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Read
Part 1
Start with what
you love. Craft business
owners don’t start their business to earn money: rather, they decided to
make money from doing what they love. In starting a new business, you will
experience many ups and downs and it will take time before you can build the
business to the level that you can actually live off from its earnings. The
passion that you have for your craft can help you sustain the level of
interest in the business and push you to work at it until you succeed.
(article continued below ...)
Spend time
knowing your market.
Before you even start your business, you need to find out if people will buy
your items, and if they will buy it at a profitable price. Many
entrepreneurs make the mistake of turning their hobbies into serious
business, only to find that the market is too small to make the business
profitable. Your business can only survive if it generates enough demand to
sustain it.
Never assume that there is a market for your products: find them first.
Visit craft shows, flea market, talk to other crafters, and read trade
publications. Go to eBay and look at whether similar products are selling,
and at what price. Some crucial information you need to look out for: check
whether similar products are now being made by machines and mass-marketed;
or whether imports from China or other foreign countries are lowering the
price or demand for handcrafted items.
Find out where
to market your products.
Should you sell on the Web or in flea markets? Should you present your
products at craft shows? Or should you sell in all these markets? You need
to determine where you will sell your products. The ideal would be to select
the outlet that will allow you to reach the most number of customers at the
least cost possible. Many crafters are opening web sites to reach the global
market, then their set-up tables at flea markets during weekends. Others
have found online auction sites as the best place to sell, or at least to
dump excess inventory, including items returned.
Start slowly,
but surely. This is
particularly important if you are starting on a very limited budget. If you
do not have enough resources, you have little room for trial and error. It
is best to first know what the market wants before spending too much on
inventory, supplies and marketing. You also need to know how to
cost-effectively run your business and learn the skills that you need to
manage your cash flow. Craft businesses often take about two years before
they show major profits.
Price your
products right. How to
price the products is often a challenge for craft business owners. You do
not want to price yourself too low that inadequately covers your costs; but
you also do not want to overprice yourself out of the market. The key is to
price for profit.
There are several ways to determine the right price for your products.
First, add up all your costs, including raw materials, labor, overhead
(rent, heating), licenses, marketing expenses, profit, and others. To
compute your labor costs, decide how much you (or your employee) will be
paid per hour to produce products, then multiply this hourly rate by the
number of hours a week that will be spent producing crafts. Add your labor
cost to the cost of materials per piece, and then divide by the number of
products produced in a given time period to get the price per piece.
Second, you can approach other retailers and artisans offering similar
products. Research the marketplace and compare prices in stores, galleries,
and on the Web. If your price is more than similar products, you may need to
reduce it by cutting hourly price, finding less expensive supplies or by
increasing your production time. If your price is significantly less than
similar products, you may want to consider raising your price.
-- Jenny Fulbright is a staff writer of PowerHomeBiz.com.
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