Cost-plus pricing (adding a fixed percentage for profit on top of your costs) is the worst pricing strategy around. And it’s used by most companies(!)
But… there are two good uses for it:
- Use it when all your products or services are completely customized. Thus if you build new houses to customer specs — then your costs are always different and thus cost-plus pricing is your best strategy.
- Use it to analyze markets you might want to enter. Calculate a cost-plus price of what you would have to charge if you entered the market. If your costs plus a profit margin are lower than what companies already in the market are charging — then this could be a very profitable market for you to enter.