Guide
How to Calculate a Pricing Floor
A usable floor price starts with real variable costs, not just markup on COGS.
What it means
A pricing floor is the lowest price that still covers the variable costs attached to the order. A stronger version also preserves a target contribution margin instead of merely breaking even.
Why it matters
Operators lose discipline when discounts are set without cost visibility. A floor protects against promotions that create revenue while destroying unit economics.
Simple formula
Floor price = per-order variable costs plus fixed transaction fees, divided by the share of revenue left after percentage fees and target margin.
Common mistakes
- Building the floor from COGS only.
- Forgetting that payment fees scale with revenue.
- Ignoring promo scenarios until after the discount is live.
- Confusing the minimum viable price with the ideal market price.
Practical example
If variable costs total $42, fixed fees are $0.30, and percentage fees are 3%, your true break-even floor is materially above $42. If you also want an 18% contribution margin, the required price moves higher again.
Related tool
Use the pricing floor calculator to compare an absolute floor, a target price, and the price required to survive a promo discount.