You can start and run a profitable craft business by following these steps.
Many talented craftspeople are skilled at what they do, but are not always the best at running a business. This article teaches the basics of running a successful craft business.
PHOTO: FOTOLIA/OLEG ZHUKOV
We know that there are a lot of talented craftsmen and craftswomen out there, but how many of you are as good at selling your designs as you are at creating them? Archie and Myrna Ossin — craftspeople themselves — have published a book intended to help all you artists and hobbyists go into business for yourselves ... and succeed!
The Ossins have used the principles set down in their book for four years, and during that period, they've turned a nominal investment into a profitable craft business. That's why we've chosen to reprint the following excerpts — which are representative of the kind of levelheaded counsel you'll find in the guide — from Archie and Myrna's book.
To start and run a profitable craft business, you must — of course — have a specific product which can be made and sold. THE IMPORTANT THING IS THAT THERE SHOULD BE A DEMAND FOR THE THINGS THAT YOU CAN MAKE AT THE PRICES FOR WHICH YOU WANT THEM TO SELL. If you enjoy doing something for which you know there is little demand or if your product cannot be priced profitably, keep it as a hobby and start a business with some other item.
There are three general areas from which you can develop ideas for your products:
Successfully sold handcrafted items are those which can be associated with marketing themes. These themes include such things as:
IT IS THE COMPATIBLE COMBINATION OF YOUR PRODUCT IDEAS WITH ONE OF THESE MARKETING THEMES WHICH WILL YIELD A SUCCESSFUL PRODUCT LINE. This marketing psychology will work for you because retail outlets, gift shops and other establishments, which will sell your product to the consumer, are organized by marketing themes.
Macrame items are generally sold in plant shops and sometimes in furniture stores. One clever artist, with declining sales, decided to work his macrame craft into a different marketing theme. This artist drilled holes in wooden "ABC" baby blocks which he used as beads in his macrame to make a plant hanger for a baby's room. He sold this idea to an exclusive department store that displayed his product with baby furniture rather than in the plant section. He thus transformed his macrame work into a new product and fitted it into a new marketing theme where it found its natural outlet with other baby accessories.
One of our friends who enjoyed woodworking used to make wooden wall plaques with interesting sayings. He found, though, that people didn't want to pay enough to enable him to cover the costs involved in making his high quality signs. A survey revealed, however, that local businesses would pay considerably more money to obtain attractive signs to be used on their premises. His signs are now in parking lots, on store fronts and in many other locations. Changing his marketing theme from wall plaques to business signs has led him to many new customers.
One artist had trouble selling his jewelry. He decided to dye the beads used in the pieces so they would match blue jeans. By doing this, he rejuvenated his business, for he now sells his jewelry to blue jean outlets.
There are endless applications of how you can fit your craft products into marketing themes and even change themes to increase your sales. The extra thought that you put into this area will pay off, for a good marketing theme will always lead you to the people who'll buy your product.
Suppose you like to knit. Rather than knit many different types of items — from baby booties to golf club covers — you can combine knitting with any one of the marketing themes mentioned. This helps you to define your customer and to concentrate your attention on that area. Following the next paragraph are examples of how knitting can be combined with market themes to come up with product ideas.
It would be best for you to select one theme and concentrate on developing and selling several products which fall within that theme. Of course, the more unique the product, the better your chances of making sales. Any craft that you do can be viewed in this same way. Try brainstorming, using your chosen craft to think of products that will match each of the marketing themes listed below. This short list is by no means comprehensive, and you can probably come up with other themes. You'll be amazed at how many ideas you'll have. Go to department stores or shopping malls for ideas. Ask your friends, read trade magazines and keep looking for new possibilities all the time. (Note: See the "Application of Market Themes to the Craft of Knitting" chart in the Image Gallery for an example.)
New and unique products in all areas will always find a market. With new materials continually being developed, the range of available media from which items can be handcrafted Is greatly expanding.
