There are many, many handmade creative product businesses. Whether you make jewelry, paint pictures, created wooden or porcelain gifts, or make something else, you are a creative product business. I have clients who make soaps and lotions and clients who make artwork and gifts. I find there are a few key areas where creative product businesses lose money, and I have a few tips to help your business stay profitable.
Tips for Creative Product Businesses
Know your actual costs to create your product and include your labor
- Include all the items it takes to create your product, paint, paper, beads, yarn, wood, labels, shipping boxes, lotion bottles, etc. and your operational costs. For my easy formula for pricing anything guide visit: https://entremoneycoach.kartra.com/page.pricing .
- Calculate how long it REALLY takes you to create each product, and then calculate your labor cost, per piece, that you want to recover in your pricing. Don’t shortchange yourself, the number is the number. Make sure you have the true costs so you can make pricing decisions that reflect your actual time spent.
- Make sure to also include your shipping materials, tissue paper, bubble wrap, stickers, boxes, and any other items you use to ship your items above actual postage. A flat handling charge may be a good, transparent way to do this, or if shipping is included, add it into the price.
- Finally, know your fees for Etsy, Shopify, eBay, etc. if you use any of these selling sites. These can take a pretty significant chunk of profits if you use all their features and advertising offerings. Think also about the table at the fair or the farmer’s market booth. You must consider the cost to sell your product in your pricing.
Have a custom option available for customers and charge appropriately
One way to increase the price of an item is to have a custom option available. I’ve worked with clients who personalize items, and clients who create custom items for occasions such as weddings. Having some sort of customization available for people to buy can increase your revenues and margins. This can also be a way to resell to customers who need your custom item again in the future, such as for gifts.
You need to charge more for the extra time to tailor the product to your client’s specific wishes. Anytime you veer from a standard item, you need to have a charge. Whenever someone orders something custom, please get a deposit. It doesn’t have to be half, it can be a smaller percentage, but get some financial commitment from the buyer before you start creating your one-of-a-kind work.
Watch your discounts, coupons, and bonuses
I see creative entrepreneurs constantly markdown items, which cuts into the profits. A coupon for signing up for the email list, then free shipping, then a bonus trial size, then some other thing, and all the sudden you lose money on the sale. I know that many, many people try to compete on price in the creative space, but what you create is unique because you create it.
I don’t recommend discounting items often, or buyers will expect them and just wait to purchase until you markdown again. Offering a 10% off coupon with a newsletter signup may be ok, or even a free shipping option on a minimum purchase. Just make sure you have the margin to offer them. I worked with a client one time who barely broke even after offering her discount coupon, after the Etsy fees and advertising costs.
Have policies on product changes, returns, and refunds, and stick to them
Things can happen in shipping, the item ordered may not be exactly what the customer expected, or there may be another reason for items to need replacing or returning. Protect yourself with clear policies on shipping and tracking shipments, how long you will accept a return, and when an item will be replaced at no or little charge. Create a policy that all sales are FINAL on custom items.
When people order products online, they have several guarantees offered by payment vendors such as PayPal. They can begin a chargeback or complaint and receive their money back- from your account. Unless you have clear, understandable policies in place, you probably will lose any dispute and be out however much your item cost plus the additional vendor fees.
There is always a demand for beautiful handmade items for gifts or for any occasion. I know someone who buys a great pair of new handmade clay earrings every other week. She just loves them. Too many creatives under charge for their items and lose money in their business. Following the tips above will help you stay in profit and have the money to keep on creating what you love. Do you have a specific question related to your own business? Reach out and let’s chat!