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Pricing

Pricing: How to Price Your Product Without Underselling Yourself

Most first-time entrepreneurs price too low. I did it too. Here's how to think about pricing properly.

May 2026 · Updated October 2026 · 4 min read · By Krish Panda
Key takeaways

When I launched Velora Gran Turismo, I underpriced some products because I didn't know my real costs yet. It's one of the most common mistakes new founders make, and one of the easiest to avoid.

Start With Your Costs

Before you set a price, know your costs. For a physical product that usually means:

Add them all up. That's your floor. Your price has to be above this number or you're losing money on every single sale.

Example

Say you sell a printed hoodie. Production is $22, packaging is $1.50, you pay $5 for shipping, and your platform charges 3% plus $0.30 per order.

Before the percentage fee, each hoodie costs you $28.80. The 3% comes on top and grows with your price, so your real floor is a little higher: about $29.70. Sell for less than that and every order loses money.

Understand Your Margin

Margin is the difference between what something costs you and what you sell it for, as a share of the price. If a product costs you $10 to make and you sell it for $20, your margin is 50%.

Aim for at least 50% margin as a starting point. Lower than that and you have almost no room for marketing, mistakes, or the occasional discount.

Example

Back to the hoodie. Sell it for $60 and the 3% fee is $1.80. You keep $60 − $28.80 − $1.80 = $29.40 per sale, a margin of about 49%. That's healthy.

Margin Is Not Markup

This trips up a lot of first-time founders. Markup compares your profit to your cost. Margin compares your profit to your price. They are not the same number.

Buy something for $10 and sell it for $20, and your markup is 100%, but your margin is only 50%. If you aim for "50% markup" thinking it means 50% margin, you'll end up with a margin of just 33%, and wonder where the money went.

Price for Your Customer, Not Just Your Costs

Your costs tell you the lowest price you can charge. They don't tell you the right price. That depends on who you're selling to and what else they could buy instead.

Look at three or four similar products your customer would also consider. Where does yours fit? If your quality, design or story is better, you can charge more. Your costs are the floor; what customers are willing to pay is the ceiling. Aim somewhere between.

Don't Compete on Price

Lowering your price to undercut competitors is a race to the bottom. There will always be someone willing to go lower. Compete on quality, brand, and experience instead.

Plan for Discounts Before You Give Them

Discounts feel small to the customer and big to you, because they come straight out of your profit.

Example

Give 20% off the $60 hoodie and it sells for $48. The fee drops to $1.44, and you keep $48 − $28.80 − $1.44 = $17.76. A 20% discount cut your profit by almost 40%.

That's exactly why a healthy margin matters. It's what lets you run a launch offer without working for free.

Test Your Pricing

Your first price isn't your final price. Launch, see how people respond, and adjust. If everything sells out immediately you're probably priced too low. If nothing sells, price might be one of several things worth looking at.

If you're unsure, start a little higher. Lowering a price later is easy, and customers like it. Raising one is much harder.

The Psychology of Pricing

A price just below a round number, like $19 instead of $20, feels noticeably cheaper than the one-dollar difference suggests. Round numbers do the opposite: they feel more premium. Pick the one that fits your brand. Small detail, but it makes a real difference.

Want to run your own numbers? Use the free Rexyd Pricing Calculator to find your true cost, your break-even price, and a price with a healthy margin.

"Pricing isn't about being cheap. It's about being fair to yourself and your customers."