How to Price Your Products for Profit

Know your true cost first

You can't price for profit until you know exactly what each product costs you to get onto the shelf. This is your landed cost, and it's almost always higher than the number on the supplier's invoice.

Add up everything it takes to make the item ready to sell. If you skip these, your prices will look profitable on paper while your bank balance quietly shrinks.

• Purchase price from the supplier (per unit, after any bulk discount).
• Inbound freight and shipping, split across the units in the order.
• Import duties, customs and any clearing fees.
• Payment or platform fees you pay to sell it (card processing, marketplace commission).
• Wastage, breakage or spoilage — spread the loss across the units you can actually sell.

Markup vs margin — the difference that trips people up

These two words get used as if they mean the same thing. They don't, and confusing them is one of the most common reasons small shops under-price.

Markup is how much you add on top of your cost. Margin is how much of the final selling price is profit. A 50% markup is NOT a 50% margin.

Quick example: an item costs 100 and you add 50% markup, so you sell it for 150. Your profit is 50 — but as a share of the 150 selling price, that's a margin of about 33%, not 50%. Always be clear which one you're quoting.

Method 1: Cost-plus (the simplest way to start)

Cost-plus pricing means you take your landed cost and add a fixed markup percentage. It's the easiest method for a busy retailer because it guarantees every item clears its own costs.

1. 1

   Find the landed cost

   Total everything from section one for a single unit — say it comes to 120.

2. 2

   Choose a markup

   Pick a target markup for the category, for example 60%. Common retail markups run anywhere from 30% to well over 100% depending on the product.

3. 3

   Do the maths

   Selling price = cost × (1 + markup). So 120 × 1.60 = 192.

4. 4

   Round sensibly

   Round to a tidy shelf price like 195 or 199, then sanity-check it against what nearby shops charge.

Method 2: Target-margin pricing

Instead of adding a markup, you can work backwards from the profit margin you want to keep on each sale. This is useful when you know the margin your business needs to survive.

The formula is: selling price = cost ÷ (1 − desired margin). If your landed cost is 120 and you want a 40% margin, that's 120 ÷ (1 − 0.40) = 120 ÷ 0.60 = 200.

Target-margin thinking keeps you honest, because the margin has to cover far more than the product — rent, wages, utilities, packaging and fees all come out of it before anything reaches your pocket.

Don't forget the costs behind the counter

A price that only covers product cost will slowly sink you. Your margin also has to pay for the cost of running the shop.

Add up your monthly overheads — rent, staff, electricity, software, insurance — and make sure your overall margins across everything you sell comfortably cover them, with profit left over.

One practical check: work out your break-even, the sales you need each month just to cover fixed costs. If your current margins can't reach it at a realistic sales volume, your prices (or your cost base) need to change.

Test, watch the numbers, and adjust

Pricing isn't set-and-forget. Supplier costs move, some products sell far better than others, and a price that worked last year may be leaking profit now.

This is where good day-to-day tools earn their keep. An all-in-one platform like Tallium AI ties your POS, inventory and accounting together, so the moment a sale rings up it knows the item's cost and shows the real margin — not just the takings.

Because Tallium AI is one app for POS, inventory, e-commerce and accounting on a single flat USD price per unit (billed monthly, unlimited users, no per-seat fees and no free trial), you can see your best and worst margin items in a report instead of guessing. That makes it easy to raise, bundle or drop the products that aren't paying their way.

• Check gross margin by product and category every month, not just total sales.
• Flag items selling well at thin margins — a small price rise there adds real profit.
• Update selling prices promptly when landed costs rise, rather than absorbing the hit.
• Use bundles or good-better-best options to lift the average basket without discounting everything.

A note on tax and your prices

Sales tax, VAT, GST or SST can affect how you display and calculate prices — whether your shelf price is tax-inclusive, and how much of each sale you owe the tax authority. Getting this right protects the margin you worked out above.

This is general information only. Tax rules, rates and registration thresholds differ by country and change over time — confirm the current rules with your country's tax authority or a qualified local tax professional before finalising how you price and charge tax.

Tallium AI handles tax on invoices and receipts and keeps the records for your returns, so the tax portion stays separate from your true profit in the reports.