When I set my first prices for Kind Loom, I did what I think most people do: I looked at my cost, doubled it, and called it a day. It felt scientific. It wasn’t. “Doubling” isn’t a margin target, and once platform fees and the real landed cost crept in, some of my “healthy” prices were barely profitable. So let me give you the actual formula I use now to hit a specific gross margin — and the traps that quietly undermine it.

Margin vs the mistake most of us make

Gross margin is the share of the selling price you keep after the cost of the product itself. If a set sells for $100 and costs you $40, your gross profit is $60 and your gross margin is 60%. Simple. The mistake is thinking in “multiples” — doubling your cost gives you a 50% margin, not 100%, and tripling it gives 66.7%. If you don’t work from the actual percentage you want, you’re guessing.

The pricing formula

To hit a target gross margin, you don’t multiply — you divide. The formula is:

• Price = Cost ÷ (1 − Margin)

The “1 − margin” part is the share of the price that your cost is allowed to take up. If you want a 60% margin, your cost can only be 40% of the price, so you divide by 0.40. That’s it.

Worked examples

Let’s use a true landed cost of $36 per duvet set (roughly what one of my real shipments worked out to — I break that down in my calculators and guides). Here’s what to charge at each target:

• 40% margin: $36 ÷ (1 − 0.40) = $36 ÷ 0.60 = $60.00
• 50% margin: $36 ÷ (1 − 0.50) = $36 ÷ 0.50 = $72.00
• 60% margin: $36 ÷ (1 − 0.60) = $36 ÷ 0.40 = $90.00

Notice how quickly the price climbs. Going from a 40% to a 60% margin isn’t a small tweak — it’s a 50% higher price. That’s the reality of margin, and it’s why getting your cost right matters so much.

Price off landed cost, not invoice cost

This is the part that trips up nearly every product seller. The “cost” in the formula has to be your true landed cost — product, freight, duty, import GST impact, brokerage, currency, and last-mile — not the invoice price from your supplier. On one of my shipments the invoice said about $22 a set but the landed cost was $36. If I’d priced for a 50% margin off $22, I’d have charged $44 and actually been running a slim margin around 18% once real costs were in. Ouch.

Work out your real number first — the landed-cost guide walks through every line — then feed that into the pricing formula.

Don’t forget fees and GST

Even a clean 50% gross margin isn’t all yours. Two things eat into it after the sale:

• Platform and payment fees. Online card processing is commonly around 2.9% plus roughly 30 cents per transaction. On a $72 order that’s about $2.40 — small per sale, but it comes straight off your margin, so build a couple of points of cushion into your target. I run my store on Shopify (here’s my honest Shopify review), and I factor its fees into my cost before I set a price, not after.
• GST/HST. If you’re registered, sales tax is charged on top of your price and remitted to the CRA — it isn’t yours and it isn’t part of your margin. Don’t accidentally price as though that tax is revenue. The CRA’s GST/HST for businesses pages spell out when you need to register and charge it. In Alberta there’s no provincial sales tax, so you’re collecting the 5% GST — but customers in other provinces may owe HST, and your platform can handle those rates for you.

A quick sanity check

Before you commit to a price, run it backwards: subtract your landed cost and your expected fees from the price, then divide the result by the price. That’s your real margin. If it’s well below your target, either your cost is higher than you thought or your fees are bigger than you budgeted — and it’s much better to find that out on a spreadsheet than three months into selling.

• Decide your target margin (40/50/60% are common starting points).
• Use your true landed cost, from the landed-cost and pricing calculators.
• Apply Price = Cost ÷ (1 − Margin).
• Add a cushion for platform and payment fees.
• Remember GST sits on top and isn’t your money.

Pricing isn’t glamorous, but it’s the single lever that decides whether all the other work — the sourcing, the photos, the packaging — actually adds up to a business.

This is based on my own experience — not financial, tax, or legal advice. Rules, rates, and fees change, so confirm current details with official sources like the CRA and CBSA before you decide.