Monday, 9 January 2012

Crafting as a business, part 1

moving from a hobby to a business

Gather 'round, dear readers, and I shall tell ye a tale.  My wife, Sherri, and I have run a small jewelry business together for around 10 years.  The business, however, started well before we were married, as Sherri has been making jewelry since she was 12.  The business is called Beads, Indeed!


Here is a link to my wife's Zibbet Site.

Pretty pretty!

This post is about more than just self-promotion, however.  This is an opportunity to talk about the jewelry and crafting business.  We have learned a lot over the years and have made every mistake in the book. If you are thinking about turning your crafting hobby into a business, I hope you find this article helpful.

How it began

Beads, Indeed! started with a few beaded necklaces and a sign printed on a dot-matrix printer in cartoon font.  Sherri would make jewelry while watching TV and would sell it to relatives. In university, while we were dating, she had one relatively successful sale at her school. With a small table in a common area and the same old cartoon-font sign, she sold over $400 one chilly fall afternoon to her schoolmates and teachers. This smash success prompted us to purchase mass quantities of materials and book a table at a Christmas craft fair in Boston.

This craft fair and subsequent ones were lackluster compared to the initial success.  Most didn't even make back the cost of the tables.  It took us a few years before we were able to figure out what had gone wrong. There were many factors, but not the least is that it is actually rather difficult to turn a hobby into a business.

Making the transition from hobby to business

The decision to have a crafting business is often a very organic one. The crafter will oftentimes start making their craft for fun, and soon it becomes a cheap source of Christmas gifts for family and friends. After a few months of honing their skill the crafter is producing more necklaces than their family has necks, and needs to expand their customer base. It is at this point when they get the idea that they could exchange their excess inventory for dollar bills.  This transition is often very organic and the crafter doesn't realize that there is a difference between running a business and doing a hobby.

The difference between a hobby and a business is that a business needs customers. Crafting as a hobby is about the crafter having fun and creating. Customers, by and large don't care if the crafter is having fun in the process (friends and family excepted).  Therefore, a few adjustments need to be made in order to increase the chances that the new crafting business is something the customers will care about.

Adjustment 1: de-personalize it a bit.

The crafter will often have a great deal of personal stake in their craft.  Their work is art, and is very personal. This means that it can be hard for a crafter to sacrifice aspects of their work for the good of the business.  Treating a business as your baby instead of as your business is a source of trouble for almost every small business, but nearly impossible to avoid for the crafter. Recognizing this and making the choice to do what it takes to sell effectively is very important if the business is going to succeed.

Why?

Because as a hobby, your craft is what you find interesting. A business has to be about what the customer finds interesting.

Adjustment 2: make and promote a website

This is the basic requirement for doing business today. The website is the new storefront. It is important you have one even if you do not plan to sell your crafts over the Internet. People who hear about your business will look for it on the Internet, and having a website makes your business look professional.

I would highly recommend a service like Etsy or Zibbet over creating and maintaining your own website. These services don't cost a lot and are easy to maintain. The design is taken care of for you and it looks neat and tidy. It is much better when you are just starting out to use one of these services than to pour hours into creating a custom website that you design yourself, and then find that you have to work just as hard to keep it up to date.

Adjustment 3: Limit your designs

Most crafters like variety.  If they make a hundred different items, they'll have a hundred different designs, one of each. This is fine for a hobby, but not so much for a business because it becomes overwhelming for the customer. A table full of different designs, all of them unique becomes a jumbled mess in a customer's mind.  Special items lose their uniqueness if they are in a sea of special things.

Instead it is better to make your pieces stand out.  Depending on the craft you do, there's slightly different techniques, but it's essentially the same concept:
  • For cards, pick a few events that people would need cards for (birthday, Christmas, graduation), and then make a few designs (2 to 5) for each and be able to replicate them. Make one sample for each, take a picture, put on the website. Make more copies only after people order them. This allows you to rotate out designs that don't sell without putting in hours of time making things. Also, having too many choices actually will reduce sales because people won't be able to make up their minds. 
  • For paintings, sculptures, drawings, ceramics, or other visual art, again, do variations on themes, and then change themes every year or two. That's how the pros do it. Think Monet and his water lillies.
  • Fly tying:  This is great, because you already have a theme.  Fishing flies. Just arrange them by colour so it looks cool.
  •  For Jewelry, make variations on only a few themes and give them interesting names. That way people can say "I want a 'Classic Hollywood' style, in amethyst" or "give me the 'Madison Avenue' in turquoise".
You get the idea.
It's nice... but do you have it in pink?


Adjustment 4: pricing issues 

Almost every crafter runs into this issue.  How do you choose a price for your merchandise?  It's heart wrenching because you're trying to balance two mutually exclusive issues.  You need a price that:
  1. People will be willing to pay
  2. Reflects the time and effort that went into making the piece

For this reason, it is hard to get the price right. This harkens back to the 4 Ps of Marketing. Crafters will bounce back and forth between penetration pricing (undercharging to sell more), or cost plus (looking at how much each piece costs to make and adding a percent profit). I wouldn't recommend either of these.

 Penetration Pricing


My crafts aren't special. :o( 

Penetration pricing works with Kindles and iPads, because the company makes their money when they sell you books and apps later.  It works with printers because they will sell you ink later. They can afford to lose money on the device. It doesn't work with crafts because crafts often do not generate repeat customers.


Cost-Plus Pricing


"Let's see... cost 99 cents in materials, took 4 hours to make..."

Cost plus pricing works with contractors, engineering firms, or other types of customized work. When every job is different, you just charge what it costs you plus a bit of profit.  This doesn't work for crafts or any other retail item because customers don't care how much it cost you, they care about how much it is worth to them.

At-market pricing
Therefore a better pricing model is At-Market pricing.  You just do a search on the Internet for crafts similar to yours and see what prices are being charged, and set your prices similarly.

Epilogue

Beads, Indeed! has had some successful shows over the years in spite of its shortcomings.  We've made every mistake in the book at one point or other, and the ones in this article are just the tip of the iceberg. The business is still around, however, the jewelry is still on sale, and my wife is still creative as ever!


A final note on pricing

You don't need to make the same amount of profit on all your items. This is the cost-plus mentality. Some items will be your bread-and-butter, making the majority of the profit. Other items are there to make sure people come into the store in the first place. It's ok.

For handmade beaded jewelry there's one item in particular that is more profitable than the others.  Can you guess what it is?  Do you care?  If 10 people make a guess in the comments then I'll tell you in Thursday's post.





3 comments:

David said...

Now, I'm not a crafter nor do I play one on TV. That being said, I'm not sure that At-Market Pricing is always the best call unless you're willing to cut out making particular items that, while you might enjoy crafting, will not be profitable at marketing prices.

Also, I'm guessing necklaces.

bibtoubib said...

Earrings!

Nathan Williams said...

@David: That's really the rub with crafting as a business. It becomes more about what your customers will pay for and less about what you want to do and what your crafts cost to make.

When crafting as a business you can still have some items be loss-leaders, selling below cost. You just need to have people buy enough profitable items to make up for it.

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