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Methodology

Multi-product Price Architecture Planner methodology

Check weighted portfolio margin and target-revenue gap.
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

Portfolio Margin
portfolioMargin = total contribution ÷ total revenue

Where

portfolioMargin
Portfolio Margin (decimal rate)Source: Calculated output
revenueExTax
Revenue Ex Tax (currency units, ex tax)Source: Calculated output
contributionExTax
Contribution Ex Tax (currency units, ex tax)Source: Calculated output
Revenue Ex Tax
revenueExTax = product A revenue + product B revenue

Where

productAUnits
Product A units (whole product A units/comparison period)Source: User assumption
productBUnits
Product B units (whole product B units/comparison period)Source: User assumption
revenueExTax
Revenue Ex Tax (currency units, ex tax)Source: Calculated output
Contribution Ex Tax
contributionExTax = product A contribution + product B contribution

Where

productAUnits
Product A units (whole product A units/comparison period)Source: User assumption
productBUnits
Product B units (whole product B units/comparison period)Source: User assumption
contributionExTax
Contribution Ex Tax (currency units, ex tax)Source: Calculated output
Target Revenue Ex Tax
targetRevenueExTax = total portfolio cost ÷ (1 − target portfolio margin)

Where

targetPortfolioMargin
Target portfolio margin (proportion of portfolio revenue retained as contribution)Source: User decision
portfolioMargin
Portfolio Margin (decimal rate)Source: Calculated output
revenueExTax
Revenue Ex Tax (currency units, ex tax)Source: Calculated output
targetRevenueExTax
Target Revenue Ex Tax (currency units, ex tax)Source: Calculated output
Revenue Gap Ex Tax
revenueGapExTax = target revenue − current portfolio revenue

Where

revenueExTax
Revenue Ex Tax (currency units, ex tax)Source: Calculated output
targetRevenueExTax
Target Revenue Ex Tax (currency units, ex tax)Source: Calculated output
revenueGapExTax
Revenue Gap Ex Tax (currency units, ex tax)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.

Portfolio Margin
47.4%
Revenue Ex Tax
38,000 currency units
Contribution Ex Tax
18,000 currency units
Target Revenue Ex Tax
33,333.33 currency units
Revenue Gap Ex Tax
-4,666.67 currency units

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

Interpretation

The weighted portfolio margin shows whether the expected product mix supports the target price architecture.

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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