Pricing and margin for small Filipino businesses

The most common way to price something in the Philippines is to look at what the seller beside you charges and go a peso or two lower.

It is quick and it feels safe. It also quietly assumes their costs are your costs. They might buy in bigger volume. They might own their space. They might be losing money and not know it yet. Copying their price means copying their mistakes.

Here is a better way, and it fits on one page of a notebook.

Markup and margin are not the same thing

These two words get mixed up constantly, and the mix-up costs real money.

• Markup is how much you add on top of your cost, as a percentage of the cost.
• Margin is how much of the selling price you keep, as a percentage of the price.

Say a bottle of chili oil costs you P60 to make and you sell it for P100.

• Markup: P40 / P60 = 67%
• Margin: P40 / P100 = 40%

Same bottle, same P40 profit, two very different-sounding numbers. If a supplier or a course tells you to aim for a "40% margin" and you add 40% to your cost instead, you end up with a margin of about 29%. On a small business, that gap is your salary.

Step 1: Find your real cost per unit

This is your floor. Below it, every sale makes you poorer, and selling more makes it worse.

Write down everything that goes into one batch:

• ingredients or materials
• packaging, labels, stickers, plastic, rubber bands
• gas, electricity and water for that batch
• your own time (yes, really, even at a modest hourly rate)
• delivery or the fare to buy supplies
• spoilage, breakage and the ones you gave away

Then divide by the number of units you actually sold, not the number you made. If you cooked 50 and sold 42, the cost of the 8 you did not sell is a real cost of the 42 you did.

Most people who do this honestly for the first time find their cost is higher than they thought. That is the point of doing it.

Step 2: Add the costs of getting paid and delivered

The price the customer pays is not the money you keep. Before you settle on a number, account for:

• Payment fees. Receiving on a personal QR from friends is generally free, but merchant QR and payment gateways usually charge a fee per transaction. Check your provider's current rates (GCash, Maya, PayMongo and others publish theirs).
• Marketplace fees. Shopee, Lazada and TikTok Shop take commissions plus transaction and other fees that, added together, can be a large slice of the sticker price. Read the fee page in your own seller center, because rates change and differ by category.
• Delivery you absorb, and free-shipping promos you join.
• Tax. If you are registered, percentage tax or the 8% option is computed on your gross sales, meaning the full price the buyer paid, not the payout you receive after platform fees.

A product that looks profitable at the counter can be break-even online once these are in.

Step 3: Find the ceiling

The ceiling is what your specific customer can and will pay. Two questions find it:

1. What can your customer actually spend on this, on a normal week?
2. What does the nearest alternative cost them, including the effort to get it? The tricycle fare, the wait, the minimum order, the trip to the mall.

If the alternative is a P15 fare away, your convenience is worth something. If you deliver to the office at 11:30 when the alternative is a twenty-minute walk, that is worth something too.

Step 4: Pick a point, and know why

Between the floor and the ceiling you have a choice.

• Nearer the floor buys volume, and then depends on volume. You need to sell a lot, consistently, for it to work.
• Nearer the ceiling needs a reason. Better, closer, faster, friendlier, fresher, or available when others are closed.

Neither is wrong. What is wrong is not knowing which one you picked.

Step 5: Check it against a real week

Multiply your profit per unit by the units you genuinely sold last week. Not your best week. A normal one.

Does that cover what your household needs from this business? If not, either the price is wrong, the volume is wrong, or the product is wrong. Better to find out on paper than six months in.

Do not start a price war

If your only advantage is being two pesos cheaper, anyone can take it from you tomorrow by being three pesos cheaper. Whoever has the deepest pocket wins a price war, and on your street that is rarely the newest seller.

Before you cut the price, look at what else the customer is paying for:

• Tingi. Selling smaller sizes lets more people buy. The sachet economy exists because the barrier was pack size, not the peso.
• Timing. Being open when others are closed is worth a premium.
• Distance. Walking it to the next street can be worth more than a discount.
• Bundles. "Ulam plus rice plus drink" can protect your margin better than discounting one item.

When to raise prices

Raise them when your costs go up (and they will), when you are consistently selling out, or when customers say "ang mura!" without being asked. A small, explained increase rarely loses good customers. Your suki would rather you stay open.

Your next step

Do the cost-per-unit exercise for your best-selling item tonight. One item, honestly, including your time. If the number surprises you, bring it to the Discord and ask how others in your category price. The Icreatechs course in the app also has a full lesson on this ("Stop Copying the Stall Next Door") with worked examples you can follow along.