Thursday, 4 February 2016

Pricing Your Handmade Goods



How do I price my makes? This is one of the questions I see repeatedly in craft groups and social media platforms. Many people make the mistake of under charging when they start out which can make it difficult when you need to increase your prices at a later date. If you can start with a set formula from the beginning it will make your life much easier. Many crafters start their business on a small sole trader basis and with the current threshold being an annual turnover €75,000 they are often not required to register for VAT. For the purpose of this blog we will base our information on that and ignore VAT for the moment. So here’s the basic formula…
 
materials + overheads + time = cost price
cost price x profit = trade/wholesale price
trade price x 2 = retail/selling price
 
To put that into context lets say you make something using €1.00 worth of materials, that's easy enough so far, you can simply divide the materials you buy into component parts to work out how much each part costs you and how many of each you use per product.
 
What are your overheads? That can be lots of things including the time you spend sourcing those materials, money spent on websites and other outlets where you sell your crafts, perhaps you have an Etsy shop or do craft fairs, all these fees are costs on top of your materials. Now of course it's not easy to calculate how much to attribute to each item so an average of 10-15% would be considered normal. If we go by 15% that makes your total now €1.15 for materials and overheads.
 
Your time is a big factor that you can't ignore, if you were doing an office job or working in a shop you would get an hourly rate that is still important now you work for yourself. There are other people that will tell you to base it on your experience, that to me causes another problem. Yes at the moment you will hopefully be confident enough to not consider yourself to be a novice any longer so let's say an intermediate crafter, what happens when you become an expert? You would need to increase your prices across the board. €10 per hour is perfectly acceptable and you are definitely worth it. Say your piece takes 30 minutes to make, your time cost is €5.00 + €1.15 for materials and overheads makes your total now €6.15. This figure is what is has cost you to make the item, you are yet to make any profit so if you sold it for cost price you would only break even and effectively be selling it for nothing.
 
How much profit you make is a personal decision and I have seen everything from 10% to 100% suggested. 10% is not nearly enough to keep you afloat after all if you don't make any profit your business will fail. 100% is the minimum shops will be marking up your items should you decide to sell to them on a trade/wholesale basis, they of course have their own overheads to pay for so it's not as greedy as it sounds. You could go as low as 70% but why should you be making less than the people you are supplying? After all it's your expertise and creativeness that has produced your product. So, your cost price is €6.15 x 2 to allow for profit means your total is now €12.30 for your trade or wholesale price.

Finally take your trade/wholesale price and times it by 2 to get your retail or selling price. The final price for your item is €24.60.

There is one other price point to think of when selling to shops on a sale or return commission basis rather than on a trade basis as above but we will go into this in more detail at a later date, for now this formula will keep you on the right track.
 
Once you use this formula on your own makes you will see how your prices sit alongside your competitors with your target customers. Now I would be very surprised if at least one person reading this post, if not a few are thinking this woman is nuts, there is no way I can charge that! Before you dismiss the formula consider what you are trying to do and where you want your business to go in the future.
 
I have often seen suggestions such as take the cost of your materials and times by 3 for your selling price. This may work to self fund a hobby but will not sustain a profitable business as it doesn't take into account your time or overheads incurred while running your business. Even worse is when they ask people's opinion on 'what do you think this is worth?' or 'how much would you pay for this?' My advice would be to make friends with a spreadsheet where you can input your formula and keep your pricing structure consistent. It's also much easier to simply input the cost of your materials to get the final figures than it is to work out prices for each individual piece manually.
 
Sadly not every craft is suitable for turning into a business, some labour intensive products would work out far too expensive to sell competitively unless you can either reduce the price of your materials or your time spent making it. There is nothing wrong with still crafting these pieces for fun....I certainly do!

In our next instalment we will be focusing on keeping records for your business, how to set up spreadsheets and the paperwork you need to have for your accounts.
 
Until next time....happy crafting
Trish
 
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Wednesday, 20 January 2016

Starting Your Craft Business



It can be a daunting time when you decide to turn your craft hobby into a business and it's often difficult to find the information you need so the idea of this business tips course is to help you find that information and gain knowledge of how business works.

Now before we start I want to make it clear that I am a crafter and in no way a business expert nor trading as a business advisor, however, Downland Crafts has now been running for over 5 years and that means myself and my husband Tom have picked up a few things over the years that I will attempt to share with you approximately once a fortnight over the next few months. You should also note that we are based in Ireland so the knowledge we'll be sharing will be in relation to businesses based in Ireland, I would imagine that a lot of countries will operate in a similar fashion but please check with your local authorities in case your requirements are slightly different from ours.

I'm involved, and indeed run, a few pages and groups on Facebook that deal with many different aspects of the crafting community from hobbyists to fully fledged businesses. This allows me to see things from lots of different angles and yet the same questions seem to pop up time and time again. That is why I decided to start this course of business tips to help answer some of those questions and clear up some of the confusion out there. I plan to talk about pricing, copyright, social media, keeping accounts, outlets for selling your makes, trade sales and more but first of all let's talk about making your business official.

