How to price your products for the first time without guessing
Choosing the first price for a product is one of the hardest calls in a new business. Guessing can feel harmless until costs, demand and cash flow arrive together. A considered price gives you a clear starting point and a way to learn what customers will actually pay.
A useful first price balances three things: the cost to make and deliver one unit, the prices customers encounter nearby, and the value they place on the outcome. Australian conditions matter, from GST-inclusive retail pricing to city-specific freight and state rules. The aim is a defensible starting point, not a permanent verdict.
Start with one product rather than the whole catalogue. Calculate its unit economics, compare the local market, choose a price range, and put a short test in place. The sales data from that test becomes the foundation for every later adjustment.
Calculate the full cost of one unit
List every cost required to turn one item into a delivered, saleable order. For a handmade candle sold in Melbourne, that includes wax, wick, vessel, packaging, payment fees, delivery, and the labour used to make and pack it. Divide the total by the number of completed units to find landed unit cost.
Include a fair hourly rate for your time and a share of rent, software, insurance, and other overhead. Keep consumables, rejected items, and likely returns in the calculation rather than treating them as rare surprises. A product that earns $30 before GST may need $42 all-in to cover the real work behind it.
Next, set a contribution floor: retail price less GST, minus all unit costs. This is the amount available to cover fixed business expenses and profit. If $30 of pre-GST cost supports a $60 GST-inclusive price, the business retains about $24.55 per sale before fixed expenses. That margin funds growth; a price below the floor does not.
Learn what nearby buyers already pay
Compare products in the same city and region, not global marketplace listings with unknown shipping. Sydney, Melbourne and Brisbane have different rents, wages and delivery networks, so one national price can produce very different margins. Record local competitors’ item size, quality, delivery speed, GST treatment and total checkout price in Australian dollars.
Observe where local customers habitually shop. A handmade product may sit beside produce at a Melbourne or Brisbane farmers market, compete with a Coles or Woolworths private label, or be compared with an Australian online seller. Each channel sets different expectations about presentation, convenience, packaging and the price buyers consider reasonable.
Speak with a small group of genuine target buyers. Ask which option they currently buy, what problem the product solves, and which features justify a higher price. Recording actual choices is more reliable than asking whether people “might” buy. Keep the same questions for each product so the answers can be compared.
Frame the price around customer value
Cost sets the boundary; value helps you position the product within it. If a specialised container saves a tradesperson twenty minutes each day, the relevant value is time saved, not the container’s material. If it simply holds stationery, convenience and finish may matter more, so a cost-plus price is harder to defend.
Build a simple range: an entry version with fewer features, a standard version, and a premium version with the strongest benefits. Customers can compare the trade-off directly, and each tier must still cover its own costs. Discounting a weak product rarely fixes uncertainty; it can signal that the original price was inflated.
SCORE's business planning guidance can help you turn these assumptions into conservative, expected and optimistic sales scenarios. Link each scenario to a price, unit cost and monthly order volume. If cash only becomes positive at an unrealistic volume, adjust the offer, price or sales channel before launch.
Include Australian taxes, laws and logistics
Work in Australian dollars and separate GST from your costs. GST is generally 10% in Australia, and businesses with annual turnover of $75,000 or more must generally register. If you are GST-registered, consumer prices normally include GST; list it clearly. Use the ATO rules and your accountant’s advice for your exact situation.
Pricing claims are regulated too. The Australian Consumer Law, part of the Competition and Consumer Act 2010, prohibits misleading representations and governs many discount and “was” price claims. Do not advertise a saving you did not genuinely offer, and ensure the pack size, quality, service level and reference price behind a claim are accurate.
State and territory rules may also affect food preparation, labelling, electrical products, cosmetics and other categories. Check official regulators and industry-specific guidance before choosing a supplier. Quote delivery separately when freight is substantial, and confirm whether remote Australian customers face a different landed cost.
Build a first-price decision checklist
Keep the calculation and the market evidence together. This prevents a preferred number from driving every assumption.
- Direct materials, packaging and consumables per sellable unit
- Labour, payment fees, delivery and a fair overhead allocation
- Lowest monthly order volume that keeps cash moving
- Comparable local prices, including GST and delivery
Use the checklist to challenge the price, then watch for signs that customers are responding.
- Questions about quality, dimensions, use or suitability
- Enquiry-to-purchase rates at each tested price
- Feedback from reviews, product images and support messages
- Stock movement, repeat orders and abandoned baskets
If the signals conflict, begin with a price that protects cash and gives customers a clear reason to choose you. Set a review date and record what must change for the next decision.
Compare the main pricing approaches
No single pricing method works for every product. Use the comparison below to identify the strongest starting point, then test it against your own costs and market.
| Approach | How it works | Best fit | Main risk |
|---|---|---|---|
| Cost-plus | Adds a margin to full unit cost | Standard, easily compared products | Can price above customer willingness to pay |
| Competitor-based | Uses nearby prices as a range | Crowded markets with similar offers | Encourages price matching and thin margins |
| Value-based | Starts with the customer outcome | Differentiated or specialist products | Benefits and willingness to pay are harder to estimate |
| Launch pricing | Uses a temporary low or trial price | Testing a new product or channel | Low sales may reflect value rather than price |
A practical starting price usually combines three signals: your cost floor, the local competitive range and the value shown by customer research. With a $30 pre-GST landed cost, comparable offers from $55 to $70 and evidence that buyers value the standard option, $59 including GST may be a sensible test price.
Write down the assumptions behind that number before publishing it. Review results after a defined period or order count, then keep, raise or lower the price according to the evidence rather than daily sentiment.
Launch a price you can learn from
Choose one product, set its initial price, and track the numbers that matter: units sold, gross contribution, enquiry volume, delivery cost and customer feedback. Make one controlled change at a time where possible. Thirty days of credible sales data is more useful than a month of comments from people who never intended to buy.
Ask an experienced adviser to challenge the assumptions. If you are based in Nashville, SCORE Nashville's volunteer mentor network can help you connect with a volunteer business mentor; Australian businesses can seek equivalent support through a local small-business advisory service. Complete your unit-cost sheet, choose a test price, and speak with your first ten target customers this week.
