Saturday, November 20, 2010

The Business Chat - the 10% rule

At 2 a.m. last night I finally turned off the lights in the studio after a really long long day. Why was I working so late? Well I was having fun, however it is also 3 days before move in for the One of a Kind craft show. The One of a Kind show is a juried art show of 800 vendors, it takes place on November 25 – December 5. Yes, that is 11 days, 11 hours a day. It is a BIG deal. And I have left too much work until the last minute. Again. As I was discussing with a fellow artist (at midnight last night) who is also doing the show for the 8th year, why are we stressing about this so close to the opening date? Should we not know better? We aren’t newbies anymore. And this is my post for today.

It doesn’t matter how long you’ve been doing this, you will still stress about a show. You will still stay up too late working in the days prior to a show. You will still not know what will sell and make a guess, although now at least it’s an educated guess for me. For those who are doing their first show, or their fifth, take a really deep breath and just keep moving forward.

A large part of the uncertainty is working out inventory. The tricky part of selling to the public is trying to predict what the public wants. At this time of year people are shopping for gifts in quantities, this means that they are looking for lower priced items. In June a customer will approach me asking for a bracelet for her sister. In December that same customer will approach me asking for a $30 present for her sister. Everybody is on a budget, if you have work in a broad range of prices you will appeal to more wallets.

In my business workshops students always ask, how much work do I make for show? Unfortunately, there is no magic formula. What I can tell you is that there is a rule that we can use to help judge our stock. In the jewelry industry we have the 10% rule.
The 10% rule tells us that our booth cost should be 10% of sales.
For a $25 show, you should sell $250. A $250 show, sales should be $2500. It doesn’t matter if your $100 show is 1 day or 3 days, if the show costs $100 you should sell $1,000. Keep in mind - this 10% is an average not a guarantee. Do not expect to make the 10% in your first 5 shows because as a newbie you will make mistakes. On your first show be happy to break even (including ALL your costs not just your booth fee). In the next 4 shows you should see your sales improve as you work out your display and show techniques. Now start charting your show sales. Sometimes you will do a $25 show (expected sales $250) and make $500. Bonus! Then your next show might be a $75 show and you sell $500. Booth costs = $100, sales = $1,000, average = 10%.

Knowing this rule does help with inventory. If you are doing a show that costs $50, you can expect to sell $500. If you expect to sell $500 there’s no point stressing about bringing $8,000 worth of work. Every piece of jewelry you make costs money to make. If you don’t have reasonable expectations of selling it, this inventory is going to end up sitting on your shelf. That’s money sitting on a shelf instead of in your bank account.
A good starting point is to bring 2 or 3 times your expected sales. If you expect to sell $500, then bring $1,000 or $1,500 worth of work. Over time this will increase and you will be carrying around 4 or 5 times expected sales. It takes time and money to build an inventory. If your costs are 25% making $5,000 worth of inventory costs you $1,000. Spending $1,000 to go to a show where you sell $500 isn’t a great idea. Yes you still have the leftover inventory so if you are doing a couple of shows in a row you might be okay. It is still a better idea to make $1,000 - $2,000 to start, sell some, make a little bit more, sell some, and so on.

So now you have a rough idea of how much to bring. Take a deep breath and go and make it. I’m going back to work.

ps. Anyone in the Ontario area if you’re visiting the One of a Kind show, I’m in booth W38. Stop by and say hi!

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