Minimum Price Calculator NZ 2026/27
This calculator gives you the number you should never go below, worked out before you are sitting across a table being asked for a discount. It starts with the costs that are fixed in dollars, being your direct cost and the overhead this sale has to carry, then handles the costs that are percentages of the price, which is where most pricing goes wrong. Sales commission, an allowance for rework and warranty, and the cost of capital tied up while you wait to be paid all scale with the price, so they cannot simply be added to the cost. They have to be solved together with the margin, which is why the calculation divides rather than adds. You get two prices: a floor at your minimum acceptable margin, which is your genuine walk-away number, and a target at the margin you actually want, which is where you should open. Both are shown excluding and including GST. Then it shows the discount headroom, being how far the target price can fall before the profit reaches zero, so that when a client asks for ten percent off you already know whether that is a decision or a mistake. Knowing your floor is what lets you hold a price calmly, and it is also what lets you walk away from work that was never going to pay. Figures are indicative planning estimates, not advice on any particular contract.
Margin is on price, markup is on cost. They are different numbers and the gap grows with the percentage. Adding 15% to cost yields a 13.04% margin, not 15%.
Cost of capital = annual rate x payment terms / 365, applied as a percentage of price. It is a simple interest approximation of the funding cost while you wait to be paid, not a discounted cash flow valuation.
GST at 15% is added only for display. It never enters the margin calculation, because GST is collected for Inland Revenue rather than earned.
Consumer pricing: when quoting to a consumer, the Fair Trading Act 1986 requires prices not to be misleading, which in practice means presenting the GST-inclusive figure clearly. Business to business quoting is conventionally GST exclusive. Either is fine as long as you state which.
No benchmark margins are asserted. The floor and target margins are yours to set. There is no legislated or standard margin for any New Zealand industry.
Last verified: July 2026.
How the minimum price is built
| Direct cost | $6,552.00 |
| Overhead allocated | $1,120.00 |
| Fixed cost to recover | $7,672.00 |
| Sales commission | 5.00% |
| Rework and warranty | 3.00% |
| Cost of capital (45 days at 12%) | 1.48% |
| Floor margin | 15.00% |
| Total deducted from price | 24.48% |
| Minimum price (excl GST) | $10,158.82 |
| Minimum price (incl GST) | $11,682.65 |
What the floor price actually delivers
| Price excluding GST | $10,158.82 |
| Less sales commission | $507.94 |
| Less rework and warranty allowance | $304.76 |
| Less cost of capital | $150.29 |
| Less direct cost and overhead | $7,672.00 |
| Net profit at the floor | $1,523.82 |
Discount headroom
| Target price (25% margin) | $11,709.30 |
| Price at zero profit | $8,475.42 |
| Room to discount before profit is gone | $3,233.88 |
| Maximum discount off the target price | 27.62% |
All prices exclude GST unless stated. The zero profit price still recovers the overhead allocated to this sale, so pricing slightly below it is not an immediate cash loss, but the sale stops carrying its share of your fixed costs.
Why You Need A Number Before The Conversation Starts
Almost every price negotiation is lost in the room rather than in the spreadsheet. A client asks for ten percent off, the alternative is an empty week, and in the absence of a considered floor the answer is usually yes. The problem is not the discount. It is that nobody in the conversation knows what the discount actually costs, so it gets treated as a rounding adjustment rather than a decision about whether the work is worth doing.
A minimum price fixes that. It is not a target and it is not what you should quote. It is the line below which the work stops being worth having, calculated calmly in advance so that in the room you are making a decision rather than a concession.
The Costs That Scale With The Price
Some costs are fixed in dollars. Materials cost what they cost, and the labour hours are the labour hours. Those you can total and set aside.
Other costs are percentages of whatever you end up charging. Sales commission is the obvious one. A rework or warranty allowance is another, because the more you sell the more callbacks you eventually get. The cost of funding the job while you wait to be paid is a third, and your margin is a fourth. All of these depend on the price, which is precisely the problem: you cannot add them up until you know the price, and you cannot know the price until you have added them up.
