In a March 2026 interview with The Cut, Devin McGhee Kirkland, co-founder of beauty brand Deon Libra, called the founders’ unpaid salaries the company’s “biggest debt.” They had gone two years without pay and were entering a third. The interview did not blame pricing, but shows that sales do not always leave enough cash to pay the people doing the work.
Our biggest debt is back pay. We haven’t paid ourselves in two years, going into the third. — Devin McGhee Kirkland
Financing, retailer terms, and expense timing also affect owner pay. But when prices omit costs or labour, the shortfall is harder to see. The figures below are hypothetical examples, not market-rate recommendations.
1. Pricing Products Without Calculating the Full Cost of Delivery
Start with a product that costs $12 to make. That is only the first line. Packaging and fulfilment add $4, flat selling fees add $2, advertising and expected returns add $3, allocated overhead adds $5, and owner labour adds $10. The full cost in this example is $36.
To keep a 25% margin on the selling price, divide the cost by 1 minus the margin: $36 ÷ 0.75 = $48. The 25% is a target in this hypothetical calculation, not a benchmark every business should adopt.
The fee assumption matters. A flat $2 payment charge stays the same at different prices. A processor that charges a percentage takes more when the price goes up, so the final price must account for that. Shipping, refunds, and advertising can also shift by product or by season. Use current invoices and order records wherever possible.
The Small Business Administration’s break-even guidance helps owners sort fixed costs from variable costs and estimate how much they must sell to cover expenses. Break-even tells a founder when sales cover costs. It does not, by itself, set a price that can fund a salary or growth.
“Free shipping” may help sales, but someone pays the carrier. Try a minimum order or slower delivery and track both order volume and what each sale leaves behind.
2. Underpricing to Win Customers Instead of Pricing for Profit
At $42, the $36-cost item leaves $6 before tax and any overlooked expenses. That is about 14.3% of the selling price. At $48, the same cost leaves $12, a 25% margin. The six-dollar difference in price doubles the amount left after the listed costs.
A competitor’s lower price can tempt a founder to cut first. But a listing does not reveal supplier rates, production volume, return rate, or service level. A smaller package may cost less to produce; a slower service may include fewer revisions.
Customers with different budgets do not always need the same package. A skincare company could sell a smaller size. A consultant might offer a shorter session without the follow-up report. Each option should have its own cost and scope. The lower price then reflects less product or labor, instead of asking the business to absorb the same workload for less.
Set a floor before quoting. If a customer’s budget falls below it, change the scope or decline. A proposal that spells out deliverables and fees makes that conversation easier.
3. Using Discounts to Drive Sales Without Measuring the Profit Lost
A 10% discount on a $100 product looks modest. But if the product costs $60 to make and deliver, the amount available after those variable costs falls from $40 to $30 per sale.
That gap determines the sales target. Three full-price orders contribute $120. At the discounted price, four orders are needed to contribute the same $120. The business must sell one-third more units just to match its earlier contribution, before covering fixed costs.
Extra orders may not be free to serve. Add the cost of promotion, subsidized shipping, packaging and any extra hours. Then compare the promotion with a recent period of normal sales. The SBA’s business-management guidance advises businesses to plan marketing and evaluate its costs and results. For a discount, that means watching the money each order contributes, not only the number of orders.
A promotion may move seasonal stock or introduce a product. Set the result and end date in advance. A bundle, smaller size, or gift after a minimum purchase may meet the goal while preserving the main item’s price.
4. Treating the Owner’s Labor as Free
Owners often handle tasks that never make it onto an invoice: sourcing materials, answering customer messages, packing orders, revising a design, and reconciling accounts. If those hours are left out, the business can appear profitable while the owner works without meaningful pay.
Consider a service project requiring 20 hours. At a planning rate of $35 an hour, labour costs $700. Add $200 in software, rent, or other overhead allocated to the project, and the baseline cost reaches $900. For a 25% margin, the quote would be $1,200: $900 divided by 0.75.
That $35 rate is only an example. It is not a recommendation for a particular profession or city. Owners should choose a rate that reflects the work and their business, then consider customer demand and comparable services. Labor pay covers the owner’s work. Profit remains available for reinvestment, risk, and future expenses.
In the same The Cut interview, Melissa Butler, founder of The Lip Bar, described the role margins play in funding a company and paying its owner:
Know your numbers, and make sure your margins are there to support all the things you want: your marketing activities, the salary you want to pay yourself — all of it. — Melissa Butler
Even if the owner cannot draw the full amount yet, record the time. It can guide a fee increase, a simpler process, or a decision to stop offering work that cannot pay for itself.
5. Charging One Flat Price for Work That Requires Different Levels of Effort
Two website projects might each be quoted at $600. One takes eight hours. The other takes 20. At an internal labour cost of $40 an hour, the first project uses $320 in labour; the second uses $800. That leaves the longer job $200 short on labour cost alone, before software and overhead.
The client may not know the second project needs more work. The quote should make the boundary clear: which pages or deliverables are included, how many revision rounds, how many meetings, and whether travel or materials are extra. Additional requests can be priced separately.
Different tiers can help customers choose, but the difference needs to be real. A basic package might include a landing page and one revision; a higher tier could cover a custom site, more revisions, and post-launch support. The owner can price each version against the hours and costs it is expected to require.
After a project closes, compare the estimate with the time spent. If the same kind of job repeatedly overruns, the next quote should change. Some work may need a narrower scope; some may call for a better process. The record, not the original guess, should guide the next price.
Review five recent orders or projects. Pull receipts, fees, and time records, then recalculate what each sale left behind. Adjust the price or scope where needed. The business should be able to explain the price and use it to pay for the work.
Frequently Asked Questions
How Do I Calculate a Profitable Product Price?
Add production, delivery, selling costs, overhead, and labour. Divide by one minus the target margin. If full cost is $36 and the target is 25%, the price is $36 ÷ 0.75, or $48. Add tax and any omitted costs separately.
Should I Match a Competitor’s Price?
First compare the offers and calculate your own costs. A public price does not reveal a competitor’s supplier terms, service, or margins. If a customer has a smaller budget, offer fewer units or deliverables at a lower total.
How Can I Tell Whether a Discount Is Worth It?
Calculate contribution per sale before and during the discount, then find the added sales needed to replace what each cut removes. Include advertising, shipping incentives, and extra fulfilment. Set a review date and compare the result with normal sales.
Should I Include My Own Labor in Pricing?
Yes. Track the time needed to make, sell, and deliver the offer, then assign that work a reasonable cost. Even if cash flow delays an owner draw, the hours show what the business must eventually earn to support the work.
What Should a Service Price Include?
State the deliverables, timeline, meetings, revision limit, travel, and materials covered by the fee. Explain how extra work is billed. Clear terms help customers understand the price and help owners estimate a job before accepting it.
