How do you price for retail?

Answer 1

Practically speaking, you basically have two options for how to price products and services:

• based on your cost
• based on your competition's prices

Theoretically speaking, you always want to price something as high as the market will bear. In others words, you want to charge as much as your customers will pay.

You might try experimenting with prices to see how much you sell at different prices.

Mathematically, if you need /want to make a Gross Profit on sales of, say, 40% then you need to be able to calculate a MARK-UP percentage that will deliver you 40% when you 'retail' (sell) the item. How do you work that out? Easy; you simply subtract the 40 (as in 40%) from 100 (per-centum) which equals 60, and then divide the 40 by 60 and hit the % key on the calculator. This will result in a figure of '66.66666' (or 66.7) so you need to add (or 'mark up') 66.7% to the cost of the item. If the cost of the item was $1.00, then the 'retail' price after adding 66.7% would be $1.67. If someone actually buys the item at $1.67 then your GROSS PROFIT on the sale is $0.67 cents. Now if you divide that profit of 0.67c by 1.67 (the selling price) and hit the % key the result will show as 40.12% - VOILA, your retail price has delivered the 40% gross profit you wanted or needed.

NOTE: Adding 40% to the cost will result in a gross profit of 28.5% on sales.

Similarly, If you want a gross profit of say, 55% - subtract the 55 from 100 (= 45) and divide the 55 by the 45 and hit the % key, which results in 122.2% So one can see that to achieve a GP of 55% one must mark up on cost by 122.2%