The way out is to solve for the price in one step. Total the percentages, subtract them from 100%, and divide the fixed cost by what is left. In the worked example the percentages are 5% commission, 3% rework, 1.48% cost of capital and a 15% floor margin, totalling 24.48%. So the price has to be $7,672.00 divided by 0.7552, which is $10,158.82.
The Mistake That Costs A Fifth Of Your Margin
The most expensive pricing error in small business is adding the margin to the cost instead of dividing by it. Add 15% to $7,672.00 and you get $8,822.80. That feels like a 15% margin. It is not: the profit is $1,150.80 on a price of $8,822.80, which is 13.04%.
The error widens as the percentage rises. At a 40% intended margin, adding 40% to cost delivers only 28.6%. A business that prices this way is systematically giving away roughly a fifth to a third of the margin it thinks it is earning, on every job, permanently. Our Markup vs Margin Calculator converts between the two if you want to audit an existing price list.
Worked Example: A $7,672 Cost And Three Different Prices
Take the defaults. Direct cost of $6,552.00 and allocated overhead of $1,120.00 gives $7,672.00 of cost that has to be recovered. Commission runs at 5%, the rework allowance at 3%, and the customer pays on 45 day terms against a 12% annual cost of capital, which works out at 1.48% of the price.
At the 15% floor margin, the price is $10,158.82 excluding GST, or $11,682.65 including GST. Out of that, $507.94 goes to commission, $304.76 to the rework allowance, $150.29 to funding cost and $7,672.00 to cost, leaving $1,523.82 of profit. That is genuinely 15% of the price, which is the point.
At the 25% target margin the price is $11,709.30. That is where you should open, because you cannot negotiate up.
At zero profit the price is $8,475.42. Everything is covered and nothing is earned. The gap between the target price and this figure is $3,233.88, which is 27.62% of the target price. That is your entire discount headroom. A client asking for 10% off is taking about a third of your profit. A client asking for 30% off is asking you to pay for the work.
Slow Payment Is A Price Issue, Not Just A Cash Issue
Payment terms are usually treated as an administrative detail agreed after the price. They are actually part of the price. If your money costs 12% a year and a customer holds it for 45 days, that is about 1.48% of the value gone before you start. A customer on 90 day terms costs twice that, and one who pays on the 20th of the month following a mid-month invoice is somewhere in between.
The practical consequence is that identical prices to customers on different terms are not identical deals. If you price them the same, your fast payers are subsidising your slow ones. It is entirely reasonable to quote a slow-paying client a higher number, or to offer a discount for payment on shorter terms, and this calculator gives you the arithmetic to size either.
What The Floor Does Not Tell You
A minimum price is a financial answer to a commercial question, and it is not the whole answer. There are good reasons to take work below your floor occasionally: to keep a crew together through a quiet month, to get a foot into a client with a large pipeline behind them, or to finish a partly complete site rather than leave it. Those are strategic decisions, and they are perfectly legitimate as long as they are decisions.
What the floor prevents is doing it accidentally, repeatedly, and without noticing. If most of your work is going out near or below the floor, the problem is not any individual negotiation. It is either that your cost base is too high for your market, or that you are competing on price in a segment where you cannot win that way. Neither of those is fixed by another discount.
It is also worth noting what sits outside this calculation. The floor covers direct cost, allocated overhead, commission, rework and funding. It does not cover the cost of quoting work you did not win, which is a real overhead that has to be recovered across the jobs you do win, and it does not cover the opportunity cost of the crew being on this job rather than a better one. On a fully booked schedule, the true minimum price is not the floor calculated here but the price of the next best job you would have to turn away.
Related NZ Business and Pricing Calculators
- Selling Price Calculator: build the price you should charge, rather than the lowest you could accept.
- Markup vs Margin Calculator: convert between the two and check an existing price list for the divide-versus-add error.
- Discount Calculator: size a proposed discount in dollars before you agree to it.
- Job Costing Calculator: check afterwards whether the job delivered the margin you priced for.
- Overhead Recovery Rate Calculator: work out the overhead figure this page asks you to allocate.
- Can I Afford to Hire?: the background to this calculation.
- How Much Should I Pay Myself?: the background to this calculation.
- How to Price a Job: the background to this calculation.