Minimum selling price: the formula behind a price floor.
For an independent seller, a price floor is the lowest price that meets a chosen contribution margin under a specific set of cost and fee assumptions. It is not the same as a guaranteed net profit. This guide explains the mathematics behind our free batch calculator. Updated October 14, 2026.
Have multiple SKUs? Use our free browser-based calculator to apply the formula to a CSV of products, then export a planning report. No store connection or upload required.
Open the free batch price-floor calculator →1. Write down your per-order costs
Start with the cost of goods, shipping/fulfillment paid by you, packaging, attributed advertising cost per order and any flat processing fee. Add these to get F, the total fixed cost per sale. Keep the units consistent with the sale currency and tax basis.
For example: product $10.00 + shipping $3.00 + packaging $0.70 + attributed ads $2.00 + flat fee $0.50 = $16.20 fixed cost per order.
2. Add the percentage fees you actually pay
Let r be the sum of percentage fees that are truly charged on the same assumed net sale-price base. A purely illustrative scenario uses 6% marketplace, 10% creator commission and 2% processing, giving r = 0.18. These are example inputs, not verified current rates for any marketplace. Check your own seller agreement and the fee base before using them.
Let m be your target contribution margin as a fraction of sale price. For a 25% target, m = 0.25.
3. Solve the minimum price equation
price floor = F / (1 − r − m)For F = $16.20, r = 0.18 and m = 0.25: $16.20 / (1 − 0.18 − 0.25) = $28.42105.... Round up to the nearest cent: $28.43. The rounded price covers the modeled costs and reaches at least the 25% target under these assumptions.
Break-even is different: with m = 0, $16.20 / (1 − 0.18) = $19.75609..., rounded up to $19.76. A price between break-even and the target floor can have positive contribution while still missing the target.
| Price | Contribution after modeled costs | Contribution margin |
|---|---|---|
| $19.76 | $0.0032 | 0.02% |
| $25.00 | $4.30 | 17.20% |
| $28.43 | $7.1126 | 25.02% |
Contribution = price × (1 − r) − F. Percentages in the table are rounded for display; the underlying example is hypothetical.
4. Know when the equation is invalid
If r + m ≥ 1, the denominator is zero or negative, so no positive selling price can meet that margin in this simplified model. Do not use a negative result as a real price. Also, percentage fees charged on shipping, tax, gross transaction value or a tiered schedule require a different formula or additional inputs.
Returns, refunds, chargebacks, VAT/sales tax, discounts, fixed monthly software fees, labor and indirect overhead may change your actual economics. The calculator is a planning aid, not a live marketplace-fee feed, tax advisor or guarantee of business profitability.
5. Compare a proposed price to the floor
For each SKU, enter the current price and costs. A current price below break-even loses contribution under the modeled assumptions; a price above break-even but below the target floor misses your selected margin. Review competition and customer willingness to pay before changing prices—meeting a spreadsheet margin does not guarantee a sale.
Next action: Use the batch calculator for a draft SKU list, review the assumptions, then validate fees against the specific marketplace's official seller documentation before changing live listings.
Calculate price floors for my SKUs →Frequently asked questions
Is contribution margin the same as net profit?
No. Contribution is revenue remaining after the direct variable costs included in the model; it may still need to cover salaries, rent, software, taxes and other overhead.
Can I switch USD to GBP or EUR?
The calculator's currency selection changes display symbols only. It does not convert exchange rates, localize taxes or provide country-specific fee schedules.
Are the sample percentages official TikTok, Shopify or Amazon rates?
No. All example percentages here are hypothetical. Actual seller and processing fees depend on marketplace, region, category, fulfillment method, promotion and contract.
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