Three Questions with Megan Auman – May 2014




Three Questions with Megan Auman on Create & Thrive

Please welcome the fabulous Megan Auman – jeweller, business strategist, artist, designer, brilliant entrepreneur, and my lovely friend. Megan is going to be stopping by every other month to answer three of your burning questions – think of her a little like a whip-smart, no-nonsense business advice columnist.

Take it away, Megan…

1. I have a question about pricing. I’m working on a prototype of my first product and trying to be very careful to record time, materials, etc. as I go (having learned from experience with an Etsy store several years ago). I think this product will take about 3 hours of labor, plus materials ($2-4). So according to your formula, if I “pay” myself $10/hour, my wholesale price would be around $66, making retail $132. That seems like a lot, especially b/c there are folks on Etsy selling similar products for as low as $8!! The highest price I saw on Etsy was $65. I’m in the US, by the way.So I’m wondering if my idea can even work.

First off, your equation is actually missing two key pieces in your pricing (though I am happy to see that you’re pricing for both wholesale and retail).  In addition to materials and labor, you need to include both overhead (this is all the additional expense it takes to run your business, like equipment, studio space, etc.) and profit into your wholesale price.
But the bigger issue here is that Etsy is not a reliable benchmark when it comes to comparison pricing.  Etsy has established itself as a low-end marketplace, as the majority of sellers on Etsy are not trying to make a profit off what they sell.  Many aren’t even priced to pay themselves a living wage.
Instead, you want to head off Etsy to look for other pricing.  I always suggest looking for the highest price you can find for a similar item.  While you may not end up pricing that high, finding the highest price lets you know what the upper potential of the market is.  It will tell you if there is a market to support the price you’ve found you need to charge to make a living.

From there, it’s just a matter of making sure your web presence, branding, and all the other details of your business are in line to support your pricing!

2. I’m thinking of doing one in 2014, although I know nothing about trade shows! I have never been to a trade show before as they are not normally held in my city. If you have done one before, do you have any insights that may be of help? How do I need to prepare?

There’s a lot that goes into prepping for a trade show, and if you’ve never done one before, one of the best things to do is plan on attending one prior to exhibiting.  Even if one isn’t held in your city, it’s worth it to travel to see one, because you’ll get a much better sense of what to expect.
Walking a trade show can help you understand all that goes into booth design, promotional materials, line sheets, and catalogs, and just to see the general vibe and atmosphere of a show.  Because shows are only open to the trade, it can be tricky to get a pass to attend a show.  Often, if you try and go through registration, you’ll be asked to pay a hefty fee to attend as a “non-exhibiting manufacturer.”  Instead, the trick is to reach out directly to the sales staff.  They are the people who are responsible for filling booth space, and if you let them know you’re interested in exhibiting in the future, they will often give you a pass to attend as a “guest of sales” for free.
Once you’ve walked a show, then you can begin to make a checklist of everything you’ll need for a show – your booth display, lighting, line sheets, orders forms, promotional materials, and of course, a well thought out and cohesive product line.  Everything you need to prepare for a show is more than I can cover in the scope of this column, but if you tune in to Creative Live on June 19, 20, and 21, I’ll be giving a free webinar on how to get your products into stores and sharing all the details of how to prep for a trade show.

3. I’m really interested in getting my newest product featured in a magazine for Christmas shopping.  How far in advance do I need to reach out to the editors?

Your timing for this question is perfect, because you’ll need to start reaching out to magazine editors in the next couple of months if you’d like to see your products featured for holiday shopping.  A general rule of thumb is that you’ll want to reach out by July, but if you have a particular magazine or magazines in mind that you’d like to target (and you should) you can get much more detailed dates.
You can find out just when you’ll need to submit products by Googling the magazine name and the words “media kit.”  This should take you to an online page or PDF that the magazine puts out to help sell ad space.  But it’s useful for you because it also includes an editorial calendar with deadlines for future issues.  Once you’ve found the month of the issue you’d like to be included in, take a look at the deadlines spelled out.  You don’t want to go with the last deadline.  (That’s the very last chance for ads to go in before the magazine goes to print, and editorial content will be wrapped up long before that.)  Instead, see what the earliest deadline for that issue is, and plan on pitching your products at least a few weeks before that!

Got a question for Megan Auman?

Leave it in the comments below or email it to megan@createandthrive.com (that’s direct to Megan Eckman, Assistant Editor).

Ask the Makers ~ Tweaking for Profit






ask the makers - profit

This month we’re talking all about profit.  I didn’t want to focus on how to calculate profit or what we each do with our profits. Instead, I wanted to know how our makers have increased profit on an existing profit. Did they simply raise the price? Did they find a new supplier? Did they tweak the design? Did they change/streamline the production process?

