Minimum Viable Price Calculator
Calculate the lowest price at which a product still covers variable cost, allocated overhead, and a target margin — the floor below which a sale destroys value.
📉 Pricing📐 Minimum price = (variable cost + allocated overhead) / (1 − target margin)💼 Business
Variable cost per unit
Allocated fixed cost per unit
Target net margin (%)
Expected volume
Selling costs per unit (commission, fees)
Expected return/discount rate (%)
Please enter valid values.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Minimum Viable Price Calculator | — | Minimum price = (variable cost + allocated overhead) / (1 − target margin) | currency |
Step-by-Step Examples
Example 1
Standard Product
Variable 28, allocated fixed 12, selling 4.50, target margin 20%, 8% leakage, 3,000 units.
- Full cost = 28 + 12 + 4.50 = 44.50
- Before leakage = 44.50 / 0.80 = 55.63
- Grossed up for 8% leakage = 55.63 / 0.92 = 60.46
- Absolute floor = 32.50
✓ 60.46 minimum, 32.50 absolute floor
Example 2
No Overhead Allocation
Variable 28, no fixed allocation, selling 4.50, 20% margin, no leakage.
- Full cost = 32.50
- Minimum = 32.50 / 0.80 = 40.63
- Ignoring overhead makes the floor look 33% lower than it is
✓ 40.63 — but overhead unrecovered
Example 3
Marginal Order Decision
Same product, spare capacity, one-off order.
- Absolute floor = variable 28 + selling 4.50 = 32.50
- Any price above this adds contribution toward already-committed overhead
- But repeated below-full-cost pricing leaves overhead unrecovered
✓ 32.50 for genuine spare capacity only
Real-World Applications
Discount Discipline
A calculated floor gives sales teams a defensible limit rather than negotiating on instinct.
Marginal Order Decisions
Distinguishing the absolute floor from the full-cost floor clarifies when a low-price order is acceptable.
Product Rationalisation
Products that cannot sustain a price above their minimum viable level are candidates for discontinuation.
Leakage Awareness
Returns and discounts mean realised price is below list, which the gross-up accounts for.
Common Mistakes to Avoid
⚠️
Ignoring selling costs
Commissions, marketplace fees, and payment processing are per-unit costs that belong in the floor calculation.
⚠️
Treating the absolute floor as a normal price
Pricing at variable cost is defensible only for genuine spare capacity. Repeated use leaves fixed costs unrecovered and the business unprofitable.
⚠️
Forgetting returns and discount leakage
If 8% of value never materialises, list price must be grossed up accordingly or realised margin falls short of target.
Frequently Asked Questions
What is minimum viable price? ▾
The lowest price that still covers variable cost, allocated overhead, selling costs, and a target margin after allowing for returns and discounting.
What is the absolute price floor? ▾
Variable cost plus per-unit selling cost. Below this, each sale loses cash immediately regardless of volume.
When can I sell below full cost? ▾
When genuine spare capacity exists and the order does not displace full-price business. Any contribution above variable cost helps cover committed overhead.
Why gross up for returns and discounts? ▾
Because realised revenue is below list price. If 8% leaks away, list must be about 8.7% higher to achieve the target net price.
How should overhead be allocated? ▾
Ideally by a driver reflecting actual resource consumption. Simple per-unit allocation works when products are similar but distorts across a varied range.