The Core Pricing Formula
| Term | Formula | Example |
|---|
| Cost of Goods (COGS) | What you paid for the product (wholesale) | EltaMD SPF 46 = $14.50 wholesale |
| Markup % | (Retail Price − COGS) ÷ COGS × 100 | ($36 − $14.50) ÷ $14.50 × 100 = 148% markup |
| Margin % | (Retail Price − COGS) ÷ Retail Price × 100 | ($36 − $14.50) ÷ $36 × 100 = 60% margin |
| Retail Price from Markup | COGS × (1 + Markup %) | $14.50 × 2.0 = $29 (100% markup = 2x COGS) |
| Retail Price from Margin | COGS ÷ (1 − Margin %) | $14.50 ÷ (1 − 0.60) = $36.25 (60% margin) |
Industry Standard Markups by Category
| Product Category | Standard Markup | Standard Margin | Notes |
|---|
| Medical-grade skincare (ZO, SkinMedica, Alastin) | 100–150% | 50–60% | 2–2.5x cost. Higher markup justified by clinical credentials and exclusivity |
| SPF / sunscreen | 100–150% | 50–60% | High velocity product — consistent seller. EltaMD, SkinMedica SPF |
| Retail supplements / vitamins | 100–200% | 50–67% | Low COGS — excellent margin. Nutraceuticals, collagen, peptide supplements |
| Skincare devices (home devices) | 50–100% | 33–50% | Lower markup due to higher COGS — still strong margin dollars |
| Lash / brow retail products | 100–200% | 50–67% | Aftercare serums, lash conditioners — high margin, high perceived value |
| Retail gift cards | 100% (no COGS) | 100% gross (net ~90–95%) | Gift cards = pure margin. 10–15% never redeemed (breakage) = bonus revenue |
Service Pricing Formula — Know Your Numbers
Step 1 — COGSProduct cost for that service (Botox units used × cost per unit, filler cost, consumables)
Step 2 — Labor costProvider hourly rate × time for service. Example: $75/hr provider, 30-min service = $37.50 labor cost
Step 3 — Overhead allocationMonthly overhead ÷ monthly appointment slots × % allocated to this service. Usually 20–35% of service price
Step 4 — Target marginSet your target: 40–60% net margin on services after COGS, labor, and overhead
Step 5 — Minimum priceCOGS + Labor + Overhead = break-even. Add target margin on top = minimum viable service price
Market checkWhat are 3 comparable providers in your market charging? Price within 10–20% of market — above if you're positioned as premium
Common Pricing Mistakes to Avoid
❌ Pricing by "what feels right" without knowing your COGS — you may be losing money on services you think are profitable
❌ Discounting services to attract new patients — attracts deal-seekers, not loyal patients. Offer value instead
❌ Undercharging because you're "new" — patients associate low prices with low quality. Price what the service is worth
❌ Not updating prices annually — inflation increases your COGS every year. Review and adjust pricing every January
★ Rule of thumb: if you're always booked and never getting price pushback, you are UNDERPRICED. Premium practices stay consistently booked at premium prices.
Membership Pricing Formula
Step 1Identify your most popular monthly services (e.g., Botox maintenance, facial, skincare consult)
Step 2Calculate the retail value of what's included in the membership monthly
Step 3Price the membership at 15–25% below retail value of included services — the discount is the incentive to commit
Step 4Verify your margin: membership price ÷ your COGS for included services must still be profitable (target 40%+ margin)
Step 5Add a non-refundable enrollment fee or require annual commitment to protect against churn
ExampleBotox 20 units monthly ($280 retail) + monthly facial ($120 retail) = $400 retail value → membership $320/month (20% savings). Your COGS must be well under $320.