Tips & Talk 5 – How Much Money Can You Really Make?

How Much $$ Can You Really Make?When you start your business, you have dreams of sharing your products with the world … and also making money. That’s where the script flips, doing this to create income versus being a hobby.

But how do you know what’s possible? I’ve seen too many makers discouraged by their results because they’ve pulled a number out of the sky with no concrete plan to achieve it. So what’s really possible in the beginning when you are the only one working in your business?

Pull out a pen and paper because I give you the formula and examples.

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Transcript
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Hi there.

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I see that you made it over to the new tips

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and talk portion of the podcast.

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These are bite-sized topics that I pull from community questions and

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things that I'm observing in the world of handmade small business.

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I have a conversation to talk about today that honestly,

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I have never,

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ever heard anyone discussing,

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and that is as a solo preneur.

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So a handmade business owner,

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you're the only one working in your business.

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How much money can you truly make when it's just you?

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I'm curious.

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Have you ever thought about this before?

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Have you ever figured out how much you could actually make,

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if it's just you all right,

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let's go ahead and dive into it.

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Understanding your number is really important for a couple of reasons.

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Well, lots of times when we go into business,

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we're like,

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you know,

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I want to make X amount of money,

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but how do you know if that's even possible,

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especially as a handmade product creator,

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because with each sale,

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you've just created more work for yourself.

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So by defining this number and being realistic about what you're

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able to do,

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it confirms that you can reach that revenue number in the

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first place,

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or it gives you the means or the areas where you

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see, you need to make some adjustments so that you could

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reach that income potential.

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So let's get right down to it.

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We're going to dive right into how you figure out what

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your number is.

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Three numbers you need.

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As you go in to determine what your potential is with

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your business as it's currently set up.

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Okay? So the first thing you need is what is your

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average sale price.

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If you only make one product,

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then that's really easy.

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You know what your product is,

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you know how much you're selling it for.

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The second number is how much time does it take to

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produce each product?

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And the third number is your monthly revenue target.

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You could look at this as income,

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but for purposes of clarity and ease right now,

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we're just going to look at top line revenue.

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The formula is the same.

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Whether you're looking at the income or the revenue,

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I'm going to give you the formula.

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And then I'm going to give you three different examples using

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specific products and pretty real time numbers.

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Okay? So here's the formula.

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Once you've got your information together,

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what you do is you're going to look at the revenue.

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So this is how much money you want to make a

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month. Let's say you want to make $2,500

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a month revenue.

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You divide that by the price of your product.

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Now, if you have multiple products,

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what's the average price.

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Someone buy.

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Usually only one.

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Do they buy one in another,

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add on what's approximately your average ticket price.

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And that gets you to how many pieces you're going to

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need to produce each month to make that top line Revenue.

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Then once you have that,

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you gonna model To apply that number of pieces with how

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long it takes you.

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So the time involved to make those pieces again,

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revenue divided by retail price equals the number of pieces you

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need to sell per month.

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And then your pieces that you need to sell per month

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multiplied by how long it takes you.

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Your production time to make each Piece gives you the number

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Of hours you would need to invest in your business to

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make that top line number.

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Let me give you three examples.

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Let's say you are knitter and your product that you sell

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most often.

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Let's say this is the only price Make is a knitted

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beanie. And yeah,

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You sell these knitted beanies for $30.

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So we're gonna take 2,500.

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This is the average we're going to talk about per month.

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Divide that by $30 Per beanie,

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that means You would need to make 83 beanies each month.

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We're saying you sell a hundred percent through,

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right? That's just the way we're going to run this number.

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You sell a hundred percent Of them.

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You would make $2,500.

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However, each one of these beanies takes three hours to make.

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Which means when you run the equation,

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it would take 249 hours to make your 83 beanies to

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make $2,500.

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That's A little over 62 hours a week production time to

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make $2,500

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A month.

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Now I think we can all See,

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like that is going to be difficult.

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We're not talking about other business activities.

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We're just talking flat out production time.

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So if you run numbers and you find you're in a

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situation like this,

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where it's just completely unrealistic,

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that you would be able to put in production time like

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that. Don't despair.

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It's a good thing to know,

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because then what you can do is add more products into

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your product Flying.

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So some of the purchases are going to be higher priced

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items, which means it would be Bring up your whole overall

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average price,

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which consequently,

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if you walk this through means you need to produce less

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To make the 2,500

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To make it more realistic.

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Okay. Let me give you my second example.

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So that was the first example with the knitted beanie second

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example, let's say you do wooden signs.

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Maybe you paint them.

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Maybe they're engraved again.

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I'm going to use the 2,500

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as your monthly revenue target.

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You sell your signs for $20,

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2,500 divided by $20 gives you 125 each month that you

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would need to sell.

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Each one takes an hour to make.

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So that's 125 hours of production time each month,

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which breaks down to again a little over now,

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31 hours a week.

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That's a lot,

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that's almost a full-time job too.

