The same profit creates two different percentages
Suppose a product has $40 of defined cost and sells for $60. The $20 profit is 50% of the $40 cost, so the markup is 50%. But the same $20 is only one-third of the $60 selling price, so the profit margin is 33.33%. Neither calculation changes the dollars; each describes those dollars from a different reference point.
This is why substituting “50% markup” for “50% margin” understates the price required by a margin-based model. The percentages are equal only at zero.
Worked example
One fictional product, two percentage goals
This fictional example uses illustrative assumptions. It is not a recommendation or an industry benchmark.
Assumptions
- $40.00 of defined product cost
- No percentage or fixed selling fee in this simplified comparison
- First calculation uses 50% markup on cost
- Second calculation solves for a 50% profit margin on selling price
Calculation and result
- Price after 50% markup$60.00
- Profit at that price$20.00
- Resulting profit margin33.33%
- Price for a 50% margin$80.00
A 50% margin means the $40 cost must occupy the other 50% of price, so the price is $40 ÷ 0.50 = $80. At $80, the $40 profit is half of the final price.
Why Maker Profitability uses margin in its pricing target
The Handmade Product Pricing Calculator defines target profit as a share of the selling price after the entered costs and fees. That lets the percentage-based selling fee and target margin share one price denominator. The solver can then find a minimum price that covers both the cost base and those portions of revenue.
Margin is not automatically superior to markup, and this guide does not supply a universal target. The important practice is to name the measure, define the costs included, and use the matching formula consistently.