10If you run a café, bar or tiny hospo venue, chances are you’ve priced something like this at least once:

“Coffee’s $5… that feels about right.”

“Toastie’s $14… the café down the road charges $15, so we’ll be cheaper.”

“Cake slice? Dunno… chuck a few bucks on top.”

Most micro business owners guess their prices, tweak them when margins feel tight, and hope for the best. The problem is hope is not a pricing strategy, especially when milk prices, power bills and wages seem to rise every other week.

What you need is your minimum viable price. That’s the lowest price you can charge and still stay in business. Not thrive. Not buy a shiny new espresso machine. Just survive without quietly bleeding cash. What is a minimum viable price (really)?

Your minimum viable price is that sweet spot where all your costs are taken care of, you pay yourself a little something (yes, you matter too!), and you’re not relying on ‘it’ll be better next month’ optimism to get you through.

Anything below it means you’re subsidising customers with your own time, energy and bank account. That’s not being generous. That’s being unsustainable.

Five steps to calculate your minimum viable price

1. Know your real costs (not just the obvious ones)

Most café owners know roughly what their coffee beans cost. Fewer know what their business actually costs to run.
Start with fixed costs. These show up whether you sell one flat white or 500:

• Rent
• Electricity, gas and water
• Insurance
• POS systems and software
• Accountant and bank fees
• Music licensing
• Internet and phone
• Loan repayments

Then add variable costs:

• Ingredients like coffee, milk, bread, eggs and pastries
• Packaging such as cups, lids and napkins
• Wages, including super
• Penalty rates and weekend loadings
• Cleaning supplies

And now the big one people forget: your pay.

If you’re working 50 hours a week and not paying yourself, your pricing is already broken. Even a modest wage needs to be factored in, otherwise you’re running a very stressful hobby.

2: Work out your weekly break-even point

Add up all your weekly costs. Let’s keep the maths easy and realistic for an Aussie café:

• Fixed costs: $6,000 a week
• Variable costs: $7,000 a week
• That’s $13,000 a week just to break even.
• Now look at what you actually sell in an average week. Maybe it’s:
• 1,000 coffees
• 300 food items

That’s 1,300 items sold.

Divide your weekly costs by items sold and you get roughly $10 per item.

That doesn’t mean every item should cost $10. It means that across your menu, your average sale needs to hit that mark.
This is where your minimum viable price starts to reveal itself.

3: Stop pricing items in isolation

One of the biggest pricing traps in hospitality is looking at each menu item on its own. A muffin that costs $2.50 to make and sells for $6 feels like a win. But that muffin isn’t paying your rent, wages or electricity bill by itself.

Your menu works as a system. Coffee often carries strong margins. Food frequently doesn’t. That’s not a problem as long as you know which items are pulling their weight and which ones are just along for the ride.

If something is fiddly to make, slow to sell and barely breaks even, it’s worth asking why it’s still on the menu. Sentimental favourites and ‘people expect it’ dishes can quietly drain your margins week after week.

4: Sanity-check your prices without racing to the bottom

Yes, you should look at what nearby cafés are charging. No, you don’t need to be cheaper.

Being the cheapest option usually means thinner margins, more price-sensitive customers and zero breathing room when costs rise. Instead, aim to be within a sensible range for your area and make sure your price matches your experience.

If you’re charging $5.50 for a flat white in Australia, are you serving great coffee, offering friendly service and giving people a place they enjoy being? If the answer is yes, most customers won’t blink. What they won’t pay for is stress, rushed service and burnt-out owners who can’t afford to stay open.

5: Build in a buffer because hospo is wild

Milk prices jump. Power bills spike. Staff get sick. The dishwasher dies at 7am on a Saturday.

Your minimum viable price should include a small buffer so one rough week doesn’t tip you over. If your pricing only works when everything goes perfectly, it doesn’t work.

Ultimately, pricing is about what keeps the doors open, not what feels fair. Knowing your minimum viable price gives you business confidence. So, stop apologising for your prices and start running your business with intention.

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