Yes, in general the ROI is much better with custom work but you need to be careful with what you choose to offer. Ideally you want to focus on things that can be made without too many hours of work. Differentiate yourself with exotic veneers, custom finishes, unusual shapes, etc. Avoid items that are terribly complex. As an example, I can produce custom cabinets and sell them for a couple of thousand dollars, have a few hundred dollars in materials and maybe 20 hours of labor. Everyone can appreciate custom cabinetry and the cost can easily be justified in their budgets.
Furniture on the other hand can get very complex in terms of joinery, hand shaping, etc. You can end up with over a hundred hours in labor and a hard time getting people to appreciate why the piece costs so much. An example of this would be the rocking chairs that Woodguy is currently teaching several of us to make. You have about $500 in materials and well over 100 hours to produce a chair. A cheap shop should use $20 / hr as their labor rate giving the chair a cost of $2500. If you are shooting for a 40% margin, that means the chair should sell for over $6,000. There aren't that many people that can appreciate the beauty of the chair, let alone justify the cost. You could sell them for less, but would you really want to put over 100 hours into a piece and only earn $10 an hour?:eusa_thin