Why cost-plus pricing fails when fees are a percentage of the price
By the TrueSellerPrice team · Updated · How we calculate
Cost-plus pricing takes what a product costs and adds a fixed percentage: buy for $10, add 30%, sell for $13. It is simple and works when your costs do not depend on the price. On marketplaces they do. Commissions, payment processing and advertising are charged as a percentage of the selling price, and cost-plus ignores that.
An example that loses money
A seller buys a product for $10.00, sells on a marketplace that charges a 15% commission on the item price and 3% payment processing on the order, and spends about 10% of revenue on ads. They add a 30% markup and list at $13.00.
Illustrative inputs, not a quote from any platform. Calculated with the same engine as the calculator above.
- Product cost
- $10.00
- Commission
- 15% of price
- Payment processing
- 3% of order
- Advertising
- 10% of revenue
- Price (cost + 30%)
- $13.00
| List price | $13.00 |
| Customer pays (incl. tax) | $13.00 |
| Indirect tax collected for authorities VAT / GST / sales tax — not seller revenue | $0.00 |
| Net revenue | $13.00 |
| Marketplace commission Marketplace / referral · 15% of item price incl. tax (13.00) | −$1.95 |
| Payment processing Payment processing · 3% of order total incl. tax (13.00) | −$0.39 |
| Product cost 10.00 USD per unit | −$10.00 |
| Advertising 10% of net revenue | −$1.30 |
| Contribution profit Contribution margin -4.92% | -$0.64 |
| Profit after allocated overhead | -$0.64 |
| Margin | -4.92% |
| Markup on total cost | -4.69% |
Why it happens
The 30% markup is measured against cost, but the 28% of percentage charges is measured against the price. Every time you add a dollar to the price, 28 cents of it goes to fees and advertising. Cost-plus treats the price as if it were all yours.
Price from the margin instead
A 30% markup corresponds to a 23.08% margin. To keep that margin after the 28% of percentage charges, the product cost must fit into the remaining 48.92% of the price: price = cost ÷ (1 − margin − percentage charges).
Illustrative inputs, not a quote from any platform. Calculated with the same engine as the calculator above.
- Product cost
- $10.00
- Commission
- 15% of price
- Payment processing
- 3% of order
- Advertising
- 10% of revenue
- Target margin
- 23.08%
| List price | $20.45 |
| Customer pays (incl. tax) | $20.45 |
| Indirect tax collected for authorities VAT / GST / sales tax — not seller revenue | $0.00 |
| Net revenue | $20.45 |
| Marketplace commission Marketplace / referral · 15% of item price incl. tax (20.45) | −$3.07 |
| Payment processing Payment processing · 3% of order total incl. tax (20.45) | −$0.61 |
| Product cost 10.00 USD per unit | −$10.00 |
| Advertising 10% of net revenue | −$2.05 |
| Contribution profit Contribution margin 23.1% | $4.72 |
| Profit after allocated overhead | $4.72 |
| Margin | 23.1% |
| Markup on total cost | 30.04% |
When cost-plus is fine
If you sell direct and your only percentage cost is a small card fee, cost-plus with a generous markup is a reasonable shortcut. As soon as a meaningful share of the price goes to percentage fees or advertising, price from the margin. The pricing calculator does this for any mix of fees, and the break-even price calculator shows your floor.
Try it with your own numbers
The lowest price that covers every cost and fee.
Open Break-even price calculatorThis guide is general information for decision support, not tax, legal or accounting advice. Fee figures were checked on the date shown against third-party summaries of each platform's fee page; platforms change their fees, so confirm current rates on the official page.