Selling price formula with fees
A margin is a share of the price, and so is a percentage fee, so both come out of the price before the cost is covered.[1]
The shortcut most sellers use, cost × (1 + margin), gets both the margin and the fees wrong. On a $20 cost it gives $26.00; after the 13% fee and $0.40 the profit is only $2.22, a 8.5% margin instead of 30%.
How fees raise the price you need
Every point of fee pushes the required price up by more than a point, because the fee is also charged on the extra price. Same $20 cost and 30% margin:
| Fees | Price needed | Fees paid | Profit |
|---|---|---|---|
| 0% | $28.57 | $0.00 | $8.57 |
| 3% + $0.40 | $30.45 | $1.31 | $9.13 |
| 8% + $0.40 | $32.90 | $3.03 | $9.87 |
| 13% + $0.40 | $35.79 | $5.05 | $10.74 |
| 20% + $0.40 | $40.80 | $8.56 | $12.24 |
Look up the real percentage for your platform with the eBay, Etsy or Amazon FBA fee calculators, or the Stripe and PayPal calculators for your own site. Each has a "what to charge" mode that uses the platform's full fee schedule, including tiers and caps.
Cost-plus vs value-based pricing
Cost-plus pricing starts from your cost and adds the margin you need; it guarantees the margin but ignores what buyers will pay. Value-based and competitive pricing start from the market price and work backward to the most you can pay for the item; the margin calculator's "price + margin" mode does that. Most small sellers use both: cost-plus to find the floor, the market to find the ceiling. If the floor is above the ceiling, the product does not work at your cost.
Whatever method you use, keep each unit's contribution positive after variable costs, or every sale adds to your losses.[2]
Charm prices and advertised prices
Prices ending in .99 are a convention, not a rule; the calculator rounds up so the rounded price still meets your target. If you advertise a former or comparison price next to a sale price, U.S. FTC guidance says the former price should be one you actually offered in good faith for a reasonable period.[3] The discount calculator shows what a markdown does to your margin.
Frequently asked questions
How do I calculate a selling price from cost and margin?
Divide the cost by one minus the margin: a $20 cost at a 30% margin is $20 ÷ 0.70 = $28.57. With fees, subtract the fee percentage from the denominator too.
How do I include marketplace fees in my price?
Treat the percentage fee like part of the margin and add any fixed fee to the cost: price = (cost + fixed fee) ÷ (1 − fee − margin). For $20, 13% + $0.40 and 30%: $35.79.
Why does my price have to be so much higher with fees?
Because the fee is charged on the full price, including the extra you add to cover the fee. The higher the fee and margin together, the faster the required price rises.
Is cost-plus pricing a good strategy?
It makes sure each sale covers its cost and your margin, but it ignores what competitors charge and what buyers will pay. Check the result against the market.
Should I round prices to .99?
That is a marketing choice. If you do, round up so the rounded price still covers your target; the calculator does this automatically.