As soon as you start selling your makes you are legally required to register for tax regardless of whether this will be your main income or not. You will most likely be setting up as a sole trader which is a simple enough procedure by submitting a TR1 registration form and you can then submit your tax returns under self assessment each year. Visit http://www.revenue.ie/en/business/running/registering-tax.html#section1 to register your new business for tax. We'll go into more detail regarding tax in a later post.

I would advise that you also register your business name with the CRO, this can be done online very easily. Visit http://www.cro.ie/ena/business-registration.aspx to register your business name, it costs €20 to do this electronically or €40 for a paper filing. By registering your business name you will legally be able to operate a business under that name plus you will also receive a certificate with your business number and protect it from being registered in your country by anyone else. This is a must if you want to open trade accounts down the line with suppliers as you will often be asked for your business registration number.

There is lots helpful information to be found on the Citizens Information site including how to identify your own business type and plenty of links for more detailed information http://www.citizensinformation.ie/en/employment/types_of_employment/self_employment/setting_up_a_business_in_ireland.html

Every thing I know has been learnt as we went along and yes we made a few mistakes along the way as I'm sure you will too. A lot of what you will do in the beginning will be experimenting with different materials, methods of construction, advertising strategies and more until you find what works best for your particular niche of the craft market.

Well I'm gonna keep it short and sweet for this first instalment as I don't want to overload you with too much to start with. In the next instalment we will be tackling the question that comes up the most in our Facebook groups, pricing. It can be a minefield so I'll do my best to explain it without jargon or too much waffle.

If you have any questions, or something to add you are very welcome to comment below.

Until next time...happy crafting
Trish

Saturday, 2 January 2016

New Years Resolutions

 
 
So have you made any new years resolutions? And who's broken theirs already? I don't tend to make any but I do have plans for the year ahead so I suppose it's the same thing, sort of.
 
I have a massive personal stash of craft supplies and really don't need to buy any more for quite a while but will that stop me?....No! I do have an excuse though as yes I am buying stuff for my personal stash in the sales, but I am also securing fab new suppliers and stock for the website to replace the items we currently have in our own sale. If I'm going to be honest with you, then I should say the main reason it won't stop me buying new stuff is that I have zero self control when it comes to all card making and jewellery making supplies, especially stamps and beads. As you can probably guess this makes me a terrible saver too. If I had a rainy day then I would have to sell some of my craft stash....perish the thought...the stuff of nightmares!!!
 
Every year plan to be better at blogging for one but that only seems to last for a while until I get into something else. I am terrible at getting distracted and starting a new project which means that I forget the last one I was working on. I'm sure I'm not the only one who does this....you are welcome to make your own confession in the comments below...lol. I do have plans for this year including making this blog better by adding projects and business tips. Half the problem was that I didn't know what to write about so only told you about our products and events but now finally I understand how this blogging thing works....I think! If you could tell me what you like and what you don't as we go along that would be really helpful for me and I'll do my best to learn what interests you and what want to see here on this blog.
 
I've been designing some new stamps which is one of my favourite things to do. It takes me a little while to do each A6 sheet as I can't abide wasting space so try to cram as much on each sheet as I possible can. Then of course I am a fiddler and keep thinking 'would if be better if I....?' so change it at least a dozen times before I am finally happy...then I come back to it the next day having had a dream about another way to tweak the design...what am I like?
 
Well I have some work to do so I best get on with it, we're opening again properly on Monday so will probably have lots of things to catch up on. Plus we have many, many, many more items to add to the clearance sale throughout January so I need to get those ready too. It takes a surprising amount of time to organise and list items for sale and if you have your own website you'll know what I mean. If you know me then you will know that I am passionate about the craft industry and would never complain about a bit of hard work. I absolutely love being a crafter, I think most of us will agree that craft is not just a hobby it's a way of life.
 
Until next time...happy crafting
Trish
 

Friday, 1 January 2016

Happy New Year

 
Wishing you all a very happy new year and may 2016 bring you happiness and lots of crafts. To help you get of to a great start our sale has just started over on our website www.downland-crafts.com so pop over and grab a bargain. We will be adding new items throughout the month so be sure to keep checking back so you don't miss a thing.
 
If you haven't done so already then sign up for our newsletter, that way you'll be kept up to date with all the news and special offers. There is also an option to join the members club for free that way you can access the members special offer page as well for even more bargains.
 
We will be opening again on the 4th January and have lots of plans for 2016 including a new range of stamps. Following the success of our first range we have been busy designing lots of new ones.
 
Thank you so much for your support and 2015 and we look forward to continuing to provide you with top class craft supplies, handcrafted items and events in 2016.