Breaking Down Your Costs

Oops! This was supposed to be Wednesday's post but I accidentally published it early when I wanted to schedule it. There will be a short post on Wednesday instead.

How much are you really making from your work? Sometimes we don't honestly exaluate our costs by leaving off some of the costs.

A common pricing system that I see is Materials + Time = Wholesale x2 = Retail but I think this formula is flawed because it doesn't take into account other costs such as shipping materials, other costs, and fees.

I use a formula of Materials + Time + 15% = Base Wholesale x2 = Base Retail however because of shipping and fees from etsy and paypal it becomes more complicated after this. I add the total cost of shipping which is postage and shipping materials. Base Retail + Shipping Costs = Total Cost This number is what I WANT to receive after fees.

Note: I actually have a sliding scale for wholesale depending on order size but 200% is what I use for calculating the retail price.

Now Etsy and Paypal do fees different, Etsy doesn't charge fees on shipping while Paypal does but for simplicity I'm just going to assume they both charge on the total amount.

Etsy fees: $0.20 + 3.5%
Paypal fees: $0.30 + 2.9%

If you are interested in the math here it is (skip to the bottom if you're not)

Total Cost = C
Total price I need to charge = P
C+[$0.30+(2.9%P)]+[$0.20+(3.5%P)]=P
C+[$0.30+(.029P)]+[$0.20+(.035P)]=P
C+$0.50+.064P=P
C+$0.50=P-.064P
C+$0.50=.936P
(C+$0.50)/0.936=P

So if the amount I need to make is $28 I need to charge ($28+$0.50)/.936=30.45
Total Price - Shipping Costs = Online Retail

I've put this information into a spreadsheet on Google Docs with an imaginary item entered into it. You can download it in Excel or Open Office format and edit it with your own numbers.

Weekly Inspiration

Love the earthy colors.

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Silk screened linen napkin, originally uploaded by émili.

Video Pick - Writing Better Ads

Here's a quick little video from google on improving your ads.



Sorry I don't have a longer post for you guys this week. I'm feeling sick and wasn't able to get the post I had planned done.

Weekly Inspiration

Something for Halloween

Fall Holiday Chain Bracelet Detail, originally uploaded by RenGalSA.

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Being Small Doesn't Mean Looking Small

Today we have a guest post with a different perspective. Usually this blog is from the point of view of someone running a small handmade business today we have the point of view of a professional in advertising and marketing. If you are interested in writing a guest post, please send me an email.

David Gash is the Founder of Prova Advertising, a company that is revolutionizing the way that businesses meet their advertisement needs. Prova promotes crowdsourcing with an ingenious approach that allows small to medium sized businesses to launch Ad Design Contests in order to find the best design talent at YOUR price.

Being Small Doesn't Mean Looking Small

Here are a few tips to help your business look more professional even if it's a one-person operation.

1) Don't use your personal email address - Time and time again business owners using their personal email address for their business. This sends out the sign that you either lack money, expertise, or commitment. If any of these are true, never let it show. Take a few dollars and register a domain name and at least sign up for email service. Even if you aren't going to develop a website, a domain name will let you get a professional email address that tells the world you take your business seriously. Godaddy.com sells domain names for less than $10. A lesser known service called Google Apps can host your new domain's email for free.

2) Business Cards - It used to be that an independent business owner would have to go to their local printer and buy an enormous box of ugly business cards. The owner knew every time they handed them out that everyone saw they were small. Those days are over so let them go. Have a professional designer spend some time to put together a logo for your business and get that design into a business card. Make sure you include your name, contact information, website address and enough information so that people will remember who it was that gave them a card. Avoid the temptation to give yourself a title like President or CEO. Owner will do fine but Artist will say a lot more if you are creating a product. Let the design of your card emulate the style of your business. Find a printer online that does small quantities of full color printing and order a box. You'll be amazed how quickly you can go through 500 cards. Don't be tempted by large quantities because they are incrementally cheaper. You may decide after the first set that you want to make some changes. After you're sure they fit the bill, then you can order larger quantities. Go for full color and a UV coating on the front which will give you a high quality, expensive feel to the cards. Be sure to leave the back without coating since UV coating will keep you from being able to flip over a card to write some notes.

3) Skip the Clip Art - Clip Art can be easily spotted even if you feel like you dug it up on some remote site. You can spend as little as $200 to get a nice, quality logo for your business. Remember, usually graphic designers will charge less for a package and can get a logo, business card, and other work done for you in one project.

4) Remember the Press Release - The best way to generate free buzz for your business is to do a press release. It isn't magic but it does take some research to put it together. If you do an online search for press releases, you'll find numerous free templates to follow. Put together an announcement you may have about a new product, a new employee, or an upcoming event and send it to local news outlets that may cover community or business news. Make the release compelling and interesting and most of all, short!

5) Social Networking - Consider starting up a social networking site like Twitter or Facebook for your business. These are somewhat time intensive but the relationship that you, your business, or your products can build with existing customers is invaluable. You'll also be quickly exposed to new customers and can begin to build your brand with them. Consider Twitter for more constant updates with shorter information, such as, "I'm sitting at my wheel with a lump of clay, I wonder what will emerge today." Consider Facebook for longer, more detailed information where you can post pictures and get a real dialogue started.

6) Plan - Sit down and think about where you want to be a year from today with your business and write it down. When you are presented with any advertising opportunity, like the yellow pages, or a marketing event, look at your goals and see if that event is in line with getting you where you're headed. If not, skip it.

Big businesses have dedicated staff to pull off their marketing strategies. With a little effort and some elbow grease, your business can have the same marketing advantages. And if marketing really isn't your strength or you don't know the first thing about hiring a designer, consider hiring a company like Prova that will let you run a contest to get your marketing needs professionally met on your budget. Remember, being a small business never has to show on the outside, unless you want it to.

Weekly Inspiration

I love the monochromatic look with the texture of the wall.

girl 2, originally uploaded by rjrisco.

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A Business for Kids

Monday I spoke at a local school for a bunch of art students and a lot of business stuff came up about selling online. There are a lot of great creative kids out there who would like to sell the things they make. Personally I think it can be a very valuable learning experience for a kid to start up their own little business. So if you have a creative child who wants to try to sell their work, give them a shot at it but realize it is going to be work for you as well as them.

Legally children under 18 can't enter into legal contracts so as the parent you are ultimately responsible for any online accounts, bank accounts and so forth. This means that you're going to have to do a good bit of work, the younger they are the more work you'll have to help them with. Research with them local rules for businesses, help them with the books, you'll have to accompany them to the bank to set up an account for them (most states don't allow kids under 18 to have a bank account on their own), and teach them how to manage their money.

Most selling venues online require a credit card to set it up (and paypal prefers you have one on file). Since I don't think most kids should have access to a real credit card instead of using your own consider using a prepaid card or setting up a checking account with your child that has a debit card with a credit card logo.

On the subject of money I think you should put rules down at first about how their money must be spent or saved. A portion should be for personal spending, a portion goes back into the business, a portion to savings, and a portion to charity (let them pick whch ones, it'll mean more to them). What the proportions should be will constantly change depending on their age and how much the business is making. For a younger child (say 9-10 years old) an even 1/4 split between them would be simplest to handle but as they get older they may want more money to go into growing the business or going to college savings. Discuss it with them every few months. As your child gets closer to 18 you need to back off and let them make more of the decisions to prepare them for when they'll be on their own.

Links:
Etsy Guidelines for Sellers
Forbes article on Raising an Entrepreneur
These Kids Mean Business Documentary (aired on PBS)
Kids and Money Books on Amazon