From purchase price to selling price: how to determine what to charge
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by Verpakkingdeals.nl
6 min reading time
You buy in bundles and sell per item. Here's how to calculate from purchase price to selling price: cost per item, packaging, margin, and VAT, with a calculation example.
Your stall has a display with ten keychains. You paid €2.00 for them. What do you charge per piece: one euro, two euros, or two and a half? Most sellers guess, round up, and hope it's correct. That works until you count your sales at the end of the day and realize there's little profit left, because bags, stickers, and shipping boxes also cost money.
Below is how to calculate from purchase price to selling price without a calculator: cost per piece, everything that sticks to the product, a markup you consciously choose, and VAT that you keep separate.
Step 1: Calculate your purchase price back to a single item
Almost everything you buy in bulk, you sell individually. So the first sum is always: purchase price divided by the quantity.
Write those numbers down once and save them. You'll use them for every price you set thereafter, and you'll avoid calculating with the bulk price when selling per piece.
Step 2: Add up what sticks to the product
A product at your stall or in your webshop costs more than the purchase price. It gets a price sticker, maybe a bag around it, and for shipping, a box, tape, and a label. These amounts are small, but they are part of the cost price.
A price sticker is the cheapest part of your entire calculation. The White Price Stickers for Price Gun MX-5500 - 5000 pieces cost €9.95, so about two-tenths of a cent per label. The Refillable Ink Roll for MX-5500 costs €2.95 and lasts for thousands of stickers. Packaging is the larger item: a letterbox box of €0.18 plus a piece of tape and an envelope adds up faster.
A calculation example you can replicate
Suppose you sell a keychain from the display above via your webshop.
Item
Amount per piece
Purchase (€2.00 for 10 pieces)
€0.20
Letterbox box A6 (€17.95 per 100)
€0.18
Price sticker (€9.95 per 5000)
€0.002
Tape, roughly half a meter from a €3.00 roll
approximately €0.03
Cost price including packaging
approximately €0.41
What you don't see here yet: your carrier's shipping rate, your own time, and the risk of a shipment getting lost. These items differ per company. Add them yourself, with the rates you actually pay.
Step 3: Choose your markup consciously, not out of habit
"Times two" is the rule of thumb everyone knows, and that's precisely why it's a pitfall. For an item costing €0.20, doubling is too little, because your packaging is more expensive than the product itself. For an item costing €40.00, doubling can sometimes be too much for the market you're in.
Rather, calculate with your desired margin on the selling price. If you want a 50% margin on a cost price of €0.41, divide by 0.5: €0.82. If you want 60%, divide by 0.4: slightly more than €1.00. What remains must cover your fixed costs: stall rent, storage, the hours you work.
A few things that push your markup up or down:
Turnover rate. An item you sell every week can have a smaller margin than something that sits on the shelf for a year.
Packaging share. For small, light items, the box determines your cost price, not the product.
Comparability. Branded items are scrutinized by customers, self-assembled sets hardly ever.
Step 4: Keep VAT outside your margin
VAT is not revenue and not profit; it is an amount that ends up with the Tax Authorities via you. Therefore, always calculate your margin on the amount excluding VAT, and only add VAT when you set the price for the customer. In the Netherlands, a general rate of 21% applies, and a reduced rate of 9% for certain goods and services. You can check which rate applies to your products with the Tax Authorities; that is the only source that provides clarity on this.
If you sell to consumers, you quote prices including VAT. If you sell to businesses, excluding is common. Choose one method and be consistent, also at your stall and in your quotes.
Step 5: Ensure your price is clearly visible on the product
Prices that you set once and never review again will become inaccurate as soon as your purchase or packaging becomes more expensive. Put two moments per year in your calendar when you go through your list. Then look at three things: which items sell well but yield little profit, which are stagnant, and where your packaging costs have increased.
Take one product from your assortment and calculate it tonight: purchase per piece, packaging per piece, desired margin, plus VAT. Chances are, there's at least one item where you're charging too little. What you need to make your prices visible can be found in Price Guns & Labels. Making packaging cheaper per piece can be done via Bulk Packaging for Webshops and Packaging & Shipping. Not sure which box or bundle suits your quantities? Email your question to info@verpakkingdeals.nl and we'll help you figure it out.
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