Break-Even Pricing — How to Set Prices That Ensure Profitability

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Overview

Pricing below your break-even point guarantees losses regardless of volume. Understanding the minimum viable price is the foundation of any pricing strategy.

The Formula

Minimum Price = Variable Cost + (Fixed Cost ÷ Expected Units)

Standard formula used by professionals worldwide

Worked Example

Step-by-step

Fixed costs 200,000 | Variable 300 per unit | Expected 500 units → Min price = 300+400 = 700

Key Points

Accuracy: Results are as accurate as your inputs
Units: Always use consistent units throughout
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Frequently Asked Questions

What is cost-plus pricing?

Add desired markup to cost price. Simple but ignores market prices and competitor rates.

What is value-based pricing?

Pricing based on perceived customer value rather than cost. Can generate much higher margins.

How do I know if my price is right?

Track conversion rates. Too many objections on price → too high. Instant sales without negotiation → too low.

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