Inexpensive — yet elegant — furniture made from glass and 3-inch plastic piping and joints will probably be in the marketplace on a large scale soon. Other new product Ideas can be brought about by mixing "something old with something new." A good example of this is the combination of antique jewelry beads with new and modern beads. A new twist to informal clothing was added when artists specialized in tie-dying and painting T-shirts. One artist was able to set up a large display of her personalized T-shirts in the children's clothing area of a department store. Other new ideas have included kitchen accessories such as breadbaskets, napkin rings, etc., made of bread-like dough material treated with a lacquer. These have been popular all over the country, for they fit in well in stores specializing in gourmet kitchen accessories.
You might devise a wooden metric calculator that can be a kitchen decoration as well as a great culinary accessory. Again, use your imagination and think of items you can make that people need.
You can also develop products by improving existing products. As long as you contribute something to the product in appearance, improve its functional performance or provide better marketing and distribution, you'll succeed. However, simply doing something already done without any improvement on your part will give the consumer no compelling reason to purchase your product over one already being marketed.
An example of a product improvement is the creation of special pottery effects. Two things we've seen that are impressive are studding plain unglazed earthenware with sparkling metallic crystals and using metallic glazes in spring colors that are in definite contrast to the usual earth tones found on pottery. These sell well in furniture stores and boutiques that cater to decorators. The addition of ceramic flowers to a vase made of pottery was an attractive touch to help sell a plain vase. These and other improvements to existing products can be both exciting and lucrative.
You should make an effort to go to places where you can get ideas. It's very important that you see products similar to yours as well as products sharing the same theme. Take the time to do the following:
A show allows suppliers or craftsmen from many different parts of the country to set up booths and show their wares. These shows will give you an opportunity to find out the latest developments in your particular skill and will give you product ideas. The people who display at these shows can provide a wealth of information and ideas. They also may be helpful in:
Once you've developed new product ideas, there are some key issues to keep in mind. Don't limit yourself to just one item. Select several related items in order to develop a product line. For example if you fabricate resin trivets, also make spoon rests, napkin holders, coasters and so on. People like to buy things in groups. This includes both consumers and store buyers. Buying in groups saves people time, and it requires that they make fewer decisions. The buyer will save time when he writes an order for several items from one company. And if he eliminates an item from your product line, you still have something left to sell him. THE MORE VARIETY YOU SHOW IN STYLES, SIZES AND PRICES, THE MORE CHANCES YOU'LL HAVE TO MAKE A SALE.
Pricing your product correctly is an important part of your business. If your price is too low, you may lose money on each article you sell. On the other hand if the price is too high, you may lose sales. So every product you make and plan to sell should be carefully priced.
Two methods which will help you are market pricing and cost pricing. The market price is the sum that the product will command in the marketplace. This price is also known as "what the market will bear." In cost pricing, the value of the product is the accumulation of all production and distribution costs. These costs include material, labor, selling expenses, cost of facilities, packaging, shipping and profit.
The way to determine a market price is to fabricate prototype samples and let several people, who you think would buy your product, evaluate it. For example if your product is a baby item, ask some mothers and grandmothers what they would pay for this item in a store. Be sure to get a wide cross section of buying personalities. Most marketing research corporations do exactly this type of canvassing for their own products. The opinions of 10 of your friends, acquaintances and shopkeepers will yield information that is almost as accurate as what you'd obtain from professional market survey. After all, a professional survey simply records the opinions of a sampling of the population with respect to a given product or service. You — essentially — can do the same.
You must actively seek out pricing input from people. Don't be afraid to ask what they think, how much they'll pay and whether they have any comments about your product. Don't lose your enthusiasm and self-determination if you get a few negative responses. Once you get responses from several people, you'll be surprised at the accuracy of your survey.
The best way to show the need for cost pricing is through an example of one of our own experiences. Until we conducted this exercise, we were losing money. The product was a baby's bib which was handmade and cut in the shape of a rabbit out of a terry-cloth backing. The face of the rabbit was sewn on in applique. A cotton border trim was sewn around the edge, with excess trim being extended and finished as the tie string. Also on the bib was an applique orange felt carrot which the rabbit was eating. The cost breakdown for this article is available in the Image Gallery under the chart "Calculating the Retail Price of a Bib."
