A seller buys a carton of goods for ₦20,000, sells every piece, and still can't restock a month later. The money didn't vanish. It was never profit in the first place. It was her capital, her transport, her data and her time, all sold at a price that didn't cover them.
This guide shows you how to build a price from your real costs, check it against the market, and adjust without scaring customers away. No figure below is a current price. Every number is a made-up example, so get fresh local quotes before you use any of it.
Why "buy price plus a little" fails
Most small sellers price by feel: take the cost price, add what seems fair, and check what the neighbour charges. That ignores everything between buying and selling.
Common leaks include:
- Transport from the market or the supplier, including the okada or keke you forgot to count.
- Damaged, expired or unsold items.
- Packaging, nylon bags, labels and delivery.
- Data, phone credit, and power or generator fuel.
- Bank transfer charges and POS fees on payments you receive.
- Shop rent, market association levies and any local fees.
- Your own time, which is the cost people skip most often.
If these aren't in your price, you're paying them out of your capital without noticing.
Step 1: Find your true cost per unit
Take one restock cycle, usually a week or a month, and write down everything you spent to get goods sold.
- Goods cost: what you paid the supplier.
- Direct extras: transport, loading, packaging, delivery for that batch.
- Expected losses: estimate the share that will spoil, break or go unsold. If you're unsure, use your last batch as a guide.
- Share of running costs: add rent, data, power, helper's pay, and divide by the number of units you normally sell in that period.
Add steps 1 to 4, then divide by the number of units you can actually sell, not the number you bought. That is your true cost per unit.
A hypothetical worked example
Say you sell packaged groundnut snacks. These are assumptions only.
| Item (one month) | Assumed amount |
|---|---|
| Raw materials for 400 packs | ₦100,000 |
| Packaging | ₦16,000 |
| Transport and delivery | ₦12,000 |
| Gas, power, data | ₦20,000 |
| Stall levy and sundry | ₦8,000 |
| Total | ₦156,000 |
You make 400 packs, but you expect about 20 to be lost, stale or given as samples. So you can sell 380. True cost per pack: ₦156,000 ÷ 380 = about ₦410.
Now decide what you want to earn. Suppose you want ₦60,000 a month for your own labour, since you work most days. That adds ₦60,000 ÷ 380 = about ₦158 per pack. Your minimum price to pay yourself is roughly ₦568. Rounding to ₦600 leaves a small cushion, and anything above that is the business's real profit.
Notice what happens if you'd priced at ₦500 because a competitor does. You'd feel busy and sold out, yet you'd be paying yourself less than planned. That's the trap.
Step 2: Choose a margin that fits your type of business
Two terms get mixed up. Markup is the percentage added to cost. Margin is the percentage of the selling price that's profit. A 50% markup on ₦400 gives ₦600, but your margin is only 33%.
Margins differ by product:
- Fast-moving, low-price goods (sachet water, bread, airtime) usually carry thin margins and depend on volume.
- Perishables need higher margins to cover spoilage.
- Handmade or custom items can carry higher margins, but only if you count your hours honestly.
- Delivered or convenience items let you charge for saving the customer a trip.
Ask two or three sellers in a nearby market what their usual margin range is. Treat answers as a rough guide, not a rule.
Step 3: Check the market without copying it
Your cost-based price is the floor. The market tells you the ceiling.
- Note three to five competitor prices, in person and online (Instagram, WhatsApp statuses, Jumia, Jiji).
- Compare quality, size, packaging and service, not only the price.
- If the market price is below your floor, you have three options: cut costs, change the product (size, pack, quality), or choose a different product. Selling below cost to win customers only works for a short, planned promotion.
- If the market price is above your floor, don't rush to undercut. Price near the middle and win on reliability, delivery or presentation.
Step 4: Protect your price from inflation and supplier changes
If your supplier raises prices and you don't, your margin shrinks quietly. Build a habit:
- Recheck supplier prices every restock, not once a year.
- Keep a simple notebook or phone sheet with cost per unit and selling price side by side.
- Set a trigger, for example "if my cost rises by 5%, I review my price that week."
- Buy in bulk only when you can sell before the goods spoil and when you won't strip your working cash.
- Tell regular customers early and briefly when you raise a price. A short, honest message works better than silence followed by a surprise.
If you import or buy anything tied to the dollar, keep a small buffer in your price for exchange-rate moves. Check current rates from your bank or supplier rather than relying on old figures.
Pricing tactics that work, and ones that backfire
Worth using
- Bundles: three items for one price raise your average sale and clear slow stock.
- Tiers: offer a small, standard and premium option so customers choose, instead of just asking for a discount.
- Wholesale price: a lower per-unit price for set quantities, still above your true cost.
- Delivery fee: charge it separately or build it in, but never absorb it by accident.
Usually backfire
- Constant discounts, which train customers to wait for them.
- Giving credit with no limit. Unpaid debts are the same as selling at a loss. If you must give credit, set a ceiling per customer and a due date.
- Pricing so low that you can't afford to restock.
- Mixing business and personal money, so you never see your real margin.
Why small businesses fail on pricing
Many shops close with customers still coming. The usual causes are pricing below total cost, spending the capital as if it were profit, not tracking stock, heavy credit sales, and no cash buffer when a supplier's price jumps. Fixing your price does not remove the risk of a slow season, theft, a bad supplier or a policy change. Profit is never guaranteed, so keep some cash aside before you scale.
Registration, permits and records
Requirements depend on what you sell and where you operate. In Nigeria, many small sellers register a business name with the Corporate Affairs Commission (CAC). That usually helps when you open a business bank account or deal with larger buyers. Food, drinks, cosmetics and drugs may also need approval from NAFDAC, and local governments may charge levies or require permits. In Ghana, Kenya and South Africa, the registering bodies and rules differ. Check the official agency website or ask your local authority, and avoid anyone who offers "quick" papers for cash outside official channels.
Good records also support your price. If you're also weighing a food business, see our food canteen guide. Keep spare cash in a safe place, and read what to check before investing in money market funds before parking business savings anywhere.
Frequently asked questions
How much profit should I aim for?
There's no single number. Work out what you need to cover your costs and pay yourself, then compare it with what similar sellers in your area manage. Profit is never guaranteed.
Should I lower my price if a competitor does?
Check your floor first. If their price is below your true cost, they may be losing money or have a cheaper source. Matching them could sink you.
How do I handle customers who haggle?
Build a small negotiating room into your price, but know your floor and don't go beneath it. Offer a bundle or a free small item instead of cutting the unit price.
How often should I review prices?
At every restock, and whenever a major cost changes.
Your next step
Today, pick your best-selling product and work out its true cost per unit using the four steps above. Then compare it with your selling price. If the gap is smaller than you thought, you've found your first fix.
This article is for general information only and is not financial, legal, or tax advice. Prices, rates and rules change quickly, so check current details before making money decisions.