Starting a Handmade Business
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Lesson 2: The Costs of Selling
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Introduction: The Costs of Selling

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In this lesson, I'm going to cover the costs of selling. When I first started my Etsy shop, I really had no idea what I was getting into, cost-wise. It was a learn-as-I-went experience, which is probably not the best way to go about it.

Instead, I hope this lesson will give you a good idea of all the costs you may encounter. Being prepared is always the way to go when you're running your own business.


Deciding How and Where to Sell

Obviously, I am a huge supporter of online selling! It's the easiest and tends to cost new business owners less than other avenues. Below is a run-down of the three major ways to sell your goods, and the pros and cons associated with each.

Online

Pros:

  • Ability to sell on multiple platforms - you don't have to stick to just one online store.
  • Online tracking of finances by month, year, etc. Makes taxes easy!
  • Easy access to customers all over the world.

Cons:

  • Shipping costs can be prohibitive for larger items.
  • Scammers (while a low risk) do happen, both in terms of promising payment and then not delivering or by "stealing" your products and trying to sell them as their own.
  • Requires time and patience to build out online product listings.


Wholesale / In Local Shops

Pros:

  • Getting your product into bigger stores is basically extra marketing - hooray for exposure!
  • Accessing customers you normally would not have access to, like folks that are not especially tech-savvy, or people who don't enjoy buying online.
  • Being able to sell large amounts of stock at once.

Cons:

  • Must have the ability to fulfill large orders in a small amount of time, meaning you need easily reproducible products.
  • May require hiring extra help to meet needs.
  • The least profitable of all selling types, as the store will take a cut of the selling price of pieces or buy the product in advance at a wholesale price.


Craft Fairs / Farmer's Markets / Etc.

Pros:

  • Meeting customers face to face along with people in your community
  • Ability to meet other makers and artisans and do some networking
  • Encouraging customers to shop with you again through mailing list sign-ups and coupons

Cons:

  • Logistics can be a