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What to charge to make a real profit

Enter your costs, taxes, fees and the margin you want. The calculator shows the suggested selling price, the minimum price and how many sales per month cover the business. For products or services.

Products or servicesMinimum price and break-evenNo sign-upPDF of the calculation
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Example with the default values

Suggested selling price

R$281.69

  • Minimum price (zero margin)R$219.78
  • Profit per unitR$56.34
  • Break-even point52 units per month

Direct cost of R$100.00, fixed costs of R$8,000.00 and 80 sales per month. Replace them with your company's numbers right below.

Direct cost of one unit

Direct cost: R$100.00 per unit.

Monthly costs and volume
Percentages of the selling price

Suggested selling price

R$281.69

Per unit, with a 20% margin: R$56.34 of profit on each sale and R$4,507.04 per month, selling 80.

Minimum price

R$219.78

Zero margin: covers everything and leaves no profit. Below it, every sale takes money out of the company.

Total cost per unit

R$200.00

Direct cost plus the allocated fixed cost. The suggested price equals a markup of 1.41 on this cost.

Where each real of the price goes

  • Direct costR$100.00 (35.5%)
  • Allocated fixed costR$100.00 (35.5%)
  • TaxesR$16.90 (6%)
  • Fees and commissionR$8.45 (3%)
  • ProfitR$56.34 (20%)

Break-even point

52 units

R$14,414.41 in monthly revenue, at the suggested price, to cover the fixed costs. From there on, every sale is profit.

If you sell 20% more

Same price, 96 per month: the real margin rises to 25.9%, because the fixed costs are spread over more sales.

If you give a 10% discount

Profit per unit drops to R$30.70. To keep the same monthly profit, you would need to sell 96 per month.

Use this price in the proposal

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Markup or margin: what is the difference

Markup is how much you add on top of the cost to reach the price. Margin is how much of the price is left after paying the costs. Both describe the same profit, but on different bases, and mixing them up is the most common way to charge less than you think.

Example: a product costs R$100.00. With a 50% markup, the price is R$150.00. The profit is R$50.00, which is 33.3% of the price: that is the margin. To really have a 50% margin, the price has to be R$200.00, which equals a 100% markup.

That is why this calculator works with margin on the price. Sales taxes, card or marketplace fees and commission are also percentages of the price, and the formula combines them all: the price is the total cost divided by one minus the sum of the percentages. With 29% in percentages in the default example, the total cost is divided by 0.71, which gives a markup of 1.41.

How to allocate fixed costs

Fixed costs are what the company pays every month even without selling anything: rent, administrative salaries, the accountant, software, internet. Allocating means dividing that total by the units or jobs of the month, so that each sale carries its share. With R$8,000.00 in fixed costs and 80 sales, each one has to cover R$100.00.

The catch is the volume. Use the realistic average of the last few months, not the best month of the year: with an optimistic volume, the allocated fixed cost is too small and the price comes out lower than it should. If you sell several products, split the fixed costs in proportion to each line's revenue or to the time each one takes, and run the calculator once per product.

For services, keep two things apart. The salary of whoever delivers the work goes into the cost per hour; the salary of whoever runs the office goes into fixed costs. Counting the same salary in both places inflates the price and scares the customer away.

Common pricing mistakes

Most wrong prices do not come from wrong math, they come from a forgotten cost. Before you finalize your price list, check these six points.

Copying the competitor's price

Your competitor may have different costs, a different volume, or be losing money without knowing it. Their price is a market reference, not a calculation.

Forgetting fixed costs

Adding up only the goods and the freight makes the profit look high. Rent, the accountant and the software also have to come out of every sale.

Confusing markup with margin

Adding 30% on top of the cost does not leave 30% profit. Margin is calculated on the price, and it is always smaller than the markup.

Calculating taxes and fees on the cost

Sales taxes, card fees and commission apply to the final price. That is why they divide the cost instead of adding a percentage to it.

Leaving your own work out

If the owner delivers the service or runs the operation, the owner's pay is a cost. Without it, the profit you see is really the salary of the person doing the work.

Giving discounts without knowing the floor

Without knowing the minimum price, a discount that looks small can wipe out the whole profit of the sale. The calculator shows both numbers side by side.

A complete pricing example

Two fictional companies, one that sells a product and one that sells a service. The tax percentages are illustrative: for your company, use the effective rate your accountant gave you.

Product

A small cutting board workshop

Each board costs R$85.00 to make, plus R$10.00 of freight and R$5.00 of packaging: a direct cost of R$100.00. The company has R$8,000.00 in fixed costs per month and sells 80 boards, so each one carries R$100.00 of fixed cost. The total cost is R$200.00.

The price bears 6% in taxes and 3% in card fees, and the owner wants a 20% margin: 29% in total. The suggested price is R$200.00 divided by 0.71, that is, R$281.69. Below R$219.78 she does not cover her costs.

Each sale leaves R$156.34 to pay the fixed costs after taxes, the fee and the direct cost. The break-even point is 52 boards per month, or R$14,414.41 in revenue.

Service

A consultancy that sets up financial routines

The consultant who does the work costs R$6,000.00 per month including payroll charges and has 120 productive hours: the hour costs R$50.00. Each implementation takes 6 hours and has R$40.00 in other direct costs, which comes to R$340.00 per job.

Fixed costs are R$5,000.00 per month, divided by 20 implementations: R$250.00 each. Total cost of R$590.00. With 8% in taxes and a 25% margin, the suggested price is R$590.00 divided by 0.67: R$880.60 per implementation, with R$220.15 of profit on each one.

The minimum price is R$641.30. To cover its fixed costs, the consultancy needs 11 implementations per month, or R$9,365.08 in revenue.

Pricing by type of company

Frequently asked questions

What is the difference between markup and profit margin?

Markup is what you add on top of the cost; margin is what is left of the selling price. With a cost of 100 and a 50% markup, the price is 150, but the margin is 33%, because the 50 of profit is one third of 150. The calculator works with margin on the price, which is what actually stays in the bank after each sale.

Which tax rate should I use?

Use the effective rate your accountant gave you, that is, the percentage the company really pays on its revenue. Under Simples Nacional (the simplified tax regime for small Brazilian companies) it changes with the activity annex and the revenue bracket of the last twelve months, and ICMS (state sales tax) and ISS (municipal service tax) have their own rules that this calculator does not detail. When in doubt, ask your accountant before setting the price.

What counts as a fixed cost and what counts as a direct cost?

A direct cost only exists because you sold that unit: the goods, the raw material, the freight, the packaging, the hours spent on the job. A fixed cost is what you pay every month even if you sell nothing: rent, administrative salaries, the accountant, software, internet. Do not count the same expense in both places.

What is the minimum price?

It is the price with zero margin: it covers the direct cost, the unit's share of the fixed costs, the taxes, the fees and the commission, and leaves no profit. Below it, every sale takes money out of the company at the volume you entered. Use it as the floor when negotiating a discount.

Why does a small discount cut profit so much?

Because the whole discount comes out of the profit. The costs stay the same, and only taxes, fees and commission shrink a little along with the price. If the margin is 20%, a 10% discount takes almost half the profit of each sale. The simulation shows this with your numbers, and how many more units you would need to sell to make up for it.

Can I take the result to my accountant?

Yes, and it is a good idea. Use Print or save the calculation as PDF: you get one page with the suggested price, the minimum price, the breakdown, the break-even point and every assumption you entered. Your accountant can check the tax rate and the costs in a few minutes.

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