Small business pricing: cost of goods, bonuses and net pay
6 min read · Updated 2026-10-12 · MoneyCalc
A business that knows its gross margin knows which products actually make money, and a bonus that looks affordable on the salary is often not. Both calculations come back to the same idea: the number on the surface is rarely the number that determines the outcome.
Cost of goods sold and what the margin tells you
Cost of goods sold is what the inventory you sold cost you, worked out from opening stock plus purchases minus closing stock. Subtracting it from revenue gives gross profit, and dividing that by revenue gives gross margin.
The margin is the figure that matters, because it is what remains to pay wages, rent and everything else. A product with a high margin funds the business; one with a low margin generates revenue without generating anything to spend.
A bonus is not one number
A bonus paid to an employee usually attracts employer contributions on top, and in many places is treated differently from salary for tax purposes. A five thousand bonus can therefore cost several thousand more once the additional contributions are included.
For a small business the calculation is worth doing before committing rather than after. The same logic applies to a raise that comes with a separate employer cost, and to any benefit that has an employer side.
Gross pay and take-home pay
Gross is the figure on the contract; net is what arrives. The difference covers income tax, social contributions and other deductions, and the gap is larger at higher incomes and in some tax systems considerably larger than in others.
For anyone comparing roles or offers, net is the only comparable figure. A higher gross offer can be worth less once deductions are applied, and the effective hourly rate calculated on net figures is the honest comparison.
Pricing decisions that depend on the underlying numbers
Discounting a low-margin product can make it loss-making outright, which is why knowing the margin before discounting matters. If a product costs eighty and sells for a hundred, a ten per cent discount takes it to ninety — still profitable, but the buffer is gone.
Work out cost of goods, apply the margin, and price from the result rather than from what the market seems to be paying. Occasionally the market will not bear it, and that is useful information about which customers to have.
Run your own numbers
Free calculators that answer the “how much” version of this question. They run entirely in your browser — nothing you type is uploaded or stored.
Common questions
What is a good gross margin?
It varies widely by sector. Grocery runs thin, software and services run high. The useful comparison is against your own previous periods and against competitors, not a single benchmark.
How much does a bonus really cost an employer?
More than the headline figure, because employer contributions are usually payable on top. The bonus calculator is the place to check the full cost before committing.
Should I compare job offers on gross or net salary?
Net. Deductions differ between systems and between circumstances, so gross figures are not comparable. Calculate the effective hourly rate on net pay.
MoneyCalc provides general information only and is not financial, investment, tax or legal advice. Figures are illustrative and depend on your own circumstances. See our full disclaimer.