How to calculate a selling price
To calculate a selling price when you know your cost and desired profit margin, use this formula:
Selling Price = Cost ÷ (1 − Profit Margin)
For example, if a product costs you $60 and you want a 40% profit margin, the calculation is:
$60 ÷ (1 − 0.40) = $100
You would need to charge $100. Your gross profit would be $40, which is 40% of the $100 selling price.
The calculator above does this calculation automatically, so you only need to enter your cost and desired margin.
Price calculator example
Imagine you make handmade candles. Your wax, wick, jar, and other direct costs come to $8 per candle. You want a 33% profit margin.
The required selling price is:
$8 ÷ (1 − 0.33) = $11.94
At a selling price of $11.94, your gross profit is approximately $3.94 per candle. That $3.94 represents about 33% of the selling price.
Why you can't simply add the profit percentage to your cost
A common pricing mistake is to add the desired percentage directly to the cost. If a candle costs $8 and you add 33%, you get:
$8 × 1.33 = $10.64
But $2.64 is only about 24.8% of the $10.64 selling price. You have calculated a markup on cost, not a 33% profit margin on the selling price.
If you want 33% of the selling price to be gross profit, you need to divide the cost by 1 minus the desired margin. That's why the calculator gives a higher selling price of about $11.94.
What should I include in my cost?
Your cost should include the expenses that are necessary to make or deliver what you are selling. Depending on your situation, this might include:
- Materials and ingredients
- Wholesale or purchase cost
- Packaging and labels
- Direct labor or production time
- Shipping or delivery costs you pay
- Other direct costs required to provide the product or service
If you are unsure what your business actually spends, our Business Expenses Calculator can help you organize your costs. You can also use the Business Budget Calculator to look at your wider business expenses and budget.
Does this price include taxes and fees?
No. The price calculated here is based only on your cost and desired profit margin. It does not automatically include sales tax, VAT, payment processing fees, marketplace commissions, or other charges.
If you need to add VAT to a net selling price, use the VAT Calculator. If you are pricing an item for a marketplace or payment platform that takes a percentage of each sale, make sure those fees are accounted for before deciding on your final customer price.
Price vs. profit margin
This calculator starts with your cost and desired margin and works backward to find the selling price. It answers a simple question: “What should I charge if I want this profit margin?”
If you already know your selling price and want to analyze your profit, margin, or markup, use our Profit Margin Calculator instead.
If you are deciding how much you need to sell before your business starts covering its costs, try the Break-Even Calculator. For calculating sales generated from price and quantity, see the Revenue Calculator.
How to use the price calculator
- Enter your cost. Enter what you pay to make or buy the product, or what it costs you to provide the service.
- Enter your desired profit margin. Enter the percentage of the selling price you want to be gross profit.
- Check the selling price. The calculator shows the price you need to charge to achieve that margin.
- Review your other costs. Consider fees, taxes, shipping, overhead, discounts, and other costs that may affect the final price you actually need to charge.
What is a good profit margin?
There is no single profit margin that works for every product, service, or business. A suitable margin depends on your costs, industry, competition, pricing strategy, operating expenses, and what customers are willing to pay.
If you are unsure which margin to use, try several values in the calculator and compare the resulting selling prices. A higher margin gives you more profit per sale, but it can also make your price less competitive.
Frequently asked questions
What is a price calculator?
A price calculator helps you determine what to charge for a product or service based on its cost and the profit margin you want to earn. Enter your cost and desired margin, and the calculator works backward to find the required selling price.
How do I calculate a selling price from cost and profit margin?
Divide your cost by 1 minus the desired profit margin expressed as a decimal. For example, with a $60 cost and a 40% margin: $60 ÷ (1 − 0.40) = $100. The required selling price is $100.
What is the difference between margin and markup?
Profit margin measures profit as a percentage of the selling price, while markup measures profit as a percentage of cost. For example, a product costing $60 and selling for $100 has a $40 profit, a 40% margin, and a 66.67% markup.
For a more detailed calculation, use our Profit Margin Calculator.
Can I use this calculator for a service?
Yes. Your cost can represent the direct cost of providing a service, including your time, materials, and other direct expenses. For example, if providing a service costs you $40 and you want a 50% profit margin, the required selling price is $80.
Does the calculated price include VAT or sales tax?
No. The calculated price is the price before VAT or sales tax is added. If you need to calculate a VAT-inclusive price, use the VAT Calculator.
Can I use a different profit margin?
Yes. Try different margins to see how they change your required selling price. For example, increasing the desired margin from 30% to 40% will increase the selling price required to achieve that margin.