Saturday, August 01, 2015

The Business Chat - Sshh! Here's a dirty little secret!

This is for my knitting colleague who refuses to pay someone to code her website, she will save money by doing it herself. It’s been 3 years and she’s still working on it. 

This is for my jewelry friend who refuses to join a prestigious online marketplace because it costs $60/year. She’s selling on her own website and has sold 15 items so far this year (it’s July). 

This is for my pottery friend who will only do crafts shows if the booth fee is less then $50. She has a great job as a barista to pay the bills as the pottery sales are flatter than the flat white coffee she serves. 

This is for all the people who wince and whine and refuse to spend money for their business.  

Today I’m sharing one of those dirty little secrets that isn’t discussed much in other business columns. 

It costs money to sell your work. 

It’s hard when you first start out. You spend so much money just making your work. Then you decide to sell it and you have to invest in stuff you may not have thought about, like business cards, packaging, a website and a booth for craft shows. 

I’m here today to tell you that sorry, that is just the beginning of what you will spend money on. 

If you want to sell your work, you are going to have to spend some money on venues to sell at. 

There are 3 ways of selling your work. Let’s look at each of them.

First there is selling retail. 

Retail is when you sell directly to the customer, no middle man. The most common retail method is selling at craft shows. Craft shows cost money to buy a booth space. Plus you will need to build a good booth display and supply your own tent.

How much should you pay for a booth? Well that depends. You can buy a table at a local community centre, or church basement for maybe $25 or $50 for a day. Or you can buy a booth at a large professional show such as the One of a Kind show (in Toronto, Canada) for anywhere from $2,000 - $5,000 for 11 days. 

As with any sales experience, there is no guarantee of how much money you make. What we do know as professional crafters, is that we have a rough idea of how much we will make. The rule of thumb is that booth cost will be 10% of sales. 

When a show charges more money that means that they have more money to advertise and promote the show. Don’t be fooled into thinking that you are seriously going to make any money doing a $25 table at the local community centre. If you want to make actual money you are going to have to up your game, put on your big girl pants and pay some real money for a real show. 

Oh, and if you do shows then you have to pay for a credit card processing system. The most popular for beginning or small crafters is square.com. Cost is 2.7%.

Next on the list of retail opportunities is selling online. 

So can you code a website? Take professional photos? No? That’s okay because the opportunities for creating a free website these days are tremendous. 

While you don’t have to be a technical wizard to make your own website you do have to be willing to learn and spend time doing this. And not be afraid of it. And you will have to spend some money for your own domain name and web hosting. (usually about $15 for your domain and then $10/month for hosting plus online shopping cart software which is usually about $20/month). 

The same goes with photographing your work. If you don’t want to invest in professional shots then buy a decent digital camera and spend a LOT of time learning how to use it. 
You can use an online marketplace instead of your own website. Etsy, the most popular handmade marketplace, charges .20c per listing and 3.5% if it sells. Plus your paypal fees for you to accept online payment. (2.9% + .30c per transaction.) 
The second way of selling your work is to stores on consignment. 
Selling your work on consignment means that you place work in a shop and when they sell something they pay you a percentage. 

A standard consignment arrangement is usually 60/40, 40% for the store. With the changing economy many stores are now paying 50/50.  Plus the cost of having a decent selection of product (and product costs you money to make) out of your control for an extended period of time. Plus the cost of keeping track of the inventory a consignment store has. 
The third way of selling your work is selling to store on a wholesale basis. 
Wholesaling is when a store buys your work outright. They order from your catalogue, you produce the work and before you ship it, they give you money. 

To sell wholesale you will need to have a catalogue. Stores will expect at least a 50% discount on your retail price. 

Let’s use an example. Lisa has made a bracelet and wants to sell it. She puts a $100 price tag on it. 

If she sells it at a craft show, knowing that booth cost is 10% of sales, and the customer pays with a credit card she will pay 12.7% of the sale. She makes $87.30. (don’t forget the costs of building a booth display and standing in your booth for 12 hours a day). 

If she sells online she will make $93.10 using Etsy.com. If she has her own website she makes $96.80 (minus the monthly cost of her shopping cart and website hosting). (don’t forget the cost of marketing your online shop online and taking all the photos, and writing the product descriptions). 

If she sells to a store, either wholesale or consignment then she can expect to make $50 - $60. 

If you are wondering how anyone can make any money when they are spending so much on selling their work, the answer is that we have priced our work properly. We have done our research and found the appropriate places to sell our work. And we have done the work necessary to back up our sales.

I don’t want to make the situation sound hopeless. People sell work all the time. Look at me, I’ve been making a living at selling my handmade glass jewelry for 11 years now. (sailorgirl.com - shameless self promotion right here).  

Just be aware that no matter what, you are going to have to spend money to sell those gorgeous creations of yours.