Quick answer
Price from your full unit cost, not from competitors alone. Add up ingredients or stock, packaging, a share of gas, electricity and labor, and platform or payment fees, then set a price that delivers your target profit margin: Price = Unit cost ÷ (1 − target margin). A product costing ₱60 with a 40% target margin should sell for ₱100. Then check that price against competitors and what customers will pay.
Key takeaways
- Unit cost must include packaging, utilities, transport, labor and spoilage, not just ingredients or stock.
- Markup is profit ÷ cost; margin is profit ÷ price. A 50% markup is only a 33% margin.
- Price = unit cost ÷ (1 − target margin). For online sellers, include platform commission and payment fees in the cost.
- Know your break-even: fixed costs ÷ (price − variable cost per unit).
- Raise prices in small steps when costs rise; underpricing is a common reason small businesses fail.
On this page
- Step 1: Compute your full unit cost
- Step 2: Understand markup vs margin
- Step 3: Set the price from a target margin
- Step 4: Add platform and payment fees
- Step 5: Check the market
- Step 6: Know your break-even point
- Step 7: Watch taxes as you grow
- Pricing tips that work in the Philippines
- Frequently asked questions
- Sources
Many small Filipino businesses get busy without getting richer, because they priced by copying the next stall or by adding "a little" to ingredient costs. Pricing correctly is mostly arithmetic. Here's how to do it.
Step 1: Compute your full unit cost
Example: banana bread loaf (sold whole)
| Cost item | Per batch of 6 loaves | Per loaf |
|---|---|---|
| Flour, sugar, eggs, butter, bananas, nuts | ₱540 | ₱90.00 |
| Packaging (box, sticker, ribbon) | ₱120 | ₱20.00 |
| Gas/electricity (oven ~1 hour) | ₱60 | ₱10.00 |
| Labor (2 hours at ₱100/hour) | ₱200 | ₱33.33 |
| Spoilage allowance (5% of ingredients) | ₱27 | ₱4.50 |
| Total unit cost | ₱947 | ₱157.83 |
Most home bakers price from the first line only (₱90) and wonder why there's no money left after a busy week.
Don't forget: - Delivery or transport to buy supplies - Payment fees on e-wallets and cards, if you absorb them - Platform commissions if you sell on a marketplace or food delivery app - Your time, even if you don't pay yourself yet
Step 2: Understand markup vs margin
| Cost | Price | Profit | Markup (profit ÷ cost) | Margin (profit ÷ price) |
|---|---|---|---|---|
| ₱100 | ₱120 | ₱20 | 20% | 16.7% |
| ₱100 | ₱150 | ₱50 | 50% | 33.3% |
| ₱100 | ₱200 | ₱100 | 100% | 50.0% |
When someone says they "add 50%," their margin is only 33%. Margin is what's left to cover rent, permits and your income.
Step 3: Set the price from a target margin
Price = Unit cost ÷ (1 − target margin)
Banana bread at a 40% target margin: ₱157.83 ÷ 0.60 = ₱263 → round to ₱265.
A ₱60-cost item at 40%: ₱60 ÷ 0.60 = ₱100.
Step 4: Add platform and payment fees
If a marketplace or delivery app takes a percentage of the selling price, include it in the formula:
Price = Unit cost ÷ (1 − target margin − fee rate)
Example: unit cost ₱157.83, target margin 40%, and combined platform and payment fees of 15% of the price:
₱157.83 ÷ (1 − 0.40 − 0.15) = ₱157.83 ÷ 0.45 = ₱351
That's why many sellers set higher prices on apps than for direct orders. Check each platform's current commission and fee schedule, since they change.
Step 5: Check the market
Compare your computed price with:
- Competitors' prices for similar quality and size
- Your customers' budget (an office crowd vs a school area)
- Perceived value: packaging, consistency, convenience, freshness
If your computed price is far above the market, don't just cut the price. Lower your cost (buy in bulk, change packaging, adjust portion size) or find customers who value what makes yours different.
Step 6: Know your break-even point
Fixed costs don't change with volume: stall rent, permits, internet, salaries. Variable costs are per unit.
Break-even units = Monthly fixed costs ÷ (Price − Variable cost per unit)
Example: fixed costs ₱12,000 a month; banana bread price ₱265; variable cost ₱124.50 (ingredients, packaging, utilities and spoilage, excluding your labor).
₱12,000 ÷ (₱265 − ₱124.50) = ₱12,000 ÷ ₱140.50 ≈ 86 loaves a month to break even, about 3–4 a day.
Step 7: Watch taxes as you grow
- Non-VAT businesses pay 3% percentage tax on gross sales (unless on the 8% income tax option).
- If gross sales exceed ₱3 million in 12 months, you must register for VAT (12%), which affects pricing. Plan for it before you reach the threshold.
- Online sellers on marketplaces also see a small withholding on payouts. See BIR rules for online sellers.
Pricing tips that work in the Philippines
- Offer sizes: a tingi or single-serve option and a family or bundle size.
- Bundle slow movers with best-sellers.
- Use ₱5 and ₱0 endings for simple cash handling.
- Price direct orders lower than app orders to encourage repeat customers to order directly.
- Review costs monthly, especially after fuel, rice, sugar or flour price increases.
For neighborhood retail with thin margins, see how to start a sari-sari store.
Frequently asked questions
What is a good profit margin for a small business in the Philippines?
It depends on the industry. Sari-sari stores often run on markups of 10–20% because of high volume, while home-based food and handmade products commonly target gross margins of 30–60% to cover labor and waste. What matters is that your margin covers fixed costs and pays you.
What is the difference between markup and margin?
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. If something costs ₱100 and you sell it for ₱150, the markup is 50% and the margin is 33%.
How do I price food products?
Compute the cost of one serving: each ingredient's cost per gram or piece used, plus packaging, a share of gas or electricity, and labor. Divide by (1 − target margin). Recheck monthly since ingredient prices change.
Should I price lower than competitors to get customers?
Only if your costs are truly lower. Competing on price alone usually leads to losses. Compete on quality, consistency, convenience, portion or service instead, and price to make a profit.
How do I handle rising costs?
Recompute your unit cost monthly. When it rises, adjust prices in small steps, change portion or pack size, or find better suppliers. Communicate increases simply and keep quality consistent.
Sources
Figures checked against these official and primary sources on October 4, 2026. Government rates and promos change, so confirm on the agency's site before you act.
- Department of Trade and Industry: MSME resources and SRP monitoring
- Bureau of Internal Revenue: Percentage tax and VAT thresholds
- Republic Act No. 11976, Ease of Paying Taxes Act
General information, not personal financial, tax or legal advice. See our editorial standards and disclaimer. Found an outdated figure? Email support@success.ph.