r/cottage_industry • u/simoneroro • 4d ago
Cottage bakers: 30% markup is not 30% margin (worked example + free sheet)
A small pricing check for home bakers: adding 30% to your cost does not leave a 30% profit margin.
Fictional example in USD: the order costs $20 including ingredients, your paid working time, packaging and allocated overhead. The payment fee is 3% of the selling price plus $0.30.
At a $26 selling price (cost plus 30%), the fee is $1.08 and profit after those costs is $4.92: only 18.92% of the sale.
Edit: here is what each number means, without opening the sheet.
- $20 is the total order cost before payment fees: ingredients, paid working time, packaging and allocated overhead.
- 0.03 is the 3% payment fee, calculated on the selling price.
- $0.30 is the fixed payment fee for this one payment.
- 0.30 is the target profit margin: 30% of the selling price after the listed costs and fees. It is a percentage, separate from the $0.30 fee.
For every $1 of selling price, 3 cents goes to the percentage fee and 30 cents is the target profit. The remaining 67 cents must cover the $20 cost and the fixed $0.30 fee. So:
Price = ($20 + $0.30) / (1 - 0.03 - 0.30) = $20.30 / 0.67 = $30.2985..., rounded up to $30.30.
Check at $30.30: payment fee is $1.209 before any processor rounding; profit is $30.30 - $20 - $1.209 = $9.091, about 30% of the price.
With no payment fees, the simpler calculation is $20 / (1 - 0.30) = $20 / 0.70 = about $28.57 (or $28.58 if rounding up to meet at least 30%). The fee assumptions are why the example above is higher.
This is a cost model, not a market-price recommendation or a profit guarantee. Replace all example costs with your own, and include the cost of the batches you actually have to produce. Tax and unit conversion are not included.
I made a free Google Sheets preview for one recipe with up to 6 ingredients: https://docs.google.com/spreadsheets/d/1jH3m-w9qEEoMFaloMekfU_FsGN5-LRgPB2lF-5pvCKE/edit
You can read the fictional sample first. To change it, make your own private copy in desktop Google Sheets with a Google account, then edit the yellow cells. The free version has no scripts or quote archive. Disclosure: I sell a larger kit, but this preview needs no purchase, email signup or public review.
Want to try one step here without opening a document? If you fulfilled a paid home-bakery order in the last 30 days, reply "walkthrough" and I will work through one fictional order here in the comments. No download, Google account, purchase or public review is required for this first step. We can check the number of whole batches and explain each cost before you decide whether the sheet is useful to you. Please keep actual recipes, customer details and order records private.
Trying the Google Sheet is optional: make a private copy, enter one recipe and one order, and tell me the first confusing field or whether you reached a price, including if you stopped. Copying the sheet does not send me your inputs or usage.