Cat’s Answer:

I have raised my prices, revamped with product and packaging changes that makes the product more niche specific or more gift-worthy and cut costs. I recently added a kit option for wholesale with a couple products (almost zero labor) and have reworked some products (including this cork bracelet) to significantly reduce my labor time by switching from welding to riveting.

dragonfly bracelet by cat ivins

Danielle’s Answer:

Over time, I have increased the prices on a few of my items, mainly my personalized hoops. The price of materials is pretty consistent for me, if I purchase from the same vendors, but as I got more orders, I realized maybe they could be a bit higher in price. Likewise as I got more orders, my process became more streamlined so it didn’t take quite as long, though, only marginally.

danielle

Eleanor’s Answer:

This is a bit tricky for me to answer since the products I offer for e.m.papers as they are downloads. My main materials and cost is simply my time. So for me it’s really about a pricing and advertising strategy. This has given me a lot of flexibility to play around experiment with pricing and profit margins and it’s been great.
However, I am thinking about offering printed cards soon both direct to customer using a third party supplier (printer) and potentially wholesale. I confess this overwhelms me a bit. When I think about materials, shipping, paying other vendors and the trade show costs for going the wholesale route it seems that reaching scale in sales fast is really crucial. So I’m afraid I have more questions than answers this month!
em papers

Megan’s Answer:

I recently revamped and re-released my embroidery kits.  Instead of buying white fabric and ordering custom iron-on transfers for the kits, I now print the pattern right onto the fabric thanks to Spoonflower.com.  That means I no longer have to go to the fabric store AND it saves me about $1 per kit.  I’m actually planning to raise the price by $5 starting in 2015 after I have a few more wholesale orders and sales data to know which kits sell best.  I also raised my profit margin on the kits by having multiple designs use the same color of embroidery floss.  That way I don’t have 3 different shades of blue to order every month.
coming home kit pakcaged

Have you increased your profit on an existing product?  How did you do it?

Do I Need an ABN? Do I Need to Register my Business Name? Do I Have a ‘Hobby’ or a ‘Business’? And What’s the Deal with GST??

 

 

 

Create & Thrive Q&A on ABN, Business Name, Tax, and GST

Today’s question is from Majay, who writes:

“I am just in the planning stage of creating a little online creative business. I’m 7 months pregnant now ( first one ). I know its crazy but I am trying to make some goods to sell online before the bub comes, ’cause I don’t know how busy am I going to be.

I have been contemplating this idea for a long time now, as I love creating and I am a huge fan of handmade stuff, and now that I’ve finished my full time job I thought I needed to enact my little dream of having a little online store.

I just want to ask, do I need to get an ABN or register a business name? I am sure I will not have $75,000 profit a year with my handmade goodies.

I did a bit of research but still I am confused: I don’t want to get in trouble!

Majay”

For those of you outside of Australia, you may not know what most of the title of this post means – but bear with me! The local equivalents to these questions in your country is something you NEED to figure out asap.

Also – let me just state that I’m not an accountant or tax agent, so I’m just giving my personal advice based on my understanding of Australian business and tax rules. Please do your own research based on your situation and talk to a professional if you’re unsure of what you need to do.

 

Okay, so, let’s look at Majay’s questions.

 

People often conflate – ABN/Business Name Registration/GST/Putting business income on their tax – as one big morass, but it’s actually 4 separate – though inter-related – issues. Let’s look at each one individually.

 

Getting an ABN (Australian Business Number)

From the Australian Government website here:

“An ABN is not compulsory, but it does allow you to:

  • facilitate a single Business Activity Statement (BAS)
  • confirm your business identity to others when ordering and invoicing
  • avoid Pay as You Go (PAYG) tax on payments you receive
  • claim Goods and Services Tax (GST) credits
  • claim energy grants credits
  • obtain an Australian domain name.

 

Some of the above is pretty irrelevant when you’re starting out. That said, I would encourage anyone starting even a very small business to register for an ABN. It’s free, easy, and gives your business legitimacy. Also, of course, you can’t get an Aussie domain (.com.au) without one.

An ABN is just a number that other businesses and the government can use to identify your business. It’s kinda like a TFN (tax file number) for your business.

Your ABN isn’t linked to any one business, either. If you register as a sole trader, you can use the same ABN for multiple enterprises (in my understanding).

This is connected to the whole ‘do I put my income down on my tax return as a ‘business’ or a ‘hobby‘.

 

Do I Have a Hobby or a Business?

