It’s coming to the end of the year, so it’s a good time to review your progress and look at what has and hasn’t worked for your craft business.
At Folksy we get lovely notifications that tell us when a shop has reached a certain sales milestone and we’ll often mention these achievements in the High Fives section of our newsletter to sellers. There are thousands of shops on Folksy and this is a great way for us to find shops to shout about. But the number of sales alone doesn’t tell the full story about the health of a business and how sustainable it is.
If you’re serious about growing a business, you need to be brave, take a day off designing and making, and look at your sales figures in detail. You can use the day to do a full review of where you are now and where you want your craft business to be this time next year, or even beyond.
NB. It’s important to keep detailed accounts because when you are selling anything with the intention of making a profit you need to consider legal issues, like tax and insurance.
Image: Owl Earrings – Ginger Pickle
What Makes a Sustainable Craft Business?
Most people who start a craft business start small scale and if all goes well they can then grow the business over time. The dream for many is being able to quit the day job and focus fully on building a brand. But others simply want a creative outlet and enjoy doing something they love while bringing in some extra spending money. To make both these business models work, though, you still need to take an approach that allows your business to be sustainable.
For a business to be sustainable it has to eventually begin to turn a profit. This is where creating a business plan is really useful. No one can look into the future and predict sales and profit because markets change over time and can become more saturated. However, you can identify where you want/need the business to be and how much you’ll need to sell to get there. This will give you the detailed information you need to know how your business is doing month by month.
The dictionary definition of profit: “the amount by which revenue from sales exceeds costs in a business.”
Review how your craft business performed this year by following the steps in our to-do list below, and you should feel more confident about how to grow it in the year ahead.
To Do: Revisit your elevator pitch
The elevator pitch is a short paragraph that explains exactly what your business is all about – it’s called the elevator pitch because you should be able to rattle it off easily if someone asked “so what do you do?” in the time it takes a lift to go to the top floor. Whether you’ve called it that or not, chances are you’ve written down somewhere a little explanatory paragraph about your business in the past year, perhaps in your shop bio? Does it still feel right or have you moved on and become more focused on a specific product or ethos?
To Do: Realise your strengths
Start by looking the bigger picture and assessing what worked. Write down a list of what went well for you this year, what you really enjoyed about your business and any progress you made. You don’t need to go into detail here, but you should end up with a list of positives. If you’ve had a quiet year for sales, this exercise will hopefully reignite your passion for making, and motivate you to get your head around a more in-depth analysis of what has and hasn’t worked.
To Do: Accounts
Balance your books for the previous year. Break these figures down into quarters of the year (or months if you prefer). Consider all the year’s costs – Remember every expense is tax deductable, read tips here – Tax Tips when selling Craft.
It can make you feel like the soul of your lovely creative business is being sucked away when you look at things in terms of product performance and profit margins, but if you want to keep making and selling in the long term it really is essential to consider the PPs and PMs. Having these figures should show you the best times to start making and promoting in the coming year – for example, it could be that getting Easter stock online earlier will increase the selling period, and in turn this may mean you may need to get going on Mother’s Day or Valentine’s Day stock a few months earlier.
To Do: List the profit margin for each item in your product range
List each item type in your collection and calculate the profit margin for each one. This can help you decide what to focus on in your marketing and promotions. For example, selling two crochet cafetiere cosies may make you twice the profit of selling 10 crochet key covers. However this doesn’t necessarily mean you should stop making the key covers and focus only on cafetiere cosies, because people may have bought your lower priced items as ‘add on’ items? Look back at your sales records – did a promotion or a giveaway of these lower priced items attract the buyers to your more expensive items? Can you use these easier-to-make items to pull shoppers in and lead them to other items that have bigger profit margins?
I told them to smell what sells , they bought stuff that you had to smell
— Lord Sugar (@Lord_Sugar) November 18, 2015
To Do: Smell what Sells!
Are you having to relist items for a second or third time? In the words of Lord Sugar to many a hapless Apprentice candidate, you need to “smell what sells!” Take a look at each item type in your product range and answer the following questions:
- What was the most popular item in you shop in terms of sales?
- Which item got the most views?
- Which item (or type of product) got the least views?
- Which products have been sitting unsold in your shop?
When looking at the results, don’t jump to conclusions and immediately ditch the products with the lowest number of views or sales. Dig a little deeper. It could just be that those products need a little tweaking or some extra promotion. So for each product, ask yourself:
- Are you selling it at the right price?
- Is there much competition for this type of product?
- Are the products photographed well?
- Have you used the right keywords in your titles and descriptions?
- Did you market the item well?
- Are you targeting the right customer?
- Is the item type seasonal – was it listed at the right time of year?
Try to spot if there are any patterns for your most successful products that you can replicate for other products.
- Where did you promote them?
- Where they pinned, shared, blogged or featured in the press?
- What keywords did you use in your listings and descriptions?