The cost plus pricing method
Updated: Feb 16
Is one of the easiest and most common ways to set pricing. Start with your COGS/COSS and then add in the other costs you incur in the process of selling a product or service, then add in the amount of profit that makes the effort worthwhile. The result is your price to the customer. This is a good place to start to make sure you don't lose money on a sale but there are other ways to price as well.
Price Calculation Example:
COGS per unit = $2.50 + shipping to client = $1.50 + packaging = $.60 + allowance for taxes you will pay = $.40 + desired profit = $5.00 per pair. Total price to client = $10.00
As you can see in this example, it is important to add in the costs beyond COGS or those costs will eat up your profits. The cost plus method is easy but it isn't always the best fit for all products, especially products that may be inexpensive to produce but have a high perceived value; explore market comparison or blended pricing for those services