The maker's costing glossary
Gross Margin
The share of the sale price left after COGS.
Gross margin is profit as a percentage of the selling price, after direct costs (COGS) but before overhead. It tells you how much of every dollar of revenue is left to cover your fixed costs and provide profit. It is the single most-quoted health metric in a product business — and the one makers most often confuse with markup.
Why it matters
Margin decides whether volume actually helps you. A 15% margin means you keep 15 cents per dollar to cover rent, tools, and yourself — sell more and you're barely further ahead. A 45% margin means growth compounds. Two makers with identical sales and wildly different margins live completely different lives.
How to calculate it
Subtract COGS from the price, then divide by the price and multiply by 100. Because the denominator is the price (not the cost), margin can never exceed 100%.
Gross margin % = (price − COGS) ÷ price × 100
Example
You sell an item for $100 with a $60 COGS. Margin = (100 − 60) ÷ 100 = 40%.
In practice
Most handmade businesses target a gross margin high enough that overhead and profit fit inside the remaining share — commonly 40–60% for retail. Wholesale margins are thinner, which is why wholesale only works on a genuinely low COGS.
Common mistakes
- Calling a 50% markup a '50% margin' — it's actually a 33% margin.
- Targeting a margin without knowing the true COGS underneath it.
- Ignoring that a small price cut can erase a large chunk of a thin margin.
How CrafterBy handles it
Set a target margin in CrafterBy and it works out the price for you — and shows margin and markup side by side so you never mix them up.