Finances – Your Money
Part One
Finances – YOUR MONEY
Getting your Finances right is key to running any Handcrafted, Handmade Craft Business – get this part right and in many ways the rest will happen given time.
The reason I wanted to look at this really all early on – is this – its brilliant that you have an idea to turn your hobby, new skills learnt and you want to make it a business, after all, all your friends and family are saying – omg you should sell your work, your creation, as you could make a fortune at it. Ta da business idea emerges – like last blog – you have goals, your big WHY, your plans and you know what you want to do………. But does the money add up? Thats the big question – will you actually earn anything from it and will it be viable enough to really be a business to meet your goals and the why.
Start with looking at your Financial situation in mind.
I am asking you to start here – which you might ask – WHY? Because I actually believe its about firstly beginning with looking at your personal views on finances and where you are currently, that will have a big impact on how and what value and worth you place on what products you make, services you will offer and how you will price them up. Some people may well disagree but I can only go from what I know, have experience of and have observed over many years with others prior to coming into the business world and since joining it.
Ask yourself this – do you know your outgoings? do you know your money? do you spend more than you have coming in? do you use credit cards and are in debt? all of these things will influence you and what you are trying to do and how you are going to price your products or services – as you will be doing it to respond to dealing with all of that – rather than really pricing up or looking at the true value or worth of your products or services. Panic and overwhelm, fear and lack of knowledge or refusal to face reality of current position will all impact on this area – and I have seen it all too often in people who are selling and running `businesses` when I have attended Craft Events and Fairs over the past few years.
So what do I mean ? Outgoings – get your personal finances into order, get to grip of knowing exactly where you stand personally and how much or how little you have to invest in setting up or running your potential or actual Handmade Business – lets not call it craft business but a handmade business as that is what I am actually meaning.
In the early years I did not – and it showed, I did not know fully what I needed to earn each month to make a significant £ figure to our family budget – I think I randomly picked figures out of the air on pricing my products and handmade items up and while I read loads on what I should do, I did not feel it worked for what I was doing – so I priced up what I thought would give me a reasonable return – I booked into Craft Events and Fairs – sold some, took stock home and did some sales online. I broke even on resources, just about, but did not make any profit what so ever and in all honesty if I really really worked the figures out I was practically not just running at a loss but probably giving my work away – I might as well have just knitted for charity or give it away.
My contribution was Zero a huge fat Zero to the family finances and in fact, my hubby was probably paying for more than he seen the return for. If that works for you – then fine go for it. For me it was not what I wanted – I was not into `pin money` business goals, or something that was really not a business but a hobby. For me, and I can only speak for me – It had to change.
Time for Change
About 18 months ago I realised a time for change had to come about – I wanted my Handcrafted Hand made business to make me a living – currently I thought and knew it was part time (is there ever a part time business?) but I had to supplement with other business consultancy work, a couple of other avenues re freelance contracts and some passive income (previously set up in past career before setting up in business) but not enough or at a level that I could do nothing and not work. But Pitter Patter Tiny Feet was not making me any money in all honesty and things had to change – or walk away.
I love Pptf and I did not want to give up – but in my husbands words – `stop playing at it, its a hobby Sharon, if it made money, I could see it being called a business, but its not.” – harsh but the kick in my crafty bits that I needed – a friend and close colleague said the same – “get a grip and start valuing what you are doing and start running a business not a hobby ” – and so the changes began.
My first stage was to get a grip of where I was, my personal finances and our joint finances – I separated out Business from Personal – I have always had a Business account for consultancy work but now I amalgamated all the finances into this 1 account – sounds basic and sensible – but I still hear so many who do not and it does not allow you show accurately your finances and how well or not so well you are doing.
My 2nd was get real – I won`t go into my personal situation as this is not what its about – but I got real, and I cleared and I cleaned my personal account up – there was money flowing out to things that needed to stop – an example, I had subscriptions to Knitting Magazines that were about £12 – £15 a quarter – I had 2 of them – cost £96 – £120 a year – if the business is a business then I do not need to personally subscribe to these but pay for them through my business account and only if can afford them – and I could not – so they went. Sounds small and daft but its not. Its about getting clarity. Far too often our passion as creatives and crafters gets ahead of us and we purchase because its pretty, someone selling cheap, or I want it rather than need it – this is not a hobby its a business – so you have to start by viewing the resources needed ie what you buy for it in exactly the same way.
Again sounds simple and straightforward – but again hear so many in this field – who have hobby and crafter/creative head on and not a business head on – you can still be passionate about what you making but also knowing it will make you money not lose you money – and can I also say – having resource stashs and stock is not good – its dead money – its resources you have spent on and not getting a return on – and therefore losing you money. My head was getting battered.
I seen it in what I was doing with my Consultancy business marketing and selling my time & expertise – but sadly not reflecting this in my Handmade Business – and I have not even started about pricing.
I am not going to say about keeping records and accounts, receipts and paperwork here as will do in another blog later – but its another key area to make sure keeping a check on your finances.
Finances – Your Money
Getting your Finances right is key to running any Handcrafted, Handmade Craft Business.
Ultimately this is what you have to start to look at – this is your money, your costs, your value and your worth – if you do not value it or what you make – how do you think other people will?
My next big hurdle to get my head around was – not just starting to price more appropriately but also how I was marketing and selling – again its another blog post and topic to cover but what I mean is about keeping track of your money aspect to this one – but where I was marketing and selling my gorgeous creations once I had made them.
