This is how I make the magnets. It may look complicated, but it is really easy and fast. I hope I did not miss any steps. Very similar to making card stock designs.

Christmas Magnets.
You will need:
Machine embroidery design 4x4 or smaller
Embroidery thread.
Craft felt, soft or hard type I don’t use the wool felt due to expense.
Tear Away stabilizer
Permanent Glue I use Liquid Stitch from Joann’s
Magnet Sheets I got mine from Amazon, DiYMAG 4x6 sheets.
Rotary Cutter
Directions
Cut felt a bit LARGER than the design.
Hoop tearaway
Insert hoop into machine.
Place the felt square on top of the tearaway.
Choose your design and I ALWAYS DO A BASTEING OR FIX STITCH TO SECURE FELT TO TEAR AWAY. (This fix stitch will be your cutting guide used later)
Stitch out your design.
Remove hoop from machine and un-hoop the tear away with design.
Gently remove the tear away, making sure you remove all edges of the tear away from the felt. No need to remove the tear away from the center part of the design.
Place the felt design on the magnet sticky side and use rotary cutter to cut to size. USE THE BASTE OR FIX STITCH AS YOUR CUTTING LINE.
Pull up the edges of felt and apply glue strip to EDGES of magnet. Press the felt edges down and let dry.