The correct selling price can be the difference between a business that works hard and one that actually makes money.
I’ve seen this situation many times in small businesses across Philadelphia.
The restaurant is full.
The beauty salon is fully booked.
The store is constantly selling.
But at the end of the month, the owner says something that comes up far too often:
“Sales were great… but I don’t know where the money went.”
Most of the time, the problem isn’t marketing.
It’s not the product.
It’s not the location.
The issue is usually much simpler:
The business doesn’t have a clear, correct selling price.
And when pricing isn’t properly calculated, every sale can turn into work… but not necessarily profit.
Today, we’re going to break this down in a clear, simple, and practical way.
Because pricing isn’t guessing.
It’s strategy.
What it really means to have the correct selling price
When we talk about the correct selling price, we’re not just talking about charging more.
We’re not talking about copying the business next door either.
The correct selling price is one that meets three conditions:
- Covers your costs
- Generates a margin
- Makes sense to the customer
When one of these three is missing, problems start to appear.
Many businesses in Philadelphia set prices by only looking at competitors.
“If the restaurant on the corner sells the dish for $15, I’ll do the same.”
But that business might have:
- lower rent
- fewer employees
- a different supplier
- a different sales volume
Copying prices is one of the fastest ways to destroy your margin.
A simple formula to calculate your correct selling price
There are many complex formulas, but for a small business, we’ll keep it simple:
Selling Price = Total Cost + Desired Margin
Total cost includes:
- Variable costs
- Allocated fixed costs
And the margin is what allows you to:
- reinvest
- grow
- make a living from your business
Real example in Philadelphia: restaurant in South Philly
Let’s imagine a Latin restaurant.
Cost of ingredients per dish: $6
Packaging: $1
Card fee: $0.50
Total variable cost: $7.50
Now let’s add a proportional share of fixed expenses:
Rent, utilities, insurance, etc.
Let’s say that adds $3 per dish.
Total real cost: $10.50
If the restaurant sells the dish at $11 because “that’s what competitors charge,” the margin is minimal.
Each sale generates just $0.50.
After taxes, discounts, or waste… the profit disappears.
That business does not have a correct selling price.
Example 2: beauty salon in Northeast Philly
Average service price: $80
Variable costs:
Products: $12
Disposable materials: $3
Card fee: $4
Total variable cost: $19
Fixed costs per service (allocated):
Rent, software, insurance: $15
Total cost: $34
If the price is $80, the margin seems solid.
But if the business starts offering 20% discounts, the price drops to $64.
The real margin changes completely.
This is where many businesses start losing money without realizing it.
The most common pricing mistake
Many entrepreneurs believe their problem is that their price is too high.
But in reality, the mistake is often the opposite.
The price is too low for the business model.
I often hear statements like:
“If I raise prices, I’ll lose customers.”
But the real question is:
Can you sustain your business with your current prices?
If the answer is no, your price needs to change.
How to know if your selling price is correct
Ask yourself three simple questions:
- Does your margin cover your expenses?
- Can you pay fair wages?
- Does the business generate money to reinvest?
If the answer to any of these is no, your price is probably not correct.
What to do tomorrow
- Calculate the real cost of your product or service
- Add a proportional share of fixed expenses
- Define the margin you need
That calculation brings you closer to your correct selling price.
If you want to calculate your correct selling price without complications, we’ve prepared a simple worksheet that we use with small businesses in Philadelphia. You can request it by texting “PRICE” on WhatsApp or through the form on our website.
Sometimes you don’t need to work more hours or attract more customers; what you need is clarity to make better decisions. If you’d like to review your business numbers together and build a stronger sales strategy, we’d be happy to help. Shall we talk?
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