I know Majay didn’t ask this directly, but it’s a question I hear so often that I thought I’d just throw it in here. It’s actually pretty easy to work out. Are you trying to make a profit from what you’re selling? Then you’re in business. The actual amount of money you make is completely irrelevant here.

If you’re not sure, here’s what the ATO has to say:

“Definitions

A hobby is a spare-time activity or pastime pursued for pleasure or recreation.

A business requires some form of investment and enough customers to whom its goods or services can be sold on a consistent basis with the intention of making a profit.

When selling online becomes a business, the income you earn from it is subject to tax. If this is the case, you may also be eligible for tax deductions.

Quick Checklist

There are questions you can ask yourself to work out if you are undertaking a hobby, or carrying on a business that should be declaring income:

  • Did you set up your online sales with the intention of being a business? (bolding mine)
  • Do you pay for your online-selling presence?
  • Is your main intention to make a profit?
  • Do you make repeated or regular sales?
  • Do you sell your online items for more than cost price?
  • Do you manage your online selling as if it were a business?
  • Is what you are selling online similar or the same as what might be sold in a ‘bricks and mortar’ business?

Each time you answer ‘yes’ to a question the likelihood that you are carrying on a business increases. However, all of the questions need to be considered together to get an accurate picture of your personal situation.”

 

I’m guessing pretty much everyone reading this would be answering ‘yes’ to most of those questions. Therefore, you are in business, and need to put your income on your tax return.

Frankly, I don’t know why anyone wouldn’t put themselves down as a business on their tax return… especially because if you do, all those delicious supplies you’ve bought to make your creations with become tax deductible! As are online courses, books, subscriptions, travel to conferences, etc. that you spend money on in order to improve your business.

If you’re spending the money anyways, why wouldn’t you offset it against your business income?

 

Registering a Business Name

Yes. You need to register a business name, unless you’re trading under your own name.

In detail:

“You’re required to register your business name with the Australian Securities and Investments Commission (ASIC), unless you plan to conduct your business under your, or your partner’s, first name and surname, or initials and surname.” {source}

{For more information on ABN and Business Registration issues, check out this page.}

Fair warning – this can be a frustrating process. However, it’s necessary, so just grin and bear it!

This isn’t free, but it’s pretty inexpensive.

 

Registering for GST

GST is the Australian Goods and Services Tax. Whenever you buy pretty much anything here in Australia, 10% of the cost price is this tax.

If you’re just starting out, I can say with 99% certainty that you don’t need to register for GST. In fact – I have only JUST done this as of April 2014, as I have exceeded the income threshold, and didn’t have a choice any more.

As stated by the ATO here: “You must register for GST if you run a business or enterprise and your GST turnover is $75,000 or more”. GST turnover is basically just your gross income – from Australian AND international sources.

Unless you’ve come up with the handmade equivalent of the first iPhone, I’m pretty confident you’re not going to be making this much in your first year in business. However, as one of my friends who owns his own building business has said to me ‘I don’t know why anyone wouldn’t register for GST, because you then get 10% back on all your purchases’. That is – when you buy stuff from another Australian that is business-related, you can claim the 10% GST back on that item. If you’re doing all your business buying and selling within Australia, this is certainly a good point. BUT, most of us are buying and selling stuff across international borders, so it’s a bit more complex than that.

For me, adding GST is something I wanted to avoid for as long as possible, because about 80% of my jewellery sales are international. That means I can’t just put the GST into my prices, because it wouldn’t be fair for all those international customers to be paying the extra amount (I’m pretty sure that’s illegal, too).

I have had to set up my online stores so that the tax is put on as an additional charge at checkout for Aussie customers. Thankfully, all the software I use to sell (Etsy, Ecwid, and e-junkie) make this very quick and easy to do. But I hate that my Aussie customers now have to pay more.

 

So, Majay, I hope that clarified things! And for everyone else – don’t neglect figuring this stuff out. If you’re starting a business, treat it seriously, and do it right. I’m the first person to cringe at the thought of bureaucratic paperwork, but starting a creative business isn’t just all about the fun stuff! You’ll be clearer and more relaxed when you know you’re doing things right and legally.

Image source: Death to the Stock Photo

Three Questions with Megan Auman ~ March 2014

 

 

 

 

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Please welcome the fabulous Megan Auman – jeweller, business strategist, artist, designer, brilliant entrepreneur, and my lovely friend. Megan is going to be stopping by every other month to answer three of your burning questions – think of her a little like a whip-smart, no-nonsense business advice columnist.

Take it away, Megan…

1. I see online many line sheets are titled by season/collection. What if many of my pieces are 1- 2 years old and/or good for all year round? Are you always changing your line sheets? I don’t come up with a new collection every six months as much as that would be nice!

