Profit margin vs. markup

You buy or make an item for $20 and sell it for $30. You have added $10 to the cost. That is a 50% markup, but only a 33.3% gross margin before other expenses.

Two different denominators

Markup divides profit by cost. Margin divides profit by revenue. When the denominator changes, the percentage changes too.

What happens after fees?

Suppose that $30 sale also has $3 in marketplace fees and $4 in shipping expenses that were not included in the $20 cost. The $10 spread falls to $3 in contribution profit. Your contribution margin is now 10%, even though your initial product markup was 50%.

This is why the toolkit calculates margin after all entered per-order costs and seller fees. It shows monthly profit separately, after the fixed overhead you enter.

Choose a margin you can sustain

There is no universal best margin. A handmade item with significant labor has different economics from a digital download or a print-on-demand product. Include labor, packaging, and customer acquisition before deciding what looks healthy.

Use the target-price calculator to find a candidate price, then compare it with what buyers will pay. A mathematically profitable price is only useful if the product can sell at that price.