We started asking our friends and storeowners what they would pay (retail) for this bib. To our amazement, the answers were all in agreement. The market price was determined through this study to be $3.50 retail. Having to sell a $3.88 bib for $3.50 and only making $1.00 per hour for labor caused us to drop this item from our product line. This is the type of cost analysis that you should do for every item in your line. We found that a reasonable sales "commission" for the time one spends seeing a buyer should be 15-33 percent. We also found that a reasonable profit is 33 percent of the sum of materials, labor, selling and overhead costs. Some artists price their articles by multiplying the cost of materials by three, but this method didn't work for us because labor is such a big portion of our product cost.
You have to consider reality In your pricing. Ask yourself if your work stands up to the competition of similar work done by others. If it does, can you realistically add all of the costs together and still make a profit? It may surprise you to know that it may take two to three hours of your time to pack and ship a $100 order. If you make only a small profit on an individual item, will it still be worthwhile if you're asked to make this item in large quantities? Don't forget that most retailers must add 100 percent to make their profit. The $1 item you sell to the store will have to sell for $2. Will your product sell at double your own asking price?
Don't forget that your time is money. Materials not bought with cash still cost you money if you spend time looking for them. If you use shells from the beach, old tin cans or dried flowers that you pick yourself, you should calculate the cost of these "found" materials based on your hourly wage. Figure how many items can be collected in an hour and divide that Into your wage to find out the price per piece. Include this in your figures when pricing a product.
If you plan to work at your craft yourself and never hire anyone to replace you, you should pay yourself an hourly wage competitive with those of comparable artists. If, however, you plan to replace yourself at a task, pay yourself the wage you would pay hired help. Be sure your hourly wage doesn't make your product cost more than the market price.
Profit is over and above the cost of labor, materials, selling costs and overhead. At first, you may hope to just meet expenses or possibly your labor costs, but if you are to expand your business, you'll need to figure in a profit to make it worthwhile. You may experiment with a 33 percent profit as shown in the previous example. The profit percentage you use will depend on your product and on existing economic conditions.
Overhead includes all the hidden costs of a business: a secretary, stationery, utility bills, time spent creating and designing your products, etc. After a while, you'll be able to arrive at a realistic percentage to charge for overhead. Careful records of your expenses and of time spent in tasks not directly related to product fabrication will help you in this area.
The secret of making high profits is to have an actual retail price (the sum marked on your product In the store) that is somewhere between the market price and your own calculated retail price. Selling a product at an actual retail price which is lower than the market price helps ensure high sales. Having an actual retail price above the calculated retail price ensures that you're making money. You should try to get at least one product in your line which has a high profit for you because that product alone will handle some of the overhead costs we all overlook in pricing our products. At the same time, you should have an item with a lower profit margin that produces quick turnover. The rapid sales of this item will help to encourage sales of other items with higher profit margins and will keep cash flowing into your business.
There's an old saying: "Make hay while the sun shines." This saying should be taken literally in your pricing policies. When economic times are good and people seem to just "buy anything," push your prices upward a little bit and make some extra profit. You'll find that your sales will be greatly affected by economic conditions. The extra profit you make in good times might be just what you need to keep you afloat when things get slow. In slow times, you might be forced to reduce your prices to maintain even minimum sales.
A GOOD RULE TO REMEMBER: IN GOOD ECONOMIC TIMES, PRICE YOUR ITEMS ACCORDING TO MARKET PRICING, BUT IN BAD TIMES, KEEP PROFITS AT A MINIMUM LEVEL TO KEEP SALES UP.
Remember that pricing must be reviewed periodically to reflect changes in hired help, material costs, overhead costs and economic conditions.
From How to Start and Run a Profitable Craft Business by Archie and Myrna Ossin, copyright 1977 by Ossi Publications. Reprinted by permission. Available from Amazon.com.
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