Start & Run a Craft Business. William G. Hynes

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      You may be obliged to sell to shops on consignment at the beginning of your career. If your work is unknown, store owners may be unwilling to run the risk of outright purchase. However, as soon as your work becomes accepted in the marketplace, you should insist on a straight sale in dealing with most shops.

      You may be obliged to sell to shops on consignment at the beginning of your career.

      Consignment is an unwieldy arrangement at best, as you never know exactly how much work you have sold until the retailer sends you your payment at the end of the month. Also, the retailer has less incentive to promote your work if he or she is looking at keeping only 30 percent or 40 percent of the price rather than the customary 50 percent retail markup, and is facing no loss if the piece doesn’t sell.

      Moreover, consignment involves considerably more paperwork than a straight sale. In addition to a written agreement with the consignee, you need to keep detailed records of how much of your stock is in the hands of the consignee at the end of each month.

      3. Retailing

      If you sell directly to the public, you receive all of the final selling price yourself. You make a profit as the producer of the goods and you make a profit again as the seller. However, before you start counting your profit, you have to reckon with selling expenses.

      If you are selling at a craft market, the net income from sales can be relatively high. Sales from your own studio can also be more profitable than selling to stores. If you have your own separate retail outlet, you will have retail selling expenses, but you may still make more profit per sale than you would wholesaling.

      Retailing all your work at craft markets will mean that you must spend substantial periods of time away from the workshop. This is seen as a plus by those who like traveling and/or meeting people. Even if you are not particularly fond of retail shows — and not all craftspeople are — it is still a good thing to meet your customers in person from time to time and get a first-hand idea of their reaction to your products.

      Retailing your own work usually means going to shows or selling to the public out of your own studio. There are, however, a couple of other options. You can retail your work through the mail, something we consider in the following chapter when we look at the various selling channels in more detail. You can also take advantage of opportunities to sell your work on the Internet, a subject we explore in detail in Chapter 7.

      4. Which is best for you?

      The type of product you make and the quantities you produce will be the most important factors in determining whether you sell the bulk of your work to shops or directly to the public. If you are producing unique, one-of-a-kind items, it may be possible to sell all your work directly to customers, either through markets, from your own studio, through the mail, or on the Internet. If you are making production crafts on a part-time basis, it may also be possible to dispose of your entire output at retail. But if you are making production crafts full time and have a substantial output, you will probably want to do some wholesaling.

      Most craftworkers use a variety of marketing channels.

      Even if you are able to sell most of your output at craft markets, wholesaling can be a valuable “second string” to your bow. If you are dealing with shops, you will have a smoother and more even cash flow as payments from stores will come in at times when you are not selling at shows. Selling to shops enables you to reach further afield than it might be practical for you to travel personally. Sales on the Internet also have this advantage. This, of course, does not rule out selling as much of your work as possible at craft markets or from your own studio. In fact, since you normally make a higher net profit per item on retail sales, you should aim to sell as high a percentage as possible of your output at retail.

      Most craftworkers use a variety of marketing channels. Chapters 5 and 6 look at the traditional marketing channels in detail. Chapter 7 deals with new selling opportunities offered by the Internet.

      b. Pricing Your Work

      Pricing is very important. If your products are priced too low, you will undercut the market and end up working for nothing. On the other hand, if you put too high a price on your work, you will find your goods priced out of the market.

      Set a wholesale price for your work first. If you are also selling your work at retail, simply add on an appropriate retail markup. (I discuss this below.) If you are selling the bulk of your work to shops, bear in mind that most shops will compute the selling price to the customer by doubling your wholesale price.

      There are two basic ways you can go about setting wholesale prices for your work:

      (a) Cost of production: Using this method, you determine all the direct and indirect costs of producing a piece. You add a certain amount over and above this as your profit and you have your wholesale selling price.

      (b) What the market will bear: Using this method you look at what similar products are selling for in the marketplace and try to set your prices so that they are not too far above or below those of the main competition.

      In practice, you will usually find that a combination of both methods works best.

      Start out by calculating all your production costs or the costs of all your material and labor. Material costs should be fairly easy to calculate. Don’t forget to allow a certain amount for waste, and remember to include all the materials you use.

      Labor costs are a bit more difficult to determine, especially in the beginning stages of your career. Minimum wage rates or prevailing wage rates in your area are of little use to you when you are working for yourself. More important is the time it takes you to produce a price in relation to the time taken by an experienced craftworker. You certainly can’t charge more for a piece simply because it takes you longer to produce it! On the other hand, you do not necessarily have to lower your prices as you become more efficient. As you gain experience, you will earn more per hour from your work.

      After calculating your labor and material costs, you then determine your indirect or overhead costs and add a portion of these to the cost of each item you produce. You start by estimating your total overhead costs for a given period of time — usually a year. Be careful not to overlook anything. Think of heat, light, rent, telephone, office supplies, and postage. In addition to all these, include the time you spend managing the business, designing products, purchasing supplies, and selling. All these are very real business costs, and if you do not factor them into your selling price, you will be that much out of pocket.

      When you have an estimate of your total yearly overhead costs, divide this figure by 12 to arrive at an estimate of your monthly overhead. Estimate as accurately as you can how many of each item you make per month and divide your monthly overhead figure by this amount. The result will be the amount that should be added to the cost of production of each item to cover your overhead.

      Now you can add on your net profit figure. This will be the amount you want to clear on each item after you have paid for all the costs of production and overhead costs. You do not need to make the same percentage profit on each item. On some of your bigger, more expensive items you may not want as high a percentage markup as on some of the smaller items. On average, you should aim for a net profit in the range of 15 percent to 25 percent.

      Check your price calculations against the prices of similar work in shops. If your prices appear too high, you must go back to your cost of production figures and recalculate your profit percentages, reduce your hourly labor costs, СКАЧАТЬ