Adaeze makes and sells handmade skincare products in Enugu — body butters, scrubs, and facial oils. She sells online and supplies three boutiques. Business is growing. Orders are increasing.
Last month, she made ₦680,000 in sales. After buying shea butter, oils, containers, labels, and gas for her production process, she had roughly ₦290,000 left. She paid her part-time assistant ₦45,000, covered her rent allocation of ₦20,000, and settled her data and phone bills.
By her calculation, she made about ₦225,000 in profit.
By the correct calculation, she made significantly less — because she forgot to include several real costs in her analysis. By the time we worked through her numbers properly using Lucrive's pricing calculator, her actual profit was closer to ₦140,000.
The gap between ₦225,000 and ₦140,000 exists because of costs she was absorbing without realising it. Costs that belong in her price.
Most business owners remember to include the obvious costs — materials and labour. The ones below are the ones that get forgotten.
Everything that physically goes into the product:
Important: Use the actual cost per batch, not the wholesale price. Include delivery and transport costs to get materials to your production location.
Everything the product goes into:
Many Nigerian product owners underprice because they forget packaging is a production cost. A ₦500 jar is part of the product cost, not an overhead.
The time spent actually making the product:
The trap most owners fall into: they calculate labour costs for employees but not for themselves. If you spend 4 hours a day making products, that time has a value. Include it.
In almost every physical product business, some materials are wasted, some batches fail, and some finished products do not meet quality standards.
Typical wastage rates by industry:
If you produce 100 units but 8 fail quality checks, your cost per sellable unit is based on 100 units of production divided by 92 units sold — not 100.
How to include it: multiply your direct production cost by (1 + wastage rate). If your wastage rate is 8%, multiply material + direct labour cost by 1.08.
Overhead is every business cost that is not directly tied to a specific unit of production but must still be paid whether you produce 10 units or 1,000.
This overhead must be allocated to your products. If you produce 400 units per month:
₦175,000 ÷ 400 units = ₦437.50 overhead per unit
Every unit you sell must contribute ₦437.50 toward your overhead. If it does not, your overhead costs are being absorbed by your personal finances — meaning you are subsidising your customers.
Let us rebuild Adaeze's cost per unit properly.
She makes body butter in 200ml jars. She produces 250 jars per month.
Direct costs per jar:
Wastage (7%): ₦758 × 1.07 = ₦811 per sellable jar
Labour per jar:
Overhead per jar: ₦175,000 ÷ 250 = ₦700
Total cost per jar: ₦811 + ₦350 + ₦700 = ₦1,861
This is Adaeze's floor price. She cannot sell below ₦1,861 without losing money.
She was selling body butter at ₦3,500 per jar. That sounds comfortable — until you add the margin calculation.
Actual margin: (₦3,500 − ₦1,861) ÷ ₦3,500 = 46.9% gross margin
46.9% sounds good. But from that margin, she must cover sales commissions to the boutiques (typically 20–30% in Nigeria), returns and damaged goods in transit, and any discounts or promotions.
After boutique commissions of 25%, her effective selling price to end customers is ₦2,625 — a margin of only 29% over her floor price.
That is tighter than it looks, and tighter than she thought.
Once you know your floor price, build your recommended selling price in three layers:
Layer 1 — Floor Price: Total cost per unit (the number below which you lose money)
Layer 2 — Safety Buffer: 10–20% above floor price to absorb cost fluctuations. When shea butter prices rise or electricity costs spike, your buffer protects your margin.
Layer 3 — Profit Margin: The actual profit you intend to make. For a product business, a gross margin of 40–60% before channel costs is a reasonable target.
Adaeze's recommended price calculation:
Her current retail price of ₦3,500 through boutiques is actually slightly below where it should be. A modest increase to ₦3,900 is justified by her true cost structure.
Many Nigerian product businesses sell through multiple channels — direct sales (Instagram, WhatsApp), physical markets, boutique stockists, and online platforms. Each channel has a different cost attached.
Your floor price is the minimum for any channel. But your recommended price for boutique sales must be higher than your direct price, because you are paying the boutique's commission from your margin.
The mistake is setting one price and applying it everywhere — meaning your boutique sales are effectively subsidised by your direct sales.
Most Nigerian product prices should be reviewed at minimum every six months. Costs in Nigeria change frequently:
When any of these change significantly, run your numbers again in Lucrive's pricing calculator. A 15% rise in raw material costs with no price adjustment means your margin is eroding quietly.
The business owners who stay profitable through inflationary periods are the ones who review and update their prices regularly — not the ones who set a price and never touch it again for fear of losing customers.
You do not need a spreadsheet. You do not need to remember which costs to include.
Lucrive's pricing calculator has a dedicated product pricing mode. Enter:
The calculator shows you your floor price, recommended price, and a diagnosis compared to your current selling price.
Most Nigerian product business owners who do this calculation for the first time discover one of two things: either their prices are roughly right and they can proceed with confidence, or they find a gap that explains why a busy business never seems to accumulate savings.
Both findings are worth having.
Calculate your product floor price free at lucrive.io →
People and businesses in our examples are illustrative, not real Lucrive customers. Figures are worked examples: confirm your own position with a qualified tax adviser.