Definition
Cost-plus pricing sets a price by taking what something costs to deliver and adding a fixed percentage or amount on top, a markup that is the seller's profit.
In practice
Agencies use cost-plus pricing most often for rebilling: passing a client's share of platform, hosting and model usage through at cost plus a markup, next to their own service fee. It is easy to explain and it moves with usage, so a busier client pays more without a new negotiation. What people get wrong is confusing markup with margin. A 30 percent markup on $100 of cost gives a $130 price and a margin of about 23 percent, not 30. Cost-plus also depends on knowing the cost of each client precisely. When usage arrives as one lump on the account bill, the agency ends up guessing, and it usually guesses low.
Example
An agency runs agents for six clients from one account. At month end it reads each client's usage for the period, split into hosting, models and web search, and rebills it at cost plus 25 percent on top of the monthly service fee. One client's agent was busy after a product launch and used $210 of platform usage, so that client's rebill line is $262.50. A quieter client's line comes to $48.
Common questions about cost-plus pricing
What is the difference between markup and margin in cost-plus pricing?
In cost-plus pricing, markup is the percentage added to cost, and margin is the profit as a share of the final price. A 50 percent markup on $100 gives a $150 price and a margin of about 33 percent. To hit a target margin instead, divide the cost by one minus that margin.
When should an agency rebill AI usage with cost-plus pricing?
Cost-plus pricing suits usage that varies a lot between clients or months, such as model calls and web searches, because each client's bill follows what their agents actually used. It needs an accurate cost per client. For steady, predictable costs, a fixed retainer with the cost built in is simpler to sell.
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