How to Calculate Your Selling Price
1. Determine Raw Material Costs (COGS)
Calculate the exact purchase price of all raw materials, ingredients, or components used for one portion or unit. Include a buffer for waste and shrinkage (usually 10-15%).
2. Add Labor Costs
Measure the time required to prepare or manufacture one unit. Multiply this time by your hourly wage (make sure to include employer payroll contributions, approx. +25%).
3. Allocate Overhead & Fixed Costs
Allocate running business costs such as rent, electricity, insurance, marketing, and administration to a single unit. This is crucial for overall profitability.
4. Set Your Desired Profit Margin
Choose a profit margin (e.g., 20-30%) using the slider. The profit margin is calculated based on the net selling price, ensuring you actually keep the calculated share.
5. Add Value Added Tax (VAT)
Finally, apply the correct tax rate. For example, in Germany, use 7% for take-away food or reduced items, and 19% for in-house services or standard products.
Frequently Asked Questions
What is the difference between markup and margin?
Markup is added directly to your cost of goods (e.g., a 100% markup on a $10 cost results in a $20 price). Margin is the percentage of the selling price that is profit (e.g., a 50% margin on a $20 selling price results in a $10 profit). Calculating with profit margin is generally safer to ensure running costs are covered.
Why is the Cost-of-Goods-Sold (COGS) rate so important?
In gastronomy and retail, the COGS rate (Wareneinsatzquote) is a key performance indicator. A rate between 25% and 30% is considered healthy. If your rate is higher, it indicates that raw materials are too expensive or your selling price is too low to cover labor and overhead costs.
How should I account for product shrinkage or food waste?
Always add a waste percentage (typically 5% to 20% depending on the industry and product shelf life) to the cost of raw materials. If you pay $2.00 for ingredients and expect 15% waste, calculate with a raw cost of $2.30 to protect your margin.
The results of this calculator are for guidance only and do not replace legal or tax advice. Please consult a tax advisor for specific questions.