How to calculate the right product price (formula)
This is probably the **most common mistake** of small online sellers: they sell a product for €15, think they have 30% margin, and at the end of the month — **empty wallet**.
Why? Because they didn't take into account **all costs**:
- Product cost
- Platform fee (Etsy 6.5%, Shopify 2.9% + fixed)
- Shipping cost (if you pay it)
- Tax (if VAT registered)
- Returns and complaints (2-5% of sales)
When you add all this up, it turns out that from a €15 sale, **€1 of profit remains** — not the €4.50 you thought.
In this article, I'll show you the **exact formula** for calculating price, with a concrete example.
The basic formula
Price = (Cost + Shipping) / (1 − Fee% − Tax% − Margin%)
Sounds complicated, but let's go through an example.
Example: Lavender candle on Etsy
Let's say you sell a candle:
- Cost price (wax, glass, scent, labor): €4
- Shipping you pay: €1
- Etsy fee: 6.5%
- VAT: 0% (not registered)
- Desired margin: 30%
Formula:
Price = (4 + 1) / (1 − 0.065 − 0 − 0.30) = 5 / 0.635 = €7.87
Rounded — **€8**.
What this means in practice
When you sell a candle for €8 on Etsy:
- Etsy takes 6.5% = **€0.52**
- Cost price = **€4**
- Shipping = **€1**
- Profit = €2.48
- Margin = 31% ✓
If you sold for €15 (as you initially thought), margin would be **65%** — sounds great, but that's not realistic for a handmade product.
What if you have multiple channels?
If you sell on both Etsy and Instagram, **the price should not be the same**.
Etsy takes 6.5%, Instagram takes nothing. So:
- Instagram price: (4 + 1) / (1 − 0 − 0.30) = €7.14
- Etsy price: (4 + 1) / (1 − 0.065 − 0.30) = €7.87
The difference is **~€0.70**. If you sell 100 candles per month, that's **€70 per month** — or €840 per year. **Not negligible.**
Rule: The price on a channel without fees should be lower than on a channel with fees. That way, the Instagram buyer gets a better price, and you get the same margin.
What if you don't know the cost price?
This is a common problem. If you make the product yourself, it's hard to calculate the "cost price" because it includes **material + labor + overhead**.
Here's a simplified method:
- Material: How much does wax, glass, scent, label cost? (e.g. €2 per candle)
- Labor: How much time does it take? (e.g. 30 min) How much are you worth per hour? (e.g. €8/h) → **€4**
- Overhead: Electricity, water, internet, equipment depreciation. (e.g. €0.50 per candle)
- Total: 2 + 4 + 0.50 = **€6.50**
This is your **real cost price** — it includes your labor too.
If you don't include your labor, **you're selling yourself below cost**.
How MicroStock helps
MicroStock has a built-in **pricing calculator** that automatically calculates:
- Recommended price based on margin
- Profit per unit
- Real margin
- Markup (on cost)
It has **2 modes**:
- Mode A: "What should the price be?" — enter margin, get price
- Mode B: "How much do I earn at this price?" — enter price, get margin
You can also **apply the price to a product** — one click, and the product is updated in the database.
Conclusion
Price is not a matter of "feeling". Price is **math**.
If you calculate price using the formula:
- You'll always be in the black
- You'll know exactly how much you earn per product
- You can compare channels and see where it's more profitable
- You won't sell below cost without knowing
MicroStock does all this automatically. No Excel, no formulas, no errors.
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