Pricing Cheat-Sheet for Small Sellers
1. Margin is not markup
Margin is profit as a share of the selling price. Markup is profit as a share of cost. Pricing on the wrong one quietly eats your profit.
| If you add this markup… | …your margin is only |
|---|---|
| 20% | 16.7% |
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 100% | 50% |
- Margin % = (Price − Cost) ÷ Price × 100
- Markup % = (Price − Cost) ÷ Cost × 100
- Price for a target margin = Cost ÷ (1 − margin ÷ 100). Example: cost ₹450, 30% margin → ₹642.86
2. Always price before GST
GST you collect belongs to the government. Work out margin on the price excluding GST, then add GST on top. If you only know the GST-inclusive price, divide by (1 + rate ÷ 100) first.
3. Discounts stack less than you think
20% + 10% off is not 30%. The second discount applies to the reduced price: combined discount = a + b − (a × b ÷ 100) = 28%.
How far can you discount? If your margin is m%, a discount of more than m% of the price means selling below cost.
4. Know your break-even
Break-even units = Fixed costs ÷ (Price − Variable cost per unit). Example: ₹60,000 fixed costs, ₹500 price, ₹300 variable cost → 300 units a month.
5. Online marketplace checklist
- Commission is usually charged on the GST-inclusive price
- Add fixed or closing fees, shipping, packaging and ad spend per order
- Budget for returns: return shipping plus damaged stock
- Fees charged to you carry 18% GST; you can claim it back only if you are GST-registered
Run your numbers: Profit Margin · Discount · Break-Even · eCommerce Profit.