How to calculate prices that actually turn a profit
Written by: Marcelo Flores
If you’re just starting your rental business, it’s completely normal to feel unsure about how to price your inventory. Most people begin by copying competitors, and while that’s not entirely wrong, it’s not enough. You need a pricing system based on real numbers and strategy. In this article, we’ll walk you through the key factors to help you price your rental items with profit in mind.
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Table of contents
1. Understand Your Target Market
Knowing your target market is one of the most important steps in pricing your rental inventory, and it should come before you even buy your first chair. Not every product fits every audience. For example, a Chiavari chair might be perfect for your market, while a rustic Cross Back chair could be a better fit for a rental company down the street. It all depends on what your clients are looking for.
Understanding your market’s purchasing power is key. If your prices are too high, you’ll lose business. If they’re too low, you’ll leave money on the table. The goal is to price where your ideal client sees value, and still says yes.
2. Product Acquisition Cost
The purchase cost of an item is a key part of your pricing formula, but it’s not as simple as applying a fixed percentage. Many new rental businesses follow the “charge 10% of the item’s cost” rule of thumb. While this sounds easy, it often leads to inconsistent (and inaccurate) pricing.
Take Chiavari chairs, for example. One rental company may pay $35 per chair, while another invests $90 in a higher-quality version. Following the 10% rule, one might charge $3.50 per chair, and the other $9.00. Both prices may be wrong for the market, and wrong for the business.
This doesn’t mean you should always chase the cheapest inventory. In fact, that’s a mistake. A high-quality chair may cost more upfront, but it will last longer, reduce replacement costs, and pay for itself many times over. You don’t necessarily charge more for it, you just earn more from it over time.
So yes, acquisition cost matters, but what matters more is understanding what that cost means over the long run.
3. Break Down Your Operating Costs
Your operating costs are a fundamental part of pricing your inventory. These include the day-to-day expenses required to keep your business running, such as:
- Storage costs
- Staff costs
- Maintenance costs
- Delivery and logistics
- Setup costs
We usually recommend excluding the last two from your costs and charge apart for each order, but the first three must be considered when costing.
It’s also important to note that not all items impact your operating costs equally. Some products take up more space, require more effort to clean, or are harder to transport. For example, folding chairs are lighter and easier to store than Chiavari chairs, which may require more handling and space. Your pricing should reflect these differences.
4. Set a Realistic Profit Margin
Once you’ve factored in your product cost and operating expenses, it’s time to decide how much profit you want to make from each rental.
Some items have lower costs and are easy to manage, so they come with lower margins. Others involve more care, setup, or visual impact, allowing you to charge much more.
Here’s a breakdown of typical items and how margins might vary:
| Item | Handling Complexity | Typical Rental Price | Estimated Cost per Use | Estimated Markup Margin |
| Plastic folding chair | Low | $1.00 – $1.50 | ~$0.50 | 100% – 200% |
| Resin folding chair | Low | $2.00 – $3.00 | ~$1.00 | 100% – 200% |
| Chiavari chair | Medium | $5.00 – $9.00 | ~$3.00 | 70% – 200% |
| Cross back chair | Medium | $6.00 – $12.00 | ~$4.00 | 50% – 200% |
| Luxury Chairs | Medium-High | $12.00 – $20.00+ | ~$5.00 | 140% – 300%+ |
| Cocktail tables | Medium | $8.00 – $15.00 | ~$4.00 | 100% – 375% |
| Tents / Canopies | Very High | $200.00 – $2,000.00+ | Varies significantly | 300%+ |
📌 Note: These are rough ranges and will vary by region, competition, and client base.
The takeaway: not every item needs the same margin. Understand the cost of each item and apply a mark up according to how much value the product offers your client, how much work it requires from you and considering your competitors pricing.
5. Common Pricing Mistakes to Avoid
Even with a good pricing strategy in place, it’s easy to fall into traps that can hurt your profitability or position in the market. Here are some of the most common mistakes party rentals make when pricing their inventory:
#1 Copying Competitors Blindly
Looking at what others charge is useful, but only as a reference. You don’t know their costs, quality, or service level. Pricing lower just to compete can quickly erode your margins.
#2 Underestimating Operating Costs
Many rentals forget to account for hidden costs like cleaning, minor repairs, staff time, or storage space. These small expenses add up, and what looked like profit can disappear fast. New rentals often ignore storage costs because they use their garage at first. But when you’re renting space and every square foot counts, bulky inventory becomes more expensive to store.
#3 Relying on the “Rule of Thumb”
As mentioned earlier, charging 10% of an item’s purchase price is rarely accurate. Your market, costs, and business model are unique. Use real numbers.
#4 Pricing Based on Emotion or Fear
Many new businesses are afraid to charge more, thinking they’ll scare clients away. But pricing too low can actually backfire, it signals low quality and attracts price shoppers, not loyal customers.
#5 Skipping Regular Price Reviews
Costs change. Demand shifts. If you set prices once and forget about them, you might be leaving serious money on the table, or operating at a loss without realizing it.
The right pricing strategy can make or break your rental business. Take the time to understand your market, know your numbers, and avoid common mistakes. When you price with intention, you protect your margins, grow your business, and stand out in a competitive industry.
