You LOVE your small business and being able to make money with products created by your own hands. It’s so rewarding that people want your creations. Yet this natural “giving” nature you have often comes with the tendency to cheat yourself out of truly making money. Why? Your expenses are too high. It’s time to reduce your product business expenses, without really feeling the pinch. (It IS possible.)
Why Reduce Product Business Expenses
It’s frustrating to want to make a living with your product but not be able to actually do it…even though sales are coming in!
There could be a number of reasons for this, one of them being that your expenses are too high. That’s what we’ll tackle here.
Clearly you don’t want to skimp on materials and compromise the quality of what you’re creating. I get that. But there are ways to reduce your product business expenses so you can see a better return (profit) on the products you’re selling.
Be Smart With Production Time
Production time doesn’t cost you anything…or does it? You know the saying that time is money. When you spend too much time perfecting the bow on that gift basket, it eats into the time you could be spending on another project (more revenue)–or being with your family (personal fulfillment).
I know you want everything you create to be just so, but perfection is both subjective and unrealistic. Your customers won’t know that the bow on the gift basket going to Kansas looks a tiny bit different from the one going for local delivery. And my guess is that they wouldn’t even notice if the two baskets were sitting side by side. It’s you, with the critical eye for detail, that notices adjustments that could have been made.
Pro Tip: Set a reasonable amount of time for the production of each piece. This matches the time calculation you’ve built into the price of that item. Then stick with it. That doesn’t take anything away from your customers or the quality of what you’re providing.
Watch for Tool and Service Creep
As a creative expert, over the years you’ve built up a full range of tools and equipment to test, experiment with, and use to add personality to your products. I’m so with you. The urge to purchase the newest and latest glue gun, chocolate molds, or cricuit machine is almost irresistible.
On top of that, as a business owner, there are tools to help run the business too. Whether it’s accounting software, shipping services connected to your website, or social media training, it can add up.
I bet you’ve also purchased classes, templates, or memberships that sounded good at the time…but you aren’t using. You may have even forgotten about them but you’re continuing to pay the monthly or annual fee. This innocent action easily eats into your profits.
Pro Tip: Schedule a recurring meeting with yourself every quarter to audit the tools you use and unsubscribe from or cancel anything you’re no longer using. Also, when a new piece of equipment comes on the scene or yet another image editing social media app, decide if it’s really required to move your business forward before you invest. This is probably the most overlooked way to reduce product business expenses.
Buy Wholesale vs. Retail
Obviously your product requires supplies and those supplies cost money. If you’ve been with me for a while, I trust you’re looking closely at the cost of each product you create and charging accordingly. I know when you’re starting out making a smaller number of products, you’re buying materials at your local Michaels or Hobby Lobby. But as you grow, you can make more from each sale when you start buying materials wholesale and in bulk. Your profit increases even though your prices remain the same.
By doing so, you’ll be able to purchase materials at a discount, which helps you create more while spending less. The only caution here is to wait on buying anything wholesale or in bulk until after you’ve proven there’s a market for your product.
Pro Tip: Regularly review your sourcing methods and research new wholesale options for the materials you use to create your product.
Attend the Right Shows
You love going to tradeshows, craft shows, and training events. Here’s the tough question: Is it worth the investment of your time, money, and energy?
Taking a hard look at the return on investment ROI of each show will tell you if it’s a solid business decision to attend. There are different types of ROI. Sometimes it’s financial ROI because you’re an exhibitor and sell product. Sometimes it’s education ROI because you’re picking up a new skill that will bring in sales down the road. And sometimes it’s emotional ROI because you’re making connections and are with friends that you only see at these shows and it boosts your spirits and energizes you.
Pro Tip: It’s your job to go into each show with a desired purpose and outcome AND honestly review each show afterward to determine if it met those points. Particularly for the shows where you’re selling, document your numbers any outside factors affecting results (like weather) and consult this information as you plan for the following year.
Looking at your revenue and expenses is an important part of being a business owner, and it’s what sets businesses apart from hobbyists. There’s nothing wrong with either, but if you want to grow a thriving business, you must reduce your product business expenses so you can have the right financial and growth mindset and checkpoints in place. And if you’re looking for additional support in growing your product business, be sure to check out Makers MBA, the fast track business development program just for makers.