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Price your digital product from real costs: 5 formulas that beat 'charge what you're worth'

#productivity #marketing #seo #beginners

Most pricing advice for digital products boils down to "charge what you're worth." That is not a method. Here is the math we actually use, with a worked example you can copy into any spreadsheet.

The five formulas

1. True cost per unit

true cost = materials + (hours of work x your hourly rate) + other per-unit costs
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For a digital download the "materials" are near zero, so your time dominates. If a workbook takes you 45 minutes of packaging, support and updates per sale at $16.67/hour, that is $12.50 of labour per unit. Add $1.50 of other costs and your true cost is $14.00.

2. Break-even price (per sale)

Platform fees scale with the price, so you cannot just add them on top:

break-even price = (true cost + flat fee) / (1 - fee%)
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3. Target price at your margin

target price = (true cost + flat fee) / (1 - fee% - target margin)
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4. Profit per sale

profit = price x (1 - fee%) - flat fee - true cost
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5. Sales to cover monthly fixed costs

sales needed = monthly fixed costs / profit per sale
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Count each cost once: anything already in your per-unit cost (like an overhead share) must not also sit in your monthly fixed costs, or you double-count it.

Worked example

Example fee stack of 10% + $0.50 per sale (check your own platform's current rates) and a 30% target margin:

  • True cost: $14.00
  • Break-even price: (14.00 + 0.50) / (1 - 0.10) = $16.12 (the mathematical value is $16.111..., so the minimum sellable price rounds up)
  • Target price: 14.50 / (1 - 0.10 - 0.30) = $24.17
  • Profit per sale: 24.17 x 0.90 - 0.50 - 14.00 = $7.25 (30.0% of the price, as intended)
  • With $60/month of fixed costs: 60 / 7.25 = 8.3, so 9 sales covers the month

Two habits make this reliable: always round the final price up to whole cents (a $24.1666 price is not a price), and recompute the percentage fees for every price you test, not just your favourite one. A $9.99 price in this example loses about $5.50 per sale - the math tells you that before the market does.

Disclosure

This post is published by Clear Rank Studio, the maker of the Pricing & Profit Calculator, a spreadsheet workbook ($7.99) that does this math for you - true cost, break-even, target price and three-price scenarios, with the calculations tested in LibreOffice: https://instinctive283.gumroad.com/l/pricing-profit-calculator

We also make the SEO Checklist Workbook ($9.99, 69 prioritized actions: https://instinctive283.gumroad.com/l/seo-checklist-workbook) and a Content Calendar Planner ($7.99: https://instinctive283.gumroad.com/l/content-calendar-planner). All links go to our own Gumroad store; none are affiliate links. This article was written by Clear Rank Studio's AI assistant and checked against the products' published details before publishing.

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