Many craft entrepreneurs start pricing from a very natural place: how much the materials cost, how long the product took to make, and what similar products sell for elsewhere. These are important questions, but on their own they don't tell you whether a product is actually profitable.

That's why profit margin percentage is one of the most important figures every entrepreneur who sells products should understand.

Profit margin percentage shows how much of a product's sale price is left for the business after the product's direct costs have been deducted. In other words, it helps you see whether there's enough left over for everything that doesn't show up in the finished product: your workspace, tools, packaging materials, online store costs, payment processing fees, marketing, taxes, product development, waste, and ultimately your own pay as the entrepreneur.

What Does Profit Margin Percentage Mean?

Profit margin percentage shows how much of a product's sale price is left for the business after the variable costs of making and selling the product have been deducted.

The margin doesn't include all of the business's costs, such as rent or insurance. When calculating a product's margin, what matters is the costs directly tied to that product. These include, for example:

• Materials and components for the product
  For a jewelry entrepreneur, this means things like ear wires, jump rings, beads, pendants, chains, clasps, wire, headpins, resin, metal parts, and other components that go into making the product.
• Packaging materials
  Bags, boxes, cards, stickers, tissue paper, and other packaging materials tied to the product.
• Product-specific outsourcing and services
  If the product involves laser cutting, engraving, plating, printing, a photography service for that specific product, or other outside work, it belongs here too.
• Product-specific waste
  If some of the materials break, don't turn out right, end up as surplus, or products get pulled from sale or stolen, this should be factored in, at least as an estimate.
• Purchase freight and costs related to sourcing materials
  If you buy materials or finished products, the shipping costs, customs duties, and other costs directly tied to sourcing them should be spread across your products, at least roughly.
• Payment processing fees and sales commissions
  Online store payment provider fees, marketplace fees, and other costs directly tied to selling the product should be included in the product-level margin calculation.
• Shipping costs when the business pays them
  If you offer free shipping or the shipping cost is included in the product price, it eats into the product's margin and should be counted.
• The value of your own work
  (More on this below)

By contrast, the business's fixed costs, such as the online store platform, bookkeeping, insurance, workspace, software, marketing, and the entrepreneur's pay, are generally paid out of the margin. So margin isn't the same thing as profit, and it isn't the same thing as the entrepreneur's pay.

A simple formula for calculating margin is:
Product's price excluding VAT minus the product's variable costs equals margin

And profit margin percentage is calculated like this:
Margin divided by the product's price excluding VAT, times 100, equals profit margin percentage

Example: If a product sells for 40 euros and its materials, packaging, payment fees, and other product-specific costs add up to 10 euros, the product's margin is 30 euros. The profit margin percentage is therefore 75% (30 € / 40 € × 100 = 75%).

Your Own Pay Isn't a "Someday" Line Item

Craft entrepreneurs face one particular pricing challenge: their own work is easily treated as a flexible cost. Materials get paid for, the online store gets paid for, packaging supplies get paid for, but your own pay is left waiting.

This distorts the picture of how profitable the business actually is.

If you don't build your own working time into the price, a product can look profitable simply because you're working for free. In that case the business isn't really generating income at all. Instead, the entrepreneur is subsidizing the product's price with their own time.

Pricing guidance for craft businesses stresses that an entrepreneur's labor needs to be added to a product's costs the same way materials are. A product can look like it has a good margin on paper if material costs are low. But if making, finishing, and packaging the product takes a lot of time, the real hourly earnings can end up very low.

Here's a practical way to start:

• Decide on a realistic hourly rate for your own work. What hourly pay do you want?
• Measure how long it takes to make one product. Include finishing, packaging, and at least some share of the time spent on product descriptions.
• Calculate whether the product's price still leaves enough margin after that.

What Counts as a Good Margin for a Craft or Jewelry Entrepreneur?

There's no single right answer to this. A good margin depends on the product's price, material costs, production time, sales channel, how scalable the product is, and how much fixed costs the business carries.

In jewelry and craft products, material costs can be small relative to the final sale price, but working time can be significant. If a product is made slowly by hand, a high margin percentage alone doesn't necessarily mean good profitability. A product can look good in percentage terms, but if making one piece of jewelry takes two hours and it leaves only 20 euros of margin, the hourly earnings end up too low.

That's why a craft entrepreneur should look at two things at once:

1. Profit margin percentage
How much of the sale price is left after costs?

2. Margin in euros relative to time spent
How much money does the product generate per hour of production, packaging, and sales work?

The second figure is often the decisive one. A craft entrepreneur's bottleneck usually isn't materials, it's time. If you can make 20 units of a particular jewelry design in an hour, pricing it can work well even with a smaller margin per piece. But if making one piece of jewelry takes an hour, the price needs to be at an entirely different level.

What Margins Should You Aim For?

A practical goal for a craft or jewelry entrepreneur is this: the product's regular price should be able to withstand discounts, resale through retailers, waste, returns, payment processing fees, marketing, and your own pay, without the business becoming unprofitable.

This often means that for products sold directly to consumers, the margin percentage needs to be fairly strong. If the margin is already thin, even a small discount campaign or paid advertising can wipe out profitability entirely.

