Manufacturing
How to price a product you make (without guessing)
A simple, honest method to set a price that protects your margin — built on real cost.
Key takeaways
- ▸ Start from true cost (BOM + yield + wastage), not the competitor's shelf.
- ▸ Add overheads, then your target margin.
- ▸ Check the market — but don't price below your real cost.
- ▸ Revisit pricing when material rates change.
Pricing by copying a competitor's shelf price is how makers quietly lose money. A better method starts with one number you control: your true cost.
Step 1 — know your true cost
Build a Bill of Materials for one unit, add labour and packaging, and include yield and wastage. That's your real per-unit cost — the floor below which you lose money.
Step 2 — add overheads and margin
- Add a share of overheads (rent, power, admin).
- Add your target margin — the profit you need, not just want.
- That gives your minimum healthy price.
Step 3 — sanity-check the market
Now look at what the market pays. If you're below it, you have room to raise. If the market is below your healthy price, the answer isn't to sell at a loss — it's to cut cost (negotiate materials, reduce wastage) or reposition the product.
Step 4 — revisit when costs move
Material rates change. A price set last year may be a loss today. Software that recosts your BOM automatically — and can even suggest a price from cost — keeps your pricing honest without a monthly spreadsheet.