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Right? So something to consider,

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as you're looking at what is actually feasible,

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what could you actually really produce to make that goal of

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the 2,500

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in this case,

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maybe you can get your production time down by batching so

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you can produce more.

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Maybe you can get it so that one of your wooden

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signs doesn't take an hour,

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but it only takes 40 minutes.

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Maybe you raise your prices,

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things like that,

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okay. To affect the numbers so that you can bring in

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the revenue that you're trying to reach.

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Third example is let's say you make soap.

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We're sticking with a 2,500

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top line revenue that you're trying to make a month.

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You sell your bars for seven 50,

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a bar running the math you would need to make and

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sell 335 bars each month.

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But you can make 20 bars at a time and we'll

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call that a batch.

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And so if you divide the batches into the 335 bars

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for the month,

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that 16 call it almost 17.

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Batches takes three hours to make a batch that equates to

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50 hours a month,

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which only equates to 12 and a half hours a week.

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Now that feels really reasonable production time,

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12 and a half hours a week to make $2,500

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a month.

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So this is the formula that you would use to figure

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out if the revenue that you want to make within your

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business is realistic with you being the only person doing the

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production. This number is really important because as we start out

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in our business,

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yes, it's easy to start your business.

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You make something people want to buy it.

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So you get started.

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You get your pricing in line,

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but what about the production time?

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Is it realistic to meet your revenue goal?

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Here is the way for you to figure out if it's

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achievable based on the time.

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But if you're seeing that,

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it's not,

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don't worry,

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Don't stress out because there are different ways that you can

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affect the numbers so that it is realistic.

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Again, the formula,

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just to summarize it one more time is you take your

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overall revenue that you want to make in a month.

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For these examples,

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I've used $2,500.

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You divide it by the average retail price of your order.

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If you make only one product,

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then that's how much you sell that one.

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Product four.

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If you sell multiple products,

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it's the average ticket price across all of your product ranges.

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That gives you how many pieces you need to make each

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month. Then you multiply those pieces by the number of hours

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it takes to produce those pieces.

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And that gives you the total hours that you would need

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to be working each month,

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calculate it down into the week to achieve the $2,500

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in top line revenue.

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Now, of course,

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how much time you have to devote to your business each

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week depends on,

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you know,

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are you also working a nine to five?

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You're in a full-time job?

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Do you have children's activities that you are managing through?

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And obviously as a priority only,

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you know how much time you can actually devote,

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but this gives you a realistic view.

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As I've said,

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then once,

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you know,

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if what you're trying to do is realistic,

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then there's opportunities to tweak.

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This helps you figure out if you should increase your prices

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on existing items.

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If you should add some higher priced items to the mix.

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And if you should include some other items that don't take

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any production time at all,

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if you make an upscale product,

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let's say you make beautiful.

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Hand-woven shawls.

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You sell them for,

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let's say $200 a shawl.

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You won't have to make as many to reach your monthly

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revenue. This also really helps because it gives you a feel

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for at what point along the way you need to get

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help producing your product.

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Of course,

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isn't the only thing that you do.

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You have to market it.

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There is bookkeeping to do.

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There is shipping to do.

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You're going to go out to craft shows.

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Maybe you're going to be networking.

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So production.

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If I really were to give it a percentage of your

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overall time into your business would be,

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I'm going to say about 60%.

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The rest of that is promotion.

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And all the other things that go with the business.

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This is not a number that I would want you to

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be afraid of at all.

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This is a number that will ground you in reality,

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that if you are starting this business and you're going to

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be relying on this income,

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that will be coming in each month,

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that it's something that's going to be realistic.

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I am sure that this discussion is going to bring up

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some question,

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some conversation.

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And I don't know,

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some of you might,

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when you run your numbers,

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be like,

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Oh my gosh,

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you know,

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what am I doing?

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How do I fix this?

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I need to adjust some things.

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We can have those conversations over in the breeze.

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If you aren't familiar with the breeze gift biz breeze,

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it's my private Facebook group for all handmade creators.

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And I take Q and a sessions.

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Each Thursday mornings,

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you can ask your specific question.

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It's almost pretty much free coaching and you'll get input from

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other people who are in breeze as well.

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So we can carry on this conversation there.

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But I wanted to get this out to you for everybody

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to start really thinking about the reality of what you're in

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business for and the money that you're trying to make and

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compare that against production time,

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how you're pricing your products time in,

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in terms of balancing it into your life.

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Because remember the reason we've started,

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this is love of making your product and sharing it with

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the world,

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of course,

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but being able to have flexibility in your life,

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the flexibility that your time throughout your day brings as well

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as what the income brings.

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I know this is a little bit of a heavier topic.

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We need to face reality.

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We can't live in a dream world.

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If we want real results,

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you live in a dream world.

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You get dream Results.

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You live in a world of reality and we get real

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results. That's a wrap.

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I bet get to the point kind of girl.

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And this is what you can expect from these quick midweek

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sessions. Now it's your turn go out and fulfill that dream

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of yours.

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Share your handmade products with us.

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We want them,

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