Your product is selling every day.
Customers love it.
You keep restocking it.
You may even call it your best-selling product.
But here is the uncomfortable question:
How much money are you actually making from every sale?
Because a product can sell very fast and still give your business very little profit.
And if you keep celebrating sales without checking the numbers, you may be working harder while your business becomes financially weaker.
The Problem
Many small business owners decide prices using questions like:
“How much are other people selling it?”
“What price will customers accept?”
“Let me just add ₦1,000 to the cost.”
“If I make it cheaper, more people will buy.”
These questions are understandable.
But they are not enough.
Your selling price needs to make sense against the actual cost of delivering the product or service and the profit your business needs to generate. Pricing based only on competitors, intuition, or a simple markup can leave important costs out of the calculation.
And this creates a dangerous situation:
High sales can give you the impression that the business is doing well while your actual profit remains weak.
A Realistic Example
Imagine a small fashion business sells a particular shirt for ₦15,000.
The owner buys it for ₦10,000.
At first glance:
Selling price: ₦15,000
Purchase cost: ₦10,000
Difference: ₦5,000
The owner may think:
“I'm making ₦5,000 on every shirt.”
But is that really the final profit?
What about transportation?
Packaging?
Payment charges?
Delivery support?
Damaged items?
Discounts?
Staff costs?
Rent?
Electricity?
Marketing?
Other operating expenses?
Not every business needs to allocate every expense directly to each individual product, but the owner still needs to understand the relationship between product costs, operating costs, selling price and profit.
That ₦5,000 difference is not automatically ₦5,000 of final business profit.
The Impact
Now imagine the shirt becomes extremely popular.
The business sells 200 shirts in a month.
That sounds excellent.
But if the business has priced the product too low, selling more may simply mean doing more work without creating enough profit to support the business.
This is why revenue and profit are not the same thing.
And it is also why your best-selling product is not automatically your most profitable product.
Consider two products:
Product A
Sales: ₦500,000
Gross profit before other business expenses: ₦50,000
Product B
Sales: ₦300,000
Gross profit before other business expenses: ₦90,000
Product A generated more revenue.
But Product B generated more gross profit in this simplified example.
That is the kind of difference a business owner needs to see before deciding what deserves more attention.
Break-even analysis can also help a business understand how many units it needs to sell before its revenue covers its costs. The basic calculation uses fixed costs and the difference between selling price and variable cost per unit.
Practical Solutions
1. Know the real cost of your product
Don't stop at the supplier's price.
Record the costs that are directly connected to getting the product ready for sale.
For example:
Purchase/manufacturing cost
Transportation
Packaging
Delivery-related costs
Payment charges
Production labour where applicable
Other directly attributable costs
The exact costs will depend on your type of business.
2. Know your selling price
For every important product, you should be able to answer:
What do we sell it for?
And not just from memory.
Keep your prices recorded.
3. Know your gross profit
A simple starting point is:
Selling Price − Direct Cost = Gross Profit
For example:
₦15,000 − ₦10,000 = ₦5,000
This does not mean the business owner has ₦5,000 of final profit in their pocket.
It means ₦5,000 remains after the direct cost in this simplified example, before other business expenses are considered.
That distinction matters.
4. Stop pricing only because your competitor does
Your competitor may have a completely different cost structure.
Maybe they:
Buy in much larger quantities.
Have lower transportation costs.
Have different suppliers.
Operate from a cheaper location.
Have a different customer segment.
Sell additional products that make their overall business profitable.
Copying their price without understanding your own numbers can be dangerous.
Competitive pricing can be useful, but it should be considered alongside your costs and what customers are willing to pay.
5. Review your prices when your costs change
Your supplier increases the price.
Transportation becomes more expensive.
Packaging costs increase.
Your operating expenses rise.
But your selling price remains unchanged for months.
That can quietly reduce your margin.
Your price should therefore be reviewed when the economics of the business change.
6. Know which products actually make money
Don't only ask:
“What sells the most?”
Also ask:
“What gives us the best financial contribution?”
These are two different questions.
A product that sells 100 units may deserve more attention than one that sells 10 units—but only after you understand what each sale contributes to the business.
Common Mistakes
1. Copying competitors' prices
Their business is not your business.
2. Using a fixed markup for everything
Different products can have different costs, demand, risks and value.
3. Forgetting hidden or indirect costs
A product can look profitable until the wider cost of running the business is considered.
4. Giving discounts without calculating the effect
A ₦2,000 discount may look small.
But if your original profit was only ₦3,000, that discount has removed a large portion of your contribution.
5. Assuming high sales mean high profit
More transactions do not automatically mean more money retained by the business.
6. Never reviewing prices
Costs and market conditions can change.
Your pricing should not be treated as something you set once and forget forever.
What You Can Do Today
Choose your five most-selling products.
Create a simple table:
| Product | Selling Price | Direct Cost | Difference |
|---|---|---|---|
| Product 1 | ₦ | ₦ | ₦ |
| Product 2 | ₦ | ₦ | ₦ |
| Product 3 | ₦ | ₦ | ₦ |
| Product 4 | ₦ | ₦ | ₦ |
| Product 5 | ₦ | ₦ | ₦ |
Then ask yourself:
Which product sells the most?
Which product gives me the largest amount left after direct cost?
Which product has the smallest margin?
Which product is frequently discounted?
Have any of my product costs increased recently?
Are my current prices still sustainable?
You may discover something surprising.
Your biggest seller may not be your biggest profit generator.
The Bigger Business Lesson
Don't manage your business only by looking at sales.
Sales tell you that transactions are happening.
They don't tell you the whole story.
A healthy business needs visibility into what it sells, what each sale costs, what remains after those costs, what the business spends, and what ultimately becomes profit.
That is the difference between:
“We are selling a lot.”
and
“We understand how our business makes money.”
The second one gives you much more information for making business decisions.
A Question for You
Think about your best-selling product right now.
If I asked you, “How much profit does your business actually make from selling one unit of this product?” — could you calculate the answer without guessing?
If you cannot, that may be one of the numbers your business needs to understand next.
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