While you should be at least tweaking your line sheet twice a year to coincide with the major trade show seasons, that doesn’t mean you have to do a complete overhaul, especially if you aren’t a true fashion brand.  (Meaning you aren’t designing two brand new collections a year – and most of us aren’t!)

Retailers want to see what’s new, but they also want to be able to reorder their favourites and best sellers, so you’ll want to strike a balance between the two.  Each season, give yourself some time to go through your line and ask the following questions:

  • What items sold the best?
  • What items didn’t sell?
  • What items were most profitable?
  • What items were least profitable? (Or not profitable at all?)

And finally, are there any gaps in the line?  Are there items that retailers have been requesting?  (Such as earrings in a different size or a different metal option.)

With these questions in mind, you can make changes to your line (and line sheet) that keep buyers interested but don’t require the substantial effort of designing a new collection every season.

 

2. I realize many retailers expect wholesale to be 50% of retail prices. I struggle with this because until now, I have generally done that, but I ‘fudge’ prices on a case by case basis depending on which location/type of boutique I am in. Some retailers want to match my retail so will only buy half price, others will charge more and just ask me for my asking price. In attempts to polish up one price point for the line sheet, I am considering raising all my wholesale prices, unless you think there is some flexibility with the 50%?

This questions actually looks at wholesale pricing from the wrong perspective.  Retailers aren’t looking for a discount off of retail, they are looking to mark up a percentage from your wholesale price.  That means if you are selling to stores, it’s your job to establish a set wholesale price.  From there, your retailers will mark the price up anywhere from 2 to 3 times.  (2.2 and 2.3 are also common wholesale markups.)  As a vendor, you can suggest a retail price (MSRP), but you’ll likely not be able to enforce it.

Since you’ve been approaching your wholesale pricing from the standpoint of a retail price, it’s very likely that you’ll need to do some new calculations and set new wholesale pricing.  It’s essential that you are profitable at the wholesale level.  That means your wholesale price needs to take into account your materials, labour, overhead, and profit.

You’ll also want to make sure that if you’re selling retail (on your website or at a retail market) that you’re marking up in a way that’s comparable to your retailers.  Every industry is different (jewellery tends to mark up higher than other products) so make sure you ask around so that you aren’t undercutting your retailers.

 

3. I have many one of a kind (ish) items that could be made again and/or slight variations. I am afraid my line sheet will be way too long if I include all the options. For earring styles that come in different colours, would you suggest putting an image for each different stone, or just one photo with an option list of all the different stones? Also, real gemstones often vary slightly, so one batch of amethyst may be more faceted or dark purple then another. How should I handle this?

It’s important to understand the distinction between true one of a kinds (which are pieces that can never be reproduced again) with items that include options or variations (like different stone choices).   While it’s not impossible to wholesale one of a kind items, it does produce it’s own set of challenges and often involves communicating designs to buyers in creative ways.

In your case, you’ll just need to communicate to buyers all of the options that are available for each style.  You’re right in thinking that your line sheet will be incredibly long if you showed a full image of each variation.  Instead, you’ll want to show one image and then show a cheat sheet of the options, such as an index that shows all the stone options available for your collection.

As far as variations go, that’s completely understandable when working with natural gemstones (or any other natural material) and buyers will understand.  Just make sure you note on your line sheet that variations can be accepted.  If you really want to ease buyer concerns, let them know that if they don’t love a particular stone, they can always exchange the piece for another one.  Buyers will rarely take you up on this, but it gives them enough peace of mind that they’re more likely to place an order!

 

Want more wholesale advice?

Looking for the basics of selling your products to retailers?  Join Megan for a FREE, 3-day online class on Creative Live on June 19, 20, and 21.  

 

Got a question for Megan Auman?

Leave it in the comments below or email it to megan@createandthrive.com (that’s direct to Megan Eckman, Assistant Editor).

C&T Q&A – Finding the Balance Between Blogging and Making {VIDEO}

Finding the Balance Between Blogging and Making - Create & Thrive with Jess Van Den

It’s Q&A time!

This month’s question comes from Miranti, who asks…

Hi Jess,

I wanted to pick your brain a little and ask how you balance “making” with blogging? I often find that blogging takes up a lot of my thoughts and time, and I really want to focus more on making goods for my store.Wondered whether you might have any pearls of wisdom on this?

Thanks a bunch!

Miranti

 

Ahh, balance. It’s definitely a struggle at times to find the balance between making and blogging – goodness knows I’ve been through this.

In the video I share how I personally walk this line – and what I recommend you do if you’re finding it difficult to balance blogging time with making time.

 

 Is this something you ever struggle with?

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