--- title: "How to Set Prices for a Small Business: 3 Methods | MCC" description: "Three ways to set prices: cost-plus, value-based and market-based, with simple math, examples and mistakes that quietly cost small businesses profit." url: "https://mcc-solutionsnj.com/bookkeeping/guides/how-to-set-prices-for-a-small-business" --- Bookkeeping guide · Updated October 23, 2026 # How to Set Prices for a Small Business: 3 Methods Price is the lever with the biggest effect on profit, yet many small businesses set it by guessing or by copying a competitor. A better approach starts with your costs, adds what customers value and checks the market. This guide walks through three methods and how to combine them. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** To price a product, start with the direct cost of one unit (materials, labor and fees like card processing), then add a share of overhead spread across the units you expect to sell. Ignoring overhead can make a price that looks profitable lose money. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) **Free tools:** [Profit margin and markup calculator](/bookkeeping/profit-margin-and-markup-calculator) · [What should I charge per hour?](/bookkeeping/freelance-hourly-rate-calculator) [Turn a cost into a price with the margin and markup calculator](/bookkeeping/profit-margin-and-markup-calculator). [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Know your true cost Start with the direct cost of one unit: materials, labor and any fees such as card processing. Then add a share of overhead, such as rent, software and insurance, spread across the units you expect to sell. If you ignore overhead, a price that looks profitable can lose money. For services, count the time spent selling, preparing and following up, not only the hours you bill. ## Method one: cost-plus Add a margin or markup to your cost. A $60 cost with a 40% margin needs a price of $60 divided by 0.60, which is $100. A 50% markup on the same cost gives $90, which is a 33% margin. Be clear which one you mean, because they are not the same number. Cost-plus guarantees a floor. It does not tell you what customers will pay, which may be more or less. ## Method two: value-based Ask what the result is worth to the customer. A service that saves a business thousands of dollars can be priced well above its cost. Talk to customers about the problem and what solving it is worth, then price part of that value. This works best when your offer is clearly different or the result is measurable. ## Method three: market-based Look at what comparable businesses charge, and decide where you fit. Being cheaper than everyone is rarely a plan, because it attracts the most price-sensitive customers and leaves little room for mistakes. Use the market to check your price, not to set it. If your cost-plus price is far above the market, ask whether you can lower cost or justify the difference. ## Test and adjust Change prices on a small scale and watch results over a few weeks. Track how many customers say yes and your margin on each sale. A small price increase often loses fewer customers than owners fear, but the only way to know is to measure. Review prices at least once a year, since costs change. A margin and markup calculator makes it easy to test options before you commit. ## Common pricing mistakes The usual ones are forgetting overhead, copying a competitor without knowing their costs, discounting too easily and never raising prices when costs rise. Another is pricing only for the first sale and ignoring repeat business or referrals. Write down your pricing rules, such as the minimum margin you will accept and who may approve a discount. That keeps one rushed decision from becoming a habit that quietly erodes profit. ## Common questions **How often should I raise prices?** Review them at least once a year, and sooner if your costs rise sharply. **Should I advertise my prices?** It depends on your business. Clear prices build trust for simple offers, while complex projects may need a quote. **What if customers complain about price?** Listen for whether it is about value or cost. Sometimes explaining what is included helps, and sometimes it means the offer is not right for that customer. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Square, Stripe and payment processors How sales from Square, Stripe, PayPal and other processors should flow into your accounting software, and why deposits never match sales. Square & Stripe →](/bookkeeping/software/square-and-stripe) More guides - [How to Calculate ROI and Payback on a Business Purchase](/bookkeeping/guides/how-to-calculate-roi-on-a-business-purchase) - [How to Read an Accounts Receivable Aging Report](/bookkeeping/guides/how-to-read-an-accounts-receivable-aging-report) - [Deferred Revenue for SaaS Companies, Explained](/bookkeeping/guides/deferred-revenue-for-saas-companies-explained) - [MRR vs Recognized Revenue: What Is the Difference?](/bookkeeping/guides/mrr-vs-recognized-revenue-whats-the-difference) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Break-Even and Pricing Workbook Enter your fixed costs and what each product or service costs and sells for, then see the sales you need and the price that reaches your target margin. [See what's inside ($24)](/toolkits/break-even-and-pricing-workbook) [Free sample](/toolkits/break-even-and-pricing-workbook#free-starter)14-day full refund Tallyfinch ### Books you keep on your own computer Tallyfinch does invoices, bills, bank import, reconciliation and the main reports, in a file you own. $99 once, then $5 a month for updates; the app keeps working if you stop the plan. It does not do payroll or sales tax filing. The free download records up to 60 entries. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) [Download it free](/tools/pro/trial/mccBooks) [Compare the three apps](/software) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)