What the Pricing Calculator Does
The pricing calculator converts a target gross margin into a selling price. It supports two approaches that sellers routinely confuse. Cost-plus pricing adds a markup percentage on top of unit cost; margin-based pricing works backwards from the margin you want to keep after the sale. A 65% markup and a 65% margin produce very different prices, and only the margin method guarantees the profit share you planned. Our editorial analysis of common pricing errors shows this single confusion is responsible for a large share of underpriced products, because a markup that sounds generous quietly delivers a much thinner margin.
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Price = Unit Cost / (1 - Target Margin)
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What each input means
Worked example
A product costs $18 per unit, fully loaded. You want a 65% gross margin.
1. Subtract the margin from 1: 1 − 0.65 = 0.35.
2. Divide cost by that figure: $18 / 0.35 = $51.43 (rounded to $51.43).
3. Verify: profit per unit is $51.43 − $18 = $33.43, and $33.43 / $51.43 = 0.65 — a true 65% margin.
Had you applied a 65% markup instead, the price would be $18 × 1.65 = $29.70, and the actual margin only ($29.70 − $18) / $29.70 = 39.4%.
Limitations — when not to rely on this
The formula prices from your costs, not from the market. It says nothing about what buyers will pay, what competitors charge, or how demand changes with price. It also assumes unit cost stays constant; volume discounts, currency swings, and rising freight can move your real cost after the price is set. Treat the result as a floor for profitability testing, then check it against market prices before committing.
> [!TIP]
> If a marketplace or payment processor takes a percentage of the sale price, include that fee inside your target margin or subtract it from the price first — otherwise the platform's cut comes straight out of the margin you calculated.