Pricing for export

Published by:

Netherlands Chamber of Commerce, KVK

2 min read

You have decided to start exporting your products. So, you need to determine a selling price for your product. This is where a cost price calculation helps. Read more about calculating a cost price.

Why calculate the price?

The export price is a crucial part of the negotiations with your buyer. You agree in advance on the selling price of your product with your customers. To do so, you need to know your costs. If you calculate the cost price of your product first, you can agree on a selling price that covers all your costs. And with which you make a profit.

How do you calculate the price?

To calculate a price, you take into account the product’s production price and the export costs. There are direct and indirect costs.

Direct costs

Direct costs are costs made to produce the product, such as:

buying raw materials
production costs
devaluation of machinery
transport costs
insurance

In addition, there are sometimes additional costs when exporting. For example for:

export documents for shipments
translations
local tests

Indirect costs

Indirect costs include your fixed operating costs. Such as:

advertising budget
travel costs
staff salaries

When calculating a cost price, you include all these costs in the cost price of your export product.

An example for calculating the cost price

Let us say you want to export 500 handbags to Australia. For how much will you sell these bags? In this example of a cost price calculation, you will see what direct and indirect costs you will have to deal with. And what a good selling price is to make a profit.

Direct cost price calculation

Production and procurement costs: € 20 per handbag	€ 10.000
Costs for loaded container: € 50.- per pallet	€ 250,00
Transport costs	€ 2.750
Sale value of shipment	€ 13.000
Direct cost per handbag: €13,000 ÷ 500	€ 26,00
Retail price per handbag	€ 49,95
Profit per handbag	€ 23,95
Total gross profit (500 handbags, € 23.95 each)	€ 11.975

Fixed operating expenses

The direct cost price example does not yet include fixed operating expenses. Such as:

storage space rental
car costs
telephone costs
business insurance
gas, water and electricity
your income
interest on loans

VAT (turnover tax) is not included in the calculation.

Calculating the indirect costs

For example, your fixed operating expenses per year are €61,800. You think you will sell 3,000 handbags per year. You calculate the indirect costs per handbag by dividing the fixed expenses by the number of handbags: €61,800 ÷ 3,000 = €20.60 per handbag.

Direct costs per handbag	€ 26,00
Indirect costs per handbag	€ 20,60
Total cost price per handbag (direct + indirect costs)	€ 46,60
Profit per handbag	€ 23,95
Sales price per hand bag (cost price + profit)	€ 70,55
Total profit (500 handbags, € 23.95 each)	€ 11.975

The example shows how the selling price per handbag changes if you include not only direct costs but also indirect costs.

Determining the selling price

After calculating the cost price, you can determine the selling price. Look not only at the cost price, but also at the prices of other suppliers in the export market. Make sure your price fits this (market-based).