The WORST mistake new entrepreneurs make:
❌ Pricing too LOW thinking it will attract customers ❌ Not counting your time as a cost ❌ Copying competitors’ prices without knowing their costs
The Correct Pricing Formula:
Step 1: Calculate Total Cost Material cost + Labour cost + Overhead cost = Total Cost
Material Cost = All raw materials/ingredients per unit Labour Cost = Your hourly rate × hours spent What is your time worth? Minimum: ₹50-100/hour Overhead Cost = Share of phone bill, electricity, packaging, delivery
Step 2: Add Profit Margin Total Cost + Profit Margin % = Selling Price
Recommended minimum profit margin: 30-50%
Example: Pricing a Custom Cake
| Cost Item | Amount |
|---|---|
| Flour, sugar, butter, eggs | ₹150 |
| Fondant and decorations | ₹200 |
| Food colouring and extras | ₹50 |
| Packaging (box, ribbon) | ₹80 |
| Your time: 4 hours × ₹75 | ₹300 |
| Gas/electricity share | ₹30 |
| Total Cost | ₹810 |
| + 40% profit margin | ₹324 |
| Selling Price | ₹1,134 |
| Round up to | ₹1,200 |
Many beginners would sell this for ₹500 — losing money on every sale!
For Service-Based Businesses:
Hourly Rate Formula: Monthly income target ÷ Working hours per month = Hourly rate
Example: You want ₹15,000/month working 100 hours/month ₹15,000 ÷ 100 = ₹150/hour minimum rate
