What profit margin should a custom or handmade business make?
By Olusegun Osunrinde, Founder, Sentralbee · Published
Margin is profit divided by the selling price. Markup is profit divided by the cost. They are not the same: a 50% markup is only a 33% margin, and doubling your cost is a 100% markup but a 50% margin. Set your margin so it covers your monthly overhead and your own pay at your normal order volume, then price from your true cost.
The short version
- Margin = profit ÷ selling price.
- Markup = profit ÷ cost.
- A 50% markup is a 33% margin. Charging double your cost is a 100% markup but a 50% margin.
Mixing them up is one of the most common pricing mistakes. If you think you're making 50% and you're really making 33%, your overheads quietly eat the difference.
Margin vs markup, with a dollar example
Take a three-tier wedding cake with a true cost of $605, sold for $865. Profit is $260.
- Markup = $260 ÷ $605 = 43%
- Margin = $260 ÷ $865 = 30%
Same cake, same profit, two very different-sounding numbers.
Convert between the two
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33% |
| 100% (double the cost) | 50% |
| 150% | 60% |
| 200% (three times the cost) | 67% |
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 − margin).
How to set your margin
- Get the true cost of each piece first: materials, your hours, overhead per piece, waste. See what is true cost?
- Add up a month of overhead: rent, utilities, insurance, software, card fees, tools.
- Pick a margin that pays for that overhead at your normal volume, with something left over. If you make 20 pieces a month and overhead is $2,000, each piece has to carry $100 of it.
- Price from the margin: price = true cost ÷ (1 − margin).
- Re-check every few months. Ingredient, lumber and fabric prices change, and your margin shrinks unless you update your costs.
Etsy's Seller Handbook makes a useful point here: it's common for a new business to have a lower margin at the start, and for the margin to grow as the business does.
How Sentralbee helps
Sentralbee works out the true cost of each product from its materials, labor and extra cost lines. You set a margin rule, as a percentage or a fixed amount. When a price falls below cost, the Bee, our built-in AI partner, tells you and suggests a price from that rule. Finances show money in and out, so you can see your overhead too.
Costing is on the Growth plan ($90 a month) and Scale. Try the free true cost calculator on one product first.
Sources
- Xero, Margin vs markup, 23 July 2026.
- Shopify, Markup vs. margin: key differences and how to calculate, 16 September 2026.
- Etsy Seller Handbook, Pricing basics: how to price for profit, conversion, and growth, 28 August 2024.
Questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. A cake that costs $605 and sells for $865 has a $260 profit: a 43% markup but a 30% margin.
What is a good profit margin for a handmade business?
There is no single right number, and it depends on your craft, your volume and your overheads. What matters is that your margin pays for rent, utilities, tools, slow months and your own salary, not just the materials in one piece.
How do I calculate a price from a margin?
Divide your true cost by one minus your margin. For a 30% margin on a $605 cost: $605 ÷ 0.7 = $864.
Why does my profit disappear even when my margin looks fine?
Usually because the cost was incomplete. Your own hours, offcuts and waste, packaging, delivery and card fees are often left out. Count every line, then set the margin.