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You’ve found the thing you love - hand making beautiful products for beautiful people but you find yourself in an endless cycle of making and shipping and making and shipping. There’s no space left to dream about new ideas or areas to explore within your business, no marketing strategy, no room for creating supporting content, the money is always tight because the products are not priced properly, and don’t even mention a work-life balance of any sort.
If this resonates for you don’t feel alone I was right there with you. Even though I wished I could bring in the income to make it work I didn’t lay the groundwork to build the business I dreamed of. I believe if you take time and intention to think through the creation stage of your products it will set the foundation for a sustainable business. More than just figuring out pricing, which I’ll touch on later, I’d like to dive deeper into how to create a product that supports the business you dream of.
Hobby vs. Business
I first want to make a note here about the difference between a business and a hobby. It’s important to decide if your goal is to build a sustainable business or to provide some extra monetary value from a hobby. If you have a craft or service that you love doing and want to make a little side money to save up for a vacation or pay down some bills but you’re not asking anything of it besides using it as a creative outlet that is completely valid and a great way to enjoy your craft without putting any stress on it.
Up until recently even though I was wanting a business I was treating my hand weaving more as a hobby. The main mindset switch is taking the time to put in a solid foundation to build a business that can be sustainable for your dream lifestyle. I would recommend taking some time to answer this question for yourself and your life, what are you wanting from this craft or service?
Any answer you come up with is right but I do believe if it’s a business you dream of, there needs to be a plan. Which brings me to the 3 main factors to creating the products to take you there.
When you set out to create a product first think about how to serve your customers best. This is where knowing who your ideal customer is comes in really handy. If your dream customers are not going to see this product as valuable than no one will buy it and let’s be real, that’s the whole goal.
A way to make sure your product will be bringing value to your customer’s life can be as simple as asking them. Social media can be a great asset for talking directly to your customers. Instagram has the ‘ask a question’ story and the poll story and you can outright ask them in a caption or post. You can ask them what they would like to see, buy, or for you to offer. This is a great first step to getting some ideas and answers straight away.
Also think about how your customers want to feel in their life, they may not know what will bring them value so you can think deeper about this for them. Then I’d ask the question, does this product or service fit within the core values of my business? For example if someone were to respond to me saying they’s like to see woven wall hangings but the way I want to bring value to my customers is by creating purposeful and functional items, wall hangings wouldn’t fit under the umbrella of being functional.
Next, I think about the time it takes to create the product or offering. For me, time is the most important factor behind value because for my current dream lifestyle I only want to be working for 10-15 hours a week. I have a 2 year old and 1 month old that I want to be present for and have the privilege to be home with in this season I’m in. So, when I only have 10-15 hours to work with, every second counts.
I tune into finding the sweet spot between a product that reflects the core purpose of my business, provides value to my customers, and actually fits in the time I’ve allotted in the ecosystem of my business for the physical making and development of the products. How you manage your time between all the facets of the business will vary person to person but here are some things to keep in mind.
A sustainable business can not only consist of making products and then shipping them with a few Instagram posts mixed in. This is where I see a lot of makers get themselves stuck and where I lived not long ago. I believe it’s important to schedule into your work week or month time for things like finances, (yuck, I know but really important) content creation for a marketing strategy, testing and developing new products or offerings, diving into the analytics of your efforts to really see what’s working and what’s not, and probably most important, rest. Running your own business means you play all the roles a larger corporation would have complete departments for.
Think about your dream work week schedule — how many hours do you want to work? How much time do you feel you need to be working on each of the facets mentioned above? A business has ebbs and flows so some seasons may need more time for development of a new product or offering and other times need more content creation before a big launch. Making a list of everything you want to be doing in your business can help start defining how a week can look.
Find a weekly calendar that goes hour by hour and start by shading out the times for sleep, food, personal time, family and rest and see what’s left. Then divvy up the items on your list in the remaining time slots. Calculate how many hours you have scheduled for physical product creation for the week and that is what you have to work with and keep in mind when you set out to create a new product.
Materials and Pricing
The cost of materials can vary greatly depending on your craft or service but there are a few tips to try and implement regardless. The higher the quality of materials the more your pricing will increase so it is important to keep in mind your ideal customer and ask questions like, do they find value in having the highest quality materials? Will they be willing to pay the top tier pricing for that particular product? You also need to ask yourself what part do the materials play in the core values of your business.
For example, I make sure the fibers I use for weaving are pure in the sense they are from reliable sources, are durable, and are appropriate for what I will be using them for. I use 100% cotton for things like towels, a cotton linen blend for lighter scarfs, and 100% wool for rugs. There are higher quality versions of these materials but I find a balance between the quality and cost that works for my business. Keep in mind prices usually drop the more you buy in bulk so that is something to plan on doing the more funds you have to do so.
Pricing is a hot topic in the maker community because the same type of product can have such a wide range in cost. There are formulas to pricing handmade products that usually go something like this:
[Material costs + Cost of labor x 2] + overhead rate = wholesale price x 2 again = retail price.
This may work well for some products and business but it may need tweaking for others. We touched on the materials costs above but here’s a break down of the rest of the formula. The cost of labor is you or your small team creating the product so please do not under or over appreciate this number. This number can increase as you gain experience in your craft, invest in yourself, and as the demand for the product increases.
The overhead rate many forget to include but is essential to building a sustainable, successful business. Overhead costs are all the expenses you pay to keep your business running throughout the year but aren’t directly related to the products. Examples of these expenses are web development and design, tools and machines, accounting fees, booth fees, utilities, advertising and marketing, printed materials, apps and softwares, educational resources, and hiring help.Don’t skip this cost because this is where your products will facilitate how you can invest in your business throughout the year. The simplest way to include these costs is to find an average rate and that is what you include into the formula. Make a list of all the expenses in a year then divide that total with your estimated amount of products you plan to sell for the year and that is your average rate.
The wholesale price is the price you will sell your products to stores. The retail standard is 50% of your retail price so that is why it is times by 2. Some shops may be open to different percentages off so don’t be afraid to have a conversation about what will work best for them as well as you. The retail price is the price of your product to everyone else and once you’ve calculated the formula above see where you land.
This is where all the factors come into play to determine if this product is going to support the business you dream of. If you feel the retail price comes out too high or too low for your customer and the value they will feel then go back through these factors and see what is causing the imbalance. For example, weaving takes a lot of time to create. But there are ways to save time by making 10 scarves at a time rather than 2. I know for my business a realistic sweet spot is for a product to take an hour or less to create. Any more than an hour and the price starts getting out of reach for where my core values lie.
There are always exceptions but finding a balance among these factors will set your business up for success and be a guide to future products. Take note of what types products do really well and assess how you feel about the balance. Could something be tweaked to let it serve your business better? Keep revisiting how things are working, not working, or making you feel. I believe a business is a living thing that needs attention and fuel but will grow into whatever you want it to be.