📈 Markup vs. Margin: The Pricing Mistake Costing Makers Money
One of the biggest pricing mistakes I see among makers is confusing markup with margin.
The two sound similar, but they measure very different things.
And if you don't understand the difference, you may think your products are profitable when they're actually not.
🧮 Let's Start with a Simple Example
Imagine you make a beaded bracelet. The beads, string, packaging, and labour cost you $6.00 to produce. You decide to sell it for $15.00. Most makers immediately think:
"I made $9.00, so that's great." And they're not wrong.
But to understand whether that price is truly healthy for your business, we need to look at two numbers: markup and margin.
💰 What Is Markup?
Markup is the amount you add to your cost to arrive at your selling price.
If your bracelet costs $6.00 to make and you sell it for $15.00, your markup is $9.00.
Markup answers the question: "What should I charge?" It's a pricing tool.
Think of markup as the number that helps you create a selling price.
📊 What Is Margin?
Margin measures how much of the selling price remains after covering the cost of the product. Using the same bracelet:
✔️ Cost: $6.00
✔️ Selling Price: $15.00
✔️ Profit: $9.00
To calculate margin:
Profit ÷ Selling Price
$9.00 ÷ $15.00 = 60%
✨ That means 60% of every sale remains after you've covered the direct cost of making the product. Margin answers a different question:
"How much money am I actually keeping?" It's a profitability tool.
🚩 Why This Matters for Makers
Many makers use a simple pricing strategy: "I'll just double my costs."
The problem is that doubling your costs doesn't automatically create a healthy business. Let's compare two bracelets...
Bracelet A
✔️ Cost: $6.00
✔️ Selling Price: $15.00
✔️ Profit: $9.00
✔️ Margin: 60%
This product has room to cover:
✔️ Market fees
✔️ Packaging
✔️ Fuel
✔️ Transaction fees
✔️ Marketing expenses
✔️ Business overhead
Bracelet B
✔️ Cost: $6.00
✔️ Selling Price: $10.00
✔️ Profit: $4.00
✔️ Margin: 40%
You're still making money. But after market fees, taxes, payment processing charges, and business expenses, that profit starts shrinking quickly.
⚠️ This is where many makers get stuck.
Sales are happening. Money is coming in. But there's very little left at the end of the month.
🎯 The Number I Want You to Watch
Most makers focus on markup. Profitable business owners focus on margin. A healthy margin gives your business room to:
✔️ Grow
✔️ Purchase inventory
✔️ Invest in marketing
✔️ Survive slower seasons
✔️ Pay yourself properly
As a general guideline, makers selling at markets, online, or through social media should aim for margins of at least 50%. Not because it's a magic number. Because businesses need profit to survive.
🔍 A Quick Pricing Audit
Choose one of your best-selling products and answer these questions:
1️⃣ What does it actually cost to make, including your labour?
2️⃣ What are you selling it for?
3️⃣ What percentage of the selling price is profit?
If you don't know the answer to Question 3, that's where to start.
The goal isn't to raise prices blindly. The goal is to understand your numbers so you can make informed decisions.
📌 What gets measured gets managed.
🏆 The Bottom Line
Markup helps you set a price.
Margin tells you whether that price works.
If you're serious about building a sustainable handmade business, you need to understand both. Because being busy is not the same thing as being profitable.
And selling more products won't fix a pricing problem.
Understanding your numbers will.
As I often tell my clients:
Revenue is vanity. Profit is sanity. Cash flow is reality.
✨ The makers who build lasting businesses aren't always the ones with the most sales.
✨ They're the ones who know exactly how much money they're keeping from every sale.
☕ Need Help Pricing Your Products?
If you're unsure whether your prices are helping your business grow, or simply helping you stay busy, it's time to look at the numbers.
Together, we'll break down your costs, review your margins, and build a pricing strategy that supports both profit and growth.
Real Conversations. Smart Business Moves.