Pricing Formula: How to Set Prices That Cover Costs and Profit

Why copying a competitor's price is risky

The common approach is to check what a competitor charges on Instagram or OLX and go slightly lower. That only works if your costs, volume and sales channel match theirs. They rarely do. A competitor's price tells you nothing about their rent, their delivery costs or how much a platform takes from each order.

So start with a floor: the price below which every sale leaves the business poorer. Only then look at the market and decide where in the range you want to sit.

What a price is made of

Break a price into parts and it becomes a sum of several components.

Add them up and you get the minimum justified price. It doesn't have to be the final one, but without it every decision about a discount or promotion is made blind.

• Variable cost per unit: materials or purchase cost, packaging, piece-rate labor, delivery to the customer.
• A share of fixed costs: rent, an administrator's salary, phone and internet, software, the steady part of advertising.
• The profit you want from each unit.
• Taxes under your tax regime.
• Fees: card and wallet payments through Click and Payme, marketplaces, aggregators, distributors.
• A reserve for returns, defects and planned discounts.

Splitting variable and fixed costs

Variable costs are easy to count: what goes into one unit. Fixed costs are divided by planned monthly volume. A bakery in Tashkent pays rent whether it sells many cakes or few. If you divide that rent by an optimistic volume, each cake looks profitable, and at month end you quietly cover the shortfall from your own pocket.

Use the volume you reliably sell in an ordinary month, not in a peak season. And count your own labor: if the owner bakes or handles orders personally, that time is a cost even when no salary is paid.

Markup vs margin: where profit leaks

Markup is measured against cost; margin is measured against price. For the same price, markup always looks larger than margin. If you want profit to be a certain share of the price but add that same share on top of cost, you end up with less profit than planned.

Pick one measure and use it the same way across the team. If your target is profit as a share of price, use this form: price = cost / (1 − target margin), with margin written as a fraction of one.

A separate price for each channel

The same product costs you different amounts to sell through an Instagram shop, on Uzum and in a physical store. A marketplace adds its commission and possibly logistics. Instagram adds Click or Payme payment fees and a courier. A wholesaler adds their own markup.

A simple spreadsheet works well: products in rows, cost items and channels in columns. When a supplier price or a delivery rate changes, you recalculate everything in minutes. If a channel can't make a profit at a price your customer accepts, cut costs there or stop selling there.

Break-even and the market check

It helps to know how many units cover your fixed costs: break-even = fixed costs / (price − variable cost per unit). If that number is higher than your real sales, revisit the price or the costs.

Then compare your calculated price with the market. If it's clearly higher, find what justifies it: materials, service, speed, warranty. If nothing does, reduce costs. If your calculation lands below the market, you may be selling something valuable too cheaply.

Common mistakes and the next step

The same few errors repeat from one business to the next. If the numbers don't add up, or you're unsure how to position against the market, the markdev team can work through your product economics as part of marketing strategy and consulting. Write to us and we'll discuss your task.

• Counting only materials and purchase cost.
• Leaving the owner's own time out of costs.
• Mixing up markup and margin.
• Forgetting payment and platform fees.
• Dividing fixed costs by an inflated sales volume.
• Not recalculating when costs change.