It's Big Awesome Savings time
Need help choosing a plan?
Created with Sketch. 1800 917 771 Schedule a call
Need help?
We're here for you.
Schedule call
Created with Sketch.
Manager calculating wholesale price
Starting a business

How to calculate wholesale price

Many retailers struggle to price for profit, especially when they’re moving from pure retail to wholesale. Sometimes, a retail price that offers a comfortable profit becomes too low for wholesale pricing due to the additional costs involved.

After all, the most common way to calculate your wholesale price is by simply dividing your retail price by half. Ideally, your costs should only take up 25% of your retail price, but keeping costs low can be tricky. Your total costs are made up of overhead costs, which are ongoing operational expenses, along with material costs that include raw materials and the finished products that make up your inventory.

If your wholesale price leaves you with narrow profit margins and you’re looking for an alternative to the 50% one-size-fits-all approach, you might want to try implementing the absorption pricing method to calculate your Recommended Retail Price (RRP) and your wholesale price.

A clock with a person sitting at a table.

Free Accounting 101 for Small Business Owners

Understand your finances and set up your books the right way with our short course. What you'll learn:

  • Understanding Financial Statements
  • Bookkeeping and Cash Flow Management
  • Business Accounting Key Terms

By the end of the course, you should have a solid understanding of the financial basics so that you're better equipped to run your business.

Please check your inbox to get started with your learning!

By signing up you are agreeing to our terms and privacy policy.

How to calculate wholesale price by using the absorption pricing method

Absorption pricing works great when you’re trying to figure out your wholesale price, as it ensures you earn a certain profit margin on every piece.

  1. Calculate your cost price by using the cost price formula
  2. Add up your cost price and your profit margin. 

How do you change your prices without losing or upsetting customers? 

1. Refresh your inventory

Selling off our existing stock and starting afresh might sound a little extreme, but it works if you regularly release new collections for your brand. This way, once you finish selling off your existing inventory, you’ll can release new collections with higher prices, while clearing out your inventory.

Also, by announcing that you’ll be raising prices for subsequent collections, you should also enjoy a surge in sales as customers are motivated to place more purchase orders due to the pending price increase. 

Grow Your Business with QuickBooks

2. Be honest and transparent

Don’t let your customers think that you are increasing prices for a better profit margin. Instead, offer a breakdown of your costs and how these costs have increased over the years. Ultimately, you need to raise your prices in order to continue offering quality products to your customers, so just tell them the truth.

Pricing can be a challenge for many businesses and while there is no easy fix, there are tools you can use to automate the initial process. In the long term, adapting your prices to reflect changing market demands and costs requires an in-depth analysis of how your products are performing. Solutions like QuickBooks that help to manage inventory as well as sales and purchase orders, that include robust reporting capabilities can help you keep your prices and profit margins at an optimal level. 

While every care has been taken to ensure the accuracy of the information presented as at 01 May 2023, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.

Related Articles

Looking for something else?

Get QuickBooks

Smart features made for your business. We've got you covered.

Help Me Choose

Use our product selector to find the best accounting software for you.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.

Stay up-to-date with the latest small business insights and trends!

Sign up for our quarterly newsletter and receive educational and interesting content straight to your inbox.

Want more? Visit our tools and templates!

By signing up you are agreeing to our terms and privacy policy.

A happy small business owner signing up for the QuickBooks newsletter on laptop