Recently I've been talking to quite a few handmade business owners who do not charge appropriately for their time because it would make their item "too expensive" (their words, not mine) and so they cost their materials and then "add a bit extra" to come up with a selling price. I've written another piece about justifying your pricing which you can read here, but the business person in me wants to scream "what are you doing?" Don't get me wrong, if you love making what it is you're making and aren't worried about making a profit and charging realistically for your time prices you out of the market and you're ok with that, all power to you.
It all comes down to why you have a handmade business in the first place. If it's to make a decent income and create a profitable business, then making items which you cannot correctly charge for is simply foolhardy and unsustainable. If however, the motivation for starting your handmade business is to be your own boss, express your creativity and work from home, then perhaps making items that you cannot sell profitably fulfils your need. I would say most creative business owners want both and so finding a middle ground between being truly creative and expressing yourself in an authentic way and making money can sometimes be quite the balancing act.
But it can work and you can do both.
Many businesses across many industries make a mix of products that are both very profitable and ones that are less so because either their market demands it or maybe it's what their brand is known for. Learn from this. Why not create items that take less time and less expensive materials (these are rarely one-offs) and also add "bulk" to your store and then fulfil your more creative side with items that take longer to make and are often commission pieces or one-offs. These can be more expensive but the profit margin is probably less.
To create a truly successful business, you need to define what "success" means to you and then create a business that fulfils that and if "success" means making a decent profit then I'm afraid you might need to suck it up and make pieces that you can create over and over and charge appropriately for. It's simply not realistic to spend all day making one item which you might sell for £20-£30 and expect to make a profit.
I'm aware that many crafters have an issue with this approach and believe that the value of handmade is the "one-off" uniqueness of it but I think this mind set is slightly naïve. Remember that if you're selling your items in a shop or market this approach might work, but if you're selling online, you have to photograph, upload, tag, title, describe etc. etc. each individual piece. It also means you cannot list that item simultaneously online in more than one shop. Your business can then become just about admin rather than creating which leads you down an unfulfilling road.
Of course, it goes without saying that these rules do not apply if you're selling high-end, high value items where making (and selling) one per day is all you need. But simple maths should tell you that if your item is selling for a £100 say and your profit is £60 (for example), even if you sell one a day and it takes you all day to make one, that's £1,200 a month. And that's the BEST you can probably hope for (I've assumed you take week-ends off and sell 20 in the month). You'll have tax to pay on top of that, marketing, insurance etc. etc. It won't leave a huge amount at the end of the month and you won't have the resource (time) to potentially make and sell more without it potentially damaging your quality of life.
So, if you want your business to be profitable, do the maths. How many can you make in a day? How much can you charge? Multiply that by 20 (I always use 20 as a rule of thumb for days in a month to take off for week-ends and quiet days on the sales side) and see what you can make in a month. Is it what you were expecting? If it isn't, rethink your offering. I know lots of artists who sell their original art at fairs and markets but sell prints (either they have them printed or do it though print on demand) which they sell online and that is their bread and butter. You can use this easy product costing & selling template to work out the selling price of your items.
Just be honest with yourself. Don't get all sulky because your chosen hand made items take so long to make that if priced appropriately you'd never sell them and take on the stance that it's "unfair". Remember what is driving you to have your business and then cut your cloth accordingly. You can do both (and many creative entrepreneurs do) but you might have to adjust your mind set.
One last word on this; worrying about money (or any excessive stress) can really dampen the creative juices for many so if you can sacrifice some of your creativity to cover your monthly bills, maybe it's worth considering.
What have you done in your business to ensure you are fulfilled creatively and still turn a profit? Tell us about it in the comments section below - we'd love to hear from you!
Enjoy this blog? Want to find out more? We offer courses for creative business owners and are very excited about our workshops in January 2016, taking place in London. Get your New Year kick-started and meet other creative entrepreneurs just like you!