What goes into your cost price
Cost price is everything you spend to get a product or service to the customer. Direct costs belong to a specific unit: raw materials, goods bought from a supplier, packaging, a craftsperson's pay for that order, delivery. Indirect costs serve the whole business: rent, an administrator's salary, phone and internet, bookkeeping, equipment wear, advertising.
Costs can also be split by how they behave. Variable costs grow with volume: flour for a cake, marketplace commission, piece-rate pay. Fixed costs barely move with the number of orders: workshop rent, salaries, software subscriptions.
Take a home bakery selling cakes through Instagram and Telegram. The price usually covers flour, cream and berries, but not the box, the ribbon, the courier's taxi, the Payme or Click fee, the time spent on decoration or a share of the kitchen rent.
What owners most often forget
Run your own calculation against this list. Each item looks small alone, but together they eat the margin.
- the owner's own labour: free work does not exist
- defects, waste, returns and sample products
- Click, Payme and bank card processing fees
- marketplace commission and delivery to the customer
- taxes
- advertising, content shoots and running the page
- equipment wear and small repairs
Full vs variable cost: two numbers, not one
Full cost includes direct costs plus a share of indirect costs per unit. It answers whether the business earns money overall. Variable cost includes only what appears with each sale. The gap between price and variable cost is the contribution margin, which pays for fixed costs and leaves profit.
Say a sewing workshop in Samarkand has spare capacity and receives a wholesale order at a reduced price. If the price is above variable cost, the order helps cover rent and salaries. But if all capacity goes to such orders, the workshop stays busy and still loses money. That is why you need both numbers.
Cost price and pricing: how to arrive at a price
Cost sets the floor, not the price itself. The ceiling comes from the market: what buyers see from competitors on OLX, Uzum and Instagram, and how much extra they will pay for your difference, whether service, speed, warranty or brand. Your price sits between the two, and the job is to find where in that range you can stand confidently.
If your full cost is above competitors' prices, you have three options: cut costs, reach a volume where fixed costs spread across more sales, or build a product people pay more for. Copying someone else's price with worse economics is a short road to losses.
Watch the exchange rate too. If materials are imported and you hold prices in sums, every currency swing changes your margin. Keep the calculation alive in a spreadsheet, with the date of its last update.
Break-even, discounts and the advertising budget
Divide monthly fixed costs by the contribution margin per unit and you get the volume at which you reach zero. If that is higher than real demand in your city or niche, the problem is the model, not the ads.
The same margin tells you how much you can pay for a customer. If Meta Ads brings a lead that costs more than what remains from the sale, more traffic means bigger losses. It also shows your discount limit: during a promotion you can sell at a loss without noticing, because revenue looks healthy.
Lowering cost without losing quality
Look for savings in order, and test every change through the customer's eyes. If they notice the saving, sales drop and the gain disappears.
- compare suppliers on total price: delivery, payment terms, minimum batch
- find where materials leak: defects, leftovers, loose usage norms
- remove steps that waste your craftspeople's time
- trim the range: slow sellers drag on purchasing and storage
- check whether packaging costs more than your buyer needs
Where to start and when to ask for help
Build a three-part spreadsheet: unit costs (materials, time, packaging, delivery, fees), monthly fixed costs with planned volume, and a summary with price, margin and break-even. Update it monthly and whenever supplier prices change. Include your own salary.
If the numbers do not add up, or you are unsure how to position your price next to competitors, that is a strategy question. The markdev team helps business owners in Uzbekistan sort out product economics, pricing and promotion channels. Tell us about your task and we will look at the figures together.
FAQ
What is the difference between cost price and selling price?
Cost price is what a sale costs you; the selling price is what the customer pays. The gap is gross profit, which still has to cover fixed expenses.
Should the owner's salary be included in cost?
Yes. Otherwise the business looks profitable while relying on unpaid work. Include at least what you would pay a hired specialist.
How often should cost price be recalculated?
Monthly, and immediately when supplier prices, rent, wages or the exchange rate change, if you use imported materials.
Can I sell below full cost?
Temporarily and deliberately, yes, if the price is above variable cost and you have spare capacity. As a permanent approach it fails, because fixed costs never get covered.
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