PricingNest

Price Floor by Margin

Calculate minimum price floors from unit costs and target margins.

Quick checklist

  • Base floors on unit cost, not list price.
  • Use contribution margin targets.
  • Include p90 usage overhead.
  • Keep floors consistent across tiers.
  • Review after infra cost changes.

Step-by-step

  1. Estimate unit cost per usage unit.
  2. Apply target gross margin.
  3. Add a buffer for peak usage.
  4. Compare floors to current pricing.
  5. Update tiers or minimums if needed.

What to watch

  • Underpriced floors create negative margins.
  • Floors that are too high reduce conversion.
  • Cost variance can break pricing assumptions.

Common mistakes

  • Ignoring request and support costs.
  • Using averages instead of p90 costs.
  • Mixing fixed and variable costs.

Tools to use