Craft events, fairs and renting space in shops etc – if this is not making you money or allowing you to sell your products/ services at a price that it is valued at or worth – then stop. I have wasted so much money over the past 3 – 4 years flogging my guts out at Craft Events and Fairs – from Community, School and Bigger venues – for to be honest so little a return that for me now I am no longer willing to do any. Its obviously not the venue or has the audience that is my market or my niche (that we can cover in another topic and blog).
For me this is all wrapped up in the Finances – My Money aspect of being honest and being real about your business and what you want to get from it. What you value your creations, your time, and your worth – and for me it was also what value and worth I wanted others to put on it also.
My Money = My Worth
I came to the decision 18 months ago but began to define it and really focus on it in earnest just after that I was not and never will be in competition with shop bought or cheaply made, mass produced or cheaply made handmade creations from other people, businesses or who ever. I began to really see what MY Value and MY Worth was and how that translated into what I sold and what I offered handmade. Its been hard, as I have been dragged at times back into doing a craft event, or making something for someone at a much lower price that I should charge (discounted prices because I was in a networking group etc – but this is and will continue to not be the direction I go in for this year onwards).
I also have priced up my handmade creations better, in a process and system that will work for me, I am clear on what I want to do, where I want to market and sell, how I go about it and I will not deviate from the pricing structure that I offer. But instead offer ways customers can meet that pricing structure easier via payment plans etc. I am testing out were I market and sell differently – I know my customer better, I am looking at how I display differently, what handmade products I offer and what added value comes with me and my handmade creations more than I have ever done before. Result already – clarity in direction, orders coming in, and confidence that in a short period of time I can run this handmade business on a more profitable financial line and in time let to me being able to focus more on it full time rather than it is at the moment.
This is why when I started the blog I meant – you need to really know what your personal financial situation is as it will have a big bearing on how you run your Business financial set up – panic and fear of not having enough or panic for it to pay you anything – can often lead people to price up poorly, not value or give their handmade creations a true value or worth – and then hope that it at least covers resources but forget all the other fee`s that come into it all as well.
If you are struggling to make your handcrafted, handmade creations make money – try to take some time out and breathe, ask yourself this;
- what are you struggling with?
- Have you priced your creations up appropriately?
- Are you wasting or spending money in areas that are costing you money not making you money? Craft events that you pay a fortune at but your items are priced so cheaply that you make sales but find you hardly get even the table / space money back as so expensive, or you make regularly no sales and do not make money back on event costs or you make sales but when take into account your time, product production, travel, insurances and so forth comes out as so little long term wise is not making you money?
- Do you have a healthy understanding of your finances and are you ready to accept what needs to change and are you ready to make those changes?
- Do you price to who you see as other competitors – but does it reflect what you want to price your handmade creations at – beware of the race to the bottom pricing wise.
- Do you give discounts and sales regularly? Mates rates etc
- Do you buy resources on a “oh I have to have basis” or because they are right for what you have planned to do and will be used to best use and value in your business.
Ultimate last question – Do you want to turn your business around to making your handcrafted handmade creations make you money? Of course the answer is yes – but are you ready to let go of what is not making you money and what will? If its yes again – then good – you are ready to look at what you need to do and do it with me as your Handmade Business / Craft Business Mentor.
The biggest thing or the most important thing I want to try to get over to anyone is this – keep a track of your money, your finances – each every penny you spend, penny of income and expenses incurred and you will find that you get to really know your money, what you need to make to break even, what you need to make a profit, what you need to expand, market, sell, grow and that all comes down to knowing precisely how much it costs for each and every handmade item you create and want to sell. You will also know how much money you need to bring into your personal finances to make it all worth while for you to carry on and run a successful and fulfilling handcrafted Handmade Crafting Business – I have said it from the start – if you are not making any profits and only breaking even or losing money – then you are not running a business that is viable in the long term and if thats the case then stop it as a business and run it as a hobby and enjoy it.
My last comment is this ; if the figures at this moment in time do not add up, as in it is not giving you enough to focus on 100% of your business time, but can grow and you want it to grow – then keep persistently at it and it will. But do not be daft to not realise that you need to get ALL your finances in order, and personal is huge – do it part time until it can grow to next level or you are in a good position to take it to the next level, use it to pay down if you owe debt or it needs to pay a part of the household bills – but please always make sure you are pricing it up and have prices that will allow you to do this – if you are only ever covering cost and a % for your time – you will probably find that in a very short time you will struggle to make it work for you. Motivation, resilience and persistence is needed when running a business and if you are not making any money on a long term basis from what you are doing, it makes it really hard to keep going.
Following your passion, being creative, making handmade is all fantastic and what I want you to do – taking your hobby or your passion into a profitable business for you – but its the profit bit you have to make sure is happening – whether thats a small % profit or not – it has to be profitable. Otherwise as I say repeatedly its not a business.
Ps – I also am tired of hearing people (often sadly women) go – I am looking to run it as a hobby that pays – its either a hobby or its not a hobby – its either a business or its not – the choice is yours. What ever you choose to do – I hope this has been helpful and of some benefit to you and look forward to reading any of your comments below in that section 🙂
Next Blog
Next blog on Finances is around Pricing your handmade creations appropriately and to make you a profit. Costs for other items – Craft Fairs, Marketing, Insurances and so forth – all part and parcel of your pricing structure.
Thank you for hearing my humble views in this blog on Finances – My Money – I am passionate about my business and the handmade creations I make and those who wish to do the same as me – run a Handmade, handcrafted business and make a living at doing it – and I only hope that my experiences and suggestions can support you in that journey you have in running your own business.