Quick answer
A simple selling-price formula is:
**Selling Price = Total Product Cost + Desired Profit**
But your total product cost should include more than the supplier's price. Include direct costs such as transport, delivery, packaging and other costs required to bring the item into your shop.
What is the difference between cost price and selling price?
Cost price is what the product costs your business. Selling price is what the customer pays.
If you buy an item for UGX 20,000 and sell it for UGX 25,000, the basic gross profit is UGX 5,000.
However, if you spent UGX 1,000 per item on transport and handling, the real cost is closer to UGX 21,000. Your real gross profit is therefore UGX 4,000 rather than UGX 5,000.
How do I add transport to product cost?
Suppose you buy 100 units for UGX 10,000 each.
Product cost = UGX 1,000,000. Transport = UGX 100,000.
Total landed cost = UGX 1,100,000.
Divide that by 100 units:
**UGX 1,100,000 ÷ 100 = UGX 11,000 real cost per unit.**
You should base your pricing decision on UGX 11,000 rather than pretending the product still costs only UGX 10,000.
What is markup?
Markup is the percentage you add to cost.
If an item costs UGX 10,000 and you add a 30% markup:
30% of UGX 10,000 = UGX 3,000.
Selling price = UGX 13,000.
The formula is:
**Selling Price = Cost × (1 + Markup Percentage)**
Is markup the same as profit margin?
No. This confuses many business owners.
If a product costs UGX 10,000 and sells for UGX 12,500, your profit is UGX 2,500.
The markup on cost is 25% because UGX 2,500 is 25% of UGX 10,000.
But the profit margin is 20% because UGX 2,500 is 20% of the UGX 12,500 selling price.
Both numbers are useful, but they answer different questions.
How much profit should I add?
There is no universal percentage for every Ugandan business.
Your acceptable margin depends on competition, product type, how quickly the item sells, risk of expiry, storage cost, theft risk, capital required and whether customers are very price-sensitive.
A fast-moving product can sometimes work with a smaller percentage because it turns over quickly. A slow-moving or risky product may require a larger margin because your money remains tied up for longer.
How do I price products when suppliers keep changing prices?
Always keep the latest purchase cost or an appropriate costing method in your stock records. Otherwise you may continue selling according to an old cost price and discover that you cannot afford to replace the item.
For example, you previously bought cooking oil at UGX 80,000 per carton and priced from that amount. The new carton costs UGX 92,000. If you keep the same selling price without checking the margin, your new profit may be very small or negative.
This is where a digital inventory system becomes more useful than memorising prices.
How low can I go when a customer bargains?
You need to know your minimum safe selling price before negotiating.
A business-management system can store cost price, normal selling price and, where useful, a minimum price or discount limit. That stops an attendant from giving a discount that looks small but actually removes the profit.
Before approving a bargain, ask:
**After the discount, is the sale still covering the current product cost and contributing enough toward expenses?**
Should wholesale and retail prices be different?
Often, yes.
A wholesaler may accept a smaller margin per unit because the customer buys a larger quantity. The important thing is to define quantity levels clearly and ensure the wholesale price still produces acceptable profit.
For example:
1–5 units: UGX 12,000 each. 6–20 units: UGX 11,500 each. 21+ units: UGX 11,000 each.
The exact figures should come from your own costs and strategy.
How can Bizinesiyo help with pricing?
Bizinesiyo can keep cost price, selling price and stock history together. This makes it possible to warn when selling prices are dangerously close to cost, analyse profit by product and help owners update prices when purchase costs change.
Frequently asked questions
**How do I calculate a 20% markup?** Multiply the cost by 1.20. A UGX 10,000 item would become UGX 12,000.
**Should transport be part of cost price?** Yes, when transport is directly required to bring the stock into the business, it should be considered when assessing the real product cost.
**Can I sell below cost to attract customers?** Businesses sometimes use controlled promotions, but repeatedly selling below cost without understanding the reason can create losses.
**Why does my profit reduce when I restock?** Your supplier cost may have increased while your selling price remained unchanged.
**What price should an attendant be allowed to change?** Give attendants clear discount or minimum-price limits and require approval outside those limits.
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