Sn3ll

Imagine you’re selling a product or service online and you’re hit with a 30% fee from the platform you’re using. That might sound like a huge cut, and you’re probably wondering how much you need to increase your prices to cover this fee without sacrificing your profit margin.

Let’s walk through a real-life scenario to figure out exactly how much you need to raise your prices.

The Scenario

Say you sell digital courses for $100 each, and a marketplace like Apple’s App Store or a payment processor charges a 30% fee. That means if you stick with your current pricing, you’ll only be taking home $70 for every course sold, which is a substantial reduction in earnings.

So, how much do you need to increase the price to make sure you’re still netting your full $100 after fees?

The Math Behind It

At first glance, it might seem like adding 30% to your price would cover the fee, but that’s not quite right. If you just added 30%, you’d increase the price to $130, and after the 30% fee is deducted, you’d still only receive $91—short of your $100 goal.

Here’s how to correctly calculate it:

Let’s call your original price P and the new price you need to charge X. After the 30% fee, you’re left with 70% of the new price:

0.7X = P

To solve for X (the new price), divide both sides by 0.7:

X = \frac{P}{0.7}

So, if your original price is $100, you need to divide it by 0.7:

X = \frac{100}{0.7} \approx 143

This means you need to charge $143 to cover a 30% fee and still net your original $100. That’s a 43% increase over your original price.

Why a 30% Fee Requires a 43% Price Increase

The key takeaway here is that when fees are deducted, they come out of your total price, not just the added portion. If you only increase the price by 30%, the fee will still eat into your profit because it’s calculated as a percentage of the entire new price, not just your original amount.

By increasing the price by 43%, you ensure that even after the 30% fee, you walk away with the full amount you originally planned to earn.

Conclusion

If you’re working on a platform that charges significant fees, understanding how much to raise your prices is critical to maintaining your margins. By doing the math carefully, you can protect your profits and make sure the fees don’t eat into your earnings.

The next time you’re faced with platform fees, remember: it’s not just a matter of adding the fee percentage to your price—you need to account for the fact that fees apply to the entire amount. In this case, a 30% fee requires a 43% price hike to stay in the black.