Cost-based pricing is a safe starting point, but with a small margin, sales volume needs to be higher than with a large margin. This matters especially in crafts, where production often doesn't scale without limit. If every product requires a lot of manual work, you can't fix too low a margin just by selling "a bit more." There are only so many hours in a day.

As a rough guide, here's how to think about margins in the craft and jewelry business:

Under 40% margin
Often too low, unless it's a very fast-moving product that requires little work, or a strategic loss leader.

40 to 60% margin
Can work for certain products, but requires close cost tracking. Resale or large discounts can be difficult.

60 to 75% margin
Often a healthier range for direct sales, if working time is accounted for and the product has enough demand.

Over 75% margin
Can be excellent, if the price is justified to the customer, quality and brand support it, and the product doesn't demand an unreasonable amount of working time.

These aren't official rules, just practical guidelines. Your real target comes from your own numbers: how much you need to sell, what your costs are, and what kind of pay you want to draw from the business.

How Does Resale Relate to Profit Margin Percentage?

Resale through retailers is a significant opportunity for many jewelry and craft brands. Products end up in stores, museum shops, or lifestyle boutiques, and the brand gains visibility and credibility.

But resale changes the pricing logic.

When you sell directly to the customer through your own online store, you keep the entire sale price. When you sell to a retailer, the retailer also needs to earn something. Stores typically add at least a 30% markup, but often as much as 50%. This means a craft entrepreneur may need to sell the product to a retailer for as little as half the retail price.

If a product is priced with only direct sales in mind, halving the price for resale can leave the entrepreneur breaking even or operating at a loss.

That's why it's worth approaching resale strategically. Not every product is suited to it. Products best suited to resale are those that are:

• quick enough to produce
• controlled in terms of material cost
• easy to reproduce consistently
• simple to price clearly
• priced so that the consumer price can still absorb the retailer's share

If a product is very labor-intensive, one of a kind, or made from expensive materials, direct sales may be the better option.

How Can You Put Profit Margin Percentage to Use in Your Own Business?

Profit margin percentage isn't just a single calculation. It's a tool that helps you make better decisions.

1. Identify Your Best Products

Your best-selling product isn't always your most profitable one. If one product sells a lot but has a weak margin, it can consume a lot of working time without a solid result. On the other hand, a less visible product can be excellent for the business if it's quick to make and has a strong margin.

Build a simple table for your products, listing:

• sale price
• material costs
• other product-specific costs
• production time
• margin in euros
• profit margin percentage
• margin per hour of work

That last figure is often an eye-opener.

2. Decide Which Products Are Worth Developing

If a product sells well but the margin is too small, you have several options. You can raise the price, switch some materials for more cost-effective ones, speed up production, sell the product only through direct sales, or create a version better suited to resale.

If a product isn't selling and the margin isn't good either, it may be a good candidate to drop from your range.

3. Plan Discounts Wisely

A discount doesn't just reduce the sale price. It cuts directly into the entrepreneur's margin and take-home income. Discounts shouldn't be given just because "everyone else does it too." First you need to know how much margin you can afford to give up.

Many small brands and businesses have changed how they think about discounts. They aim to add value in other ways instead of cutting their own prices. That's a good direction for the craft industry!

4. Assess Whether Paid Marketing Is Worth It

If a product's margin is 15 euros and acquiring one customer through advertising costs 10 euros, only 5 euros is left before other costs. If the margin is 35 euros, advertising can be a much more realistic option.

So the margin also tells you what kind of marketing your business can afford.

5. Build Different Roles Into Your Range

Not all products need to be the same. Your range can include:

• affordable entry-level products
• strong-margin staple products
• eye-catching brand pieces
• products suited to resale
• unique special items

What matters is knowing what role each product plays. Problems arise when an entire range consists of products that are beautiful but too slow to make, too cheap, or have too low a margin.

A Good Margin Isn't Greed

Many craft entrepreneurs hesitate over pricing because their products are handmade and pricing feels personal. But price isn't a moral judgment of the entrepreneur. Sound, profitable pricing is simply a condition for running a business.

If products are priced too low, the consequences show up quickly. The entrepreneur burns out, there's no money left for development, quality suffers, marketing can't be invested in, and eventually the business can't sustain itself.

A good margin isn't greed. It's simply essential for the business to keep going.

Summary: Profit Margin Percentage Helps You See the Truth About a Product

Profit margin percentage helps a craft entrepreneur look at products realistically. It shows which products are truly profitable, which need a price adjustment, and which are suited to resale.

Good pricing isn't just calculating materials and adding a bit on top. Good pricing accounts for materials, labor, waste, packaging, payment methods, marketing, resale, business costs, and the entrepreneur's own pay.

The price of a handmade product isn't just the price of the product. It's a decision about whether the business can continue, grow, and pay its maker a reasonable return.

Material prices change, postage costs rise, payment providers take their share, and your own skills keep developing. Your prices need to keep pace too. Once you know your products' margins, you stop pricing based on guesswork, comparison, or a guilty conscience. You start pricing based on knowledge. That's one of the most important steps from hobby to profitable craft business.

Try our profit margin calculator and see how much you actually take home from your product!

Best regards, Liisa