.
Step 5: Review prices regularly
Costs rise with inflation. Review prices every few months so your margin does not quietly erode. Small, regular updates beat one painful jump.
Frequently asked questions
What margin should I aim for?
It varies by industry, but price to cover all costs plus a margin that funds growth, not just survival. Know your true cost first; everything else follows from that.
Should I match competitor prices?
Use them as a reference, not a rule. If your cost plus fair margin is higher, compete on service and quality rather than racing to the bottom.
How often should I change prices?
Review every three to six months and whenever a major cost changes. Frequent small adjustments are easier for customers to accept than rare large ones.