How it works
You need units per order × orders a year units in a year. A supplier with a minimum order forces you to buy at least that many each time, so the order size is the larger of what you need and the minimum, and you place fewer orders.
Landed cost per unit = price per unit + (shipping + other fees on one order) ÷ units in the order + membership ÷ units you use in a year. Cash out per order = units in the order × price + shipping + fees. Yearly cost = landed cost per unit × units you use in a year.
A worked example
You use 500 units an order and order 12 times a year: 6,000 units. Supplier A charges $0.42 a unit and $18 shipping: $0.42 + ($18 ÷ 500) = $0.456 a unit. Supplier B charges $0.39 and $45 shipping but has a 1,000-unit minimum: $0.39 + ($45 ÷ 1,000) = $0.435. Supplier C charges $0.45 with free shipping: $0.450.
Over a year B costs $2,610, against $2,700 for C and $2,736 for A. But B takes $435 of cash per order, not $228, and you order every other month, so you carry about 500 extra units.
Prefer to work it out yourself? Step-by-step guide: do this calculation by hand or in a spreadsheet.
Common mistakes
- Comparing unit price alone. A lower price with a high shipping charge on a small order can cost more per unit.
- Counting free shipping that has a threshold you will not reach. Enter the shipping you would really pay at your order size.
- Ignoring the minimum order. A cheap unit price is not cheap if it ties up cash in stock you will not sell for months.
- Leaving out heavy, oversize, liftgate and residential fees. Put them in the other-fees box.
- Forgetting the membership. A paid shipping program only wins if the shipping it saves is more than its fee.
What this doesn’t tell you
This compares what the quotes charge, not quality, how fast an order arrives, what happens when something is wrong, or the return terms. It does not count the cost of cash tied up in extra stock or the risk the extra units go out of date. Prices change, so check the number in writing.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
What is landed cost?
The full cost of a unit by the time it is in your shop: the unit price plus shipping, handling, fees and anything else you pay to get it.
Should I always pick the lowest landed cost?
Not always. A larger minimum can lower the cost per unit and still be the wrong choice if it ties up cash you need. Look at cash out per order next to the yearly cost.
How do I count a membership?
Enter the yearly fee. The calculator spreads it over the units you use in a year, so it only helps if the shipping saved is larger than the fee.
Does this work for services as well as products?
Yes, if a service has a unit price and fees per job. Enter the price per unit of work and the fixed fee per order.
Opening or moving? See your odds with a Market Feasibility Study or Site Selection Analysis.
Sources
- U.S. Small Business Administration: Manage your finances
- IRS Publication 15 (Circular E), Employer's Tax Guide
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
