Every owner I've ever sat down with has a favourite number, and it's almost always the wrong one. It's units sold. "This one's my bestseller — I can't keep it in stock." Great. Now tell me what you make on it.
Most of the time, the answer is a pause. Then a guess. Then, once we've actually worked it out, a fairly specific facial expression.
Here's why it happens. You priced that product once, probably years ago, probably by looking at what the shop down the road charged and knocking a bit off. Then it started selling. And because it was selling, you never touched it again — you don't fix what isn't broken. Meanwhile your supplier crept prices up twice, your packaging changed, shipping went sideways, and the thing takes you twenty minutes of assembly you stopped noticing because you can do it while talking.
The volume hid the problem. It usually does.
The number almost everyone leaves out
When owners work out margin, they count the obvious stuff: what they paid for the item or the materials. Sometimes packaging. Occasionally shipping.
Almost nobody counts their own time.
I understand why. Your time feels free because no money leaves the bank when you spend it. But you are the most expensive input in your business, and the whole point of the business is eventually to pay you properly for it. If a product only works because you're doing forty minutes of unpaid labour per unit, it doesn't work. It's a hobby with a receipt.
If the margin only holds because you're not paying yourself, that's not a margin. That's a subsidy, and you're the one funding it.
So pick a number. Not your dream hourly rate — the rate you'd have to pay someone competent to do that specific task. Twenty-five, thirty, thirty-five an hour. Whatever's honest in your market. Then use it.
The ten-minute check
Take your top three sellers by units. For each one, write down:
- What you charge. The real number customers pay, not the RRP you wish you got. If half of them sell at a discount, use the blended price.
- Direct cost. Wholesale price, or materials if you make it.
- Packaging. The box, the tissue, the sticker, the card you handwrite.
- Your time. Minutes to make it, pack it, list it, photograph it — divided across however many units that effort covers. Multiply by your hourly rate.
- Transaction costs. Card fees, marketplace or platform commission, shipping you eat rather than charge.
Add the costs up. Subtract from the price. That's your real gross profit per unit. Divide it by the price and you've got your real margin percentage.
Now do the maths that actually matters: multiply that per-unit profit by monthly units. That tells you what the product contributes, which is a completely different question from what it sells.
Members: this is a screen, not a spreadsheet
The pricing audit in the club walks you through this per product, counts your hours automatically at a rate you set once, and flags anything sitting under a healthy margin — plus what you'd need to charge to fix it.
What you'll probably find
Three patterns come up over and over.
1. The loss leader you didn't choose
A popular, fiddly, labour-heavy item priced like a simple one. It brings people in, which is genuinely valuable — but you need to decide that's its job rather than discovering it by accident. A deliberate loss leader is a strategy. An accidental one is a leak.
2. The quiet hero
Something mid-volume with a beautiful margin that you've never pushed because it isn't exciting. This is the best news in the whole exercise. You don't need new customers to make more money — you need this thing at eye level, in the email, in the bundle, mentioned at the till.
3. The one you're scared to re-price
You know it's underpriced. You've known for a while. You haven't moved it because you're convinced people will notice and leave.
They mostly don't. A 10% increase on a $40 item is four dollars. The customer who loves your shop is not leaving over four dollars. And run the numbers before you panic: if you raise the price 10% and lose 10% of the volume, you almost always make more money on less work. Do that arithmetic before you decide you can't.
How to actually fix it
You have four levers, and price is only one:
- Raise the price. Fastest, and less scary than it feels. Do it quietly, with no apology and no announcement.
- Cut the time. Batch the assembly, simplify the packaging, stop handwriting the card for every single order.
- Cut the cost. Ask your supplier about a bigger break. Ask. They expect it, and the worst case is they say no.
- Change what it sits next to. Bundle the thin-margin hero with the fat-margin quiet one and sell the pair.
Pick one product and one lever this week. Not all three products and all four levers — that's how this ends up on a list you never come back to.
The uncomfortable truth is that most small businesses don't have a sales problem. They have a margin problem wearing a sales problem's coat, and the fix is a boring afternoon with a calculator rather than a new marketing strategy.
Do the boring afternoon. It's the highest-paid work you'll do all month.