The rule of thumb “price = cost × 3” survives because it is easy, not because it works. On a marketplace, part of what you pay is proportional to the price (referral fee, ads, processing) and part is fixed per unit (FBA fee, postage, per-order fee, listing fee). A multiplier on cost ignores the fixed part and treats the proportional part as if it were fixed — so it over-prices heavy cheap items and under-prices light expensive ones. The correct formula is short.
The formula
Let F = all fixed costs per unit (product cost + inbound or outbound shipping + fulfillment or postage + per-order fees), r = all percentage costs as a share of the price (referral or final value fee + payment processing + ad spend as % of price), and m = target margin as a share of the price. Net profit per unit is
profit = price − r × price − F
Setting profit = m × price and solving:
price = F ÷ (1 − r − m)
Break-even (m = 0) is simply F ÷ (1 − r). Every calculator on this site solves this equation; the only complication is that some fees jump at price thresholds (Amazon’s $10 and $50 FBA bands, whole-price referral tiers), which is why the tools iterate instead of applying the formula once.
Worked example: Amazon FBA
Small standard item, 6 oz. Product cost $5.00, inbound $0.60, FBA fee in the $10–50 band $3.45 + 3.5% = $3.57, referral 15%, planned TACoS 10%, target margin 20%.
- F = 5.00 + 0.60 + 3.57 = $9.17
- r = 0.15 + 0.10 = 0.25
- price = 9.17 ÷ (1 − 0.25 − 0.20) = 9.17 ÷ 0.55 = $16.67, so list at $16.99
Check: 16.99 − 15% (2.55) − 10% (1.70) − 9.17 = $3.57 = 21.0% margin. Cost × 3 would have said $15 — a 14% margin after ads, and the same product at 12 oz (FBA $3.91) would be at 12%.
Note the multiplier that resulted: price ÷ product cost = 3.4. For a $12 product with the same fees the formula gives $29.40 — a multiplier of 2.45. The multiplier is an output, not an input.
Worked example: Etsy
Handmade item, materials $7.50, postage and packaging $4.50 (free shipping to the buyer), listing fee $0.20 and processing fixed $0.25. Percentage costs: 6.5% + 3% = 9.5%. Target margin 35%.
- F = 7.50 + 4.50 + 0.20 + 0.25 = $12.45
- r = 0.095
- price = 12.45 ÷ (1 − 0.095 − 0.35) = 12.45 ÷ 0.555 = $22.43 → $22.50 or $24
To survive a 15% Offsite Ads order at break-even, r becomes 0.245: 12.45 ÷ 0.755 = $16.49 — comfortably below $22.50, so the price holds even on ad-attributed orders.
Worked example: eBay
Used item bought for $14, postage $5.50, per-order fee $0.40, final value fee 13.6%, no promotion. Target margin 25%.
- F = 14 + 5.50 + 0.40 = $19.90
- r = 0.136
- price = 19.90 ÷ (1 − 0.136 − 0.25) = 19.90 ÷ 0.614 = $32.41 → $32.99
If you charge $6 shipping separately, the fee base is price + shipping, so move the $6 into the price side of the equation: the answer is the same total the buyer pays.
The three mistakes the formula exposes
- Margin on cost, not price. “I want to make 30% on it” usually means 30% of cost — a 23% margin on price. Marketplaces, lenders and this site quote margin on price. Decide which you mean before you set the target.
- Ignoring the fixed fee on cheap items. A $6 item on FBA pays $2.65 in fulfillment fees (Low-Price band) — 44% of the price before the referral fee. The formula shows that a $2 product with the $2.65 Low-Price FBA fee and $0.40 inbound needs $7.77 to reach a 20% margin before ads — almost four times its cost, and the fee jumps by about $0.90 the moment the price crosses $10.
- Forgetting that ads are a percentage. If you price without an ad allowance and then run PPC at 20% ACoS, the 20% comes straight out of the margin. Put a TACoS figure into r from the start; the break-even ACoS guide shows how much you can afford.
Multipliers that come out of the formula
For orientation only — the output of the formula for typical inputs, not a rule:
| Situation | Typical price ÷ product cost |
|---|---|
| FBA, small light item, cost $3–8, 15% referral, 10% TACoS, 20% margin | 2.8–4.3× (cheaper items need the higher end) |
| FBA, cost $15–30, same fees | 2.1–2.3× |
| Etsy handmade, free shipping absorbed, 35% margin | about 1.9× (materials + postage), roughly 3× materials alone |
| eBay resale, 13.6%, 25% margin | 1.7× if the buyer pays shipping, 2.3× with free shipping |
| Shopify, 3% fees, $12 ad cost per order, 25% margin | depends almost entirely on the ad cost |
Set your own inputs in the Amazon FBA, Etsy or eBay calculator — each shows the break-even price and the price for a target margin, with the threshold jumps handled.