Glossary: Costing and Selling

The money vocabulary — what a product really costs to make, how you price it, and what the channel takes on the way to a store shelf.

~4 min

This is the money side of the operation: what a product actually costs you to make, how you set its price, and what every hand in the channel takes on the way to a shelf. Each term is defined here in plain language, at the altitude of someone running a small plant.

What a batch costs

COGS (Cost of Goods Sold) — The direct cost of making what you sold: ingredients and packaging, the labor that actually built the batch, and the production overhead tied to it. Every margin sits on top of this number, so when COGS is wrong, every price above it is wrong too.
Gross Margin — What is left of a sale after COGS, as a percentage of the selling price: (price − COGS) ÷ price. It is not the same as markup — a 50% margin is a 100% markup — and mixing the two up is how operators quietly underprice themselves.

Setting the price

Cost-plus — Pricing by taking your cost and adding a set margin or markup on top. It is a safe way to find a floor, but on its own it ignores what the market and the channel will actually bear, so treat it as a starting point, not the final answer.
Keystone — The old retail rule of thumb: double the wholesale cost to set the shelf price — a 100% markup, a 50% margin. It is shorthand for how much a store expects to make, and it tells you how far below the shelf price your wholesale price has to sit.
Price Floor — The lowest price you can sell at and still cover what the unit truly costs: COGS plus its share of overhead. Sell under it and you lose money on every case, so it is the line you hold when a big buyer pushes for one more discount.

Selling into retail and distribution

Distributor Margin — The cut a distributor keeps between the price they pay you and the price they charge the retailer, usually a fixed percentage. You build it into your wholesale price up front, because it comes out of your number, not theirs.
Slotting Fee — What a retailer or distributor charges to stock a new item — money to "buy" the shelf slot. It can be cash, free product, or a deduction off your invoices, and for a small maker it is often the real price of getting onto a shelf at all.
Chargeback — A deduction a retailer or distributor takes off what they owe you, for a compliance miss — a late shipment, a missing ship notice, a wrong label, a short order — or a promotion you agreed to. It comes straight out of your payment, turning a paperwork slip into lost margin.
GTIN / UPC — The unique product number a store scans at checkout. GTIN (Global Trade Item Number) is the number itself; the familiar UPC-A barcode carries a 12-digit GTIN-12, built from a GS1 company prefix you license, an item reference, and a check digit. Retailers require a real GS1-issued number, not one you invent (GS1 US, What is a GTIN, verified July 2026).
EDI (Electronic Data Interchange) — A standard electronic format for passing business documents — purchase orders, shipping notices, invoices — straight between your system and a retailer's, with no email and no re-keying. Larger chains require it; in North American retail it usually means ANSI X12 messages like the 850 purchase order, the 856 advance ship notice, and the 810 invoice.

Getting paid and the cash cycle

Order-to-cash — The whole run from a customer placing an order to the money landing in your account: order, pick and ship, invoice, collect. The slower and messier that run, the longer your cash stays tied up in work you have already done.
Cash-Conversion Cycle — How many days your money is locked up between paying for ingredients and getting paid for the finished product: days of inventory on hand, plus days waiting on customer payment, minus the days you take to pay your own suppliers. The shorter it is, the less cash you need to run the same volume.

Making and ordering at volume

MOQ (Minimum Order Quantity) — The smallest amount a supplier or co-packer will sell or make in one go. It sets how much cash you commit at once and how much you have to store, and it can decide whether an ingredient or a production run pencils out at all.
Co-packer / Co-manufacturer — A plant that makes or packs product for your brand instead of your own. The two words point at the same thing — "co-packer" leans toward filling and packaging, "co-manufacturer" toward making from scratch — and using one puts your recipe, your quality, and your traceability inside someone else's building.

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What a batch costs

COGS (Cost of Goods Sold) — The direct cost of making what you sold: ingredients and packaging, the labor that actually built the batch, and the production overhead tied to it. Every margin sits on top of this number, so when COGS is wrong, every price above it is wrong too.

Gross Margin — What is left of a sale after COGS, as a percentage of the selling price: (price − COGS) ÷ price. It is not the same as markup — a 50% margin is a 100% markup — and mixing the two up is how operators quietly underprice themselves.

Setting the price

Cost-plus — Pricing by taking your cost and adding a set margin or markup on top. It is a safe way to find a floor, but on its own it ignores what the market and the channel will actually bear, so treat it as a starting point, not the final answer.

Keystone — The old retail rule of thumb: double the wholesale cost to set the shelf price — a 100% markup, a 50% margin. It is shorthand for how much a store expects to make, and it tells you how far below the shelf price your wholesale price has to sit.

Price Floor — The lowest price you can sell at and still cover what the unit truly costs: COGS plus its share of overhead. Sell under it and you lose money on every case, so it is the line you hold when a big buyer pushes for one more discount.

Selling into retail and distribution

Distributor Margin — The cut a distributor keeps between the price they pay you and the price they charge the retailer, usually a fixed percentage. You build it into your wholesale price up front, because it comes out of your number, not theirs.

Slotting Fee — What a retailer or distributor charges to stock a new item — money to "buy" the shelf slot. It can be cash, free product, or a deduction off your invoices, and for a small maker it is often the real price of getting onto a shelf at all.

Chargeback — A deduction a retailer or distributor takes off what they owe you, for a compliance miss — a late shipment, a missing ship notice, a wrong label, a short order — or a promotion you agreed to. It comes straight out of your payment, turning a paperwork slip into lost margin.

GTIN / UPC — The unique product number a store scans at checkout. GTIN (Global Trade Item Number) is the number itself; the familiar UPC-A barcode carries a 12-digit GTIN-12, built from a GS1 company prefix you license, an item reference, and a check digit. Retailers require a real GS1-issued number, not one you invent (GS1 US, What is a GTIN, verified July 2026).

EDI (Electronic Data Interchange) — A standard electronic format for passing business documents — purchase orders, shipping notices, invoices — straight between your system and a retailer's, with no email and no re-keying. Larger chains require it; in North American retail it usually means ANSI X12 messages like the 850 purchase order, the 856 advance ship notice, and the 810 invoice.

Getting paid and the cash cycle

Order-to-cash — The whole run from a customer placing an order to the money landing in your account: order, pick and ship, invoice, collect. The slower and messier that run, the longer your cash stays tied up in work you have already done.

Cash-Conversion Cycle — How many days your money is locked up between paying for ingredients and getting paid for the finished product: days of inventory on hand, plus days waiting on customer payment, minus the days you take to pay your own suppliers. The shorter it is, the less cash you need to run the same volume.

Making and ordering at volume

MOQ (Minimum Order Quantity) — The smallest amount a supplier or co-packer will sell or make in one go. It sets how much cash you commit at once and how much you have to store, and it can decide whether an ingredient or a production run pencils out at all.

Co-packer / Co-manufacturer — A plant that makes or packs product for your brand instead of your own. The two words point at the same thing — "co-packer" leans toward filling and packaging, "co-manufacturer" toward making from scratch — and using one puts your recipe, your quality, and your traceability inside someone else's building.