How to Price Your Products Without Losing Profit
Simple principles to set prices that attract customers and leave you with a profit.
Pricing a product seems simple—just pick a number, right?
But if you get this wrong, you can:
❌ Lose money on every sale
❌ Undercut your credibility
❌ Price yourself out of the market
Here’s how to think about pricing strategically—so you can build a sustainable business.
Start With the Customer, Not Just Your Costs
Many founders price based on their own costs:
“It costs me $5 to make, so I’ll charge $10.”
But smart pricing starts with the consumer’s perspective:
What would you pay for this?
What price feels reasonable compared to similar products?
Will the market accept your price point?
Once you have a target price, work backward to see if you can make the margins work.
Minimum Orders and Early Margins
When you’re launching something new, you usually won’t order 100,000 units.
Small runs have higher per-unit costs.
✅ That means your margins will be tighter at first.
And that’s OK—early orders help you validate demand and prove the product works.
Reverse Engineer Your Margin
Aim for a margin that covers:
✅ Your cost of goods
✅ Shipping and logistics
✅ Marketing spend
✅ Marketplace fees (like Amazon or Etsy commissions)
✅ Your paycheck
A common rule of thumb: 3x to 5x markup.
Example:
If your product costs $5 to produce, you should target a price between $15–$25 to cover expenses and earn profit.
Competing in Crowded Categories
If you’re launching a product that already has millions of competitors—like an egg tray—you must:
✅ Be prepared to educate the customer about what makes yours unique
✅ Budget more for marketing to get discovered
✅ Expect slower adoption and potentially lower conversion rates
Set a Realistic Marketing Budget
It’s easy to get excited when sales roll in—until you realize you’re spending more on ads than you’re making in revenue.
Avoid this trap:
✅ Monitor your ad spend and return on investment (ROI) closely
✅ Know exactly what percentage of revenue you can afford to spend on marketing
Remember: big sales numbers mean nothing if your margins evaporate in ad costs.
The Bottom Line
✅ Start pricing with the customer in mind
✅ Reverse engineer to make sure the numbers work
✅ Be conservative with early marketing spend
✅ Track margins and adjust as you grow
Pricing isn’t a one-time decision—it’s an ongoing process.
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