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Methodology

Minimum Profitable Price Planner methodology

Set a floor that covers costs, variable fees and target margin.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Price Floor Ex Tax
priceFloorExTax = cost stack ÷ (1 − percentage fee − target margin)

Where

unitCostExTax
Unit cost (currency units/product unit, ex tax)Source: Business record
percentageVariableFeeRate
Percentage fee (proportion of selling price charged as variable fee)Source: Business record
targetMargin
Target margin (proportion of selling price retained as contribution)Source: User decision
priceFloorExTax
Price Floor Ex Tax (currency units, ex tax)Source: Calculated output
margin
Margin (decimal rate)Source: Calculated output
Contribution Ex Tax
contributionExTax = price floor × (1 − percentage fee) − cost stack

Where

unitCostExTax
Unit cost (currency units/product unit, ex tax)Source: Business record
percentageVariableFeeRate
Percentage fee (proportion of selling price charged as variable fee)Source: Business record
priceFloorExTax
Price Floor Ex Tax (currency units, ex tax)Source: Calculated output
contributionExTax
Contribution Ex Tax (currency units, ex tax)Source: Calculated output
Margin
margin = contribution ÷ price floor

Where

priceFloorExTax
Price Floor Ex Tax (currency units, ex tax)Source: Calculated output
contributionExTax
Contribution Ex Tax (currency units, ex tax)Source: Calculated output
margin
Margin (decimal rate)Source: Calculated output
Markup
markup = contribution ÷ cost stack

Where

unitCostExTax
Unit cost (currency units/product unit, ex tax)Source: Business record
contributionExTax
Contribution Ex Tax (currency units, ex tax)Source: Calculated output
markup
Markup (decimal rate)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

The worked rows below come directly from the registered engine and visible default fixture.

Calculation and outputs

Example

The worked rows below come directly from the registered engine and visible default fixture.

Price Floor Ex Tax
81.94 currency units
Contribution Ex Tax
20.49 currency units
Margin
25%
Markup
34.7%

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

The price floor is the lowest price that covers the entered cost stack, fees and retained-margin requirement.

3. Validation and boundary checks

  • All inputs must be finite and within the visible validation boundaries.
  • Rates use decimal values below 100%; whole-unit thresholds round upward only where the engine names that rule.
  • All compared monetary inputs use one consistent ex-tax basis and planning period.

4. Assumptions and source classification

  • Every cost, price, fee and volume is supplied by the user; no market benchmark is inferred.
  • Indirect tax is excluded from retained commercial economics unless a dedicated input explicitly models it.
  • The engine retains full precision and display formatting never feeds back into calculation.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The model does not forecast demand, competitor response, supplier negotiation outcomes or capacity.
  • It does not replace accounting, tax, legal or financial advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Related reading

Guides to interpret the decision and its assumptions.

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