Learn to interpret your results
Set prices without confusing revenue and profit
Published on
Higher sales do not guarantee more profit. Start with the full unit cost and separate indirect taxes that are not your own revenue. Then simulate discounts and quantities. Business fixed costs still exist: positive gross profit on a product does not establish net profitability.
Hypothetical example, in EUR
A EUR 120 price including a hypothetical 20% tax means EUR 100 before tax. With EUR 60 cost and a 10% discount, net revenue falls to EUR 90 and unit profit to EUR 30. Ten units give EUR 300 gross profit. The EUR 18 tax in each final EUR 108 sale is not additional profit.
120 / 1.20 × 0.90 − 60 = 30 EUR
What to check before deciding
Check whether the starting price includes tax and unit extras are already in cost. A discount lowers revenue without automatically lowering cost. The calculated target is before discount; test any continuing promotion against that price. To assess the entire business, also examine break-even and fixed costs.
What can change the result?
Full cost, discount and quantity. Percentages depend on their denominator; a calculated price guarantees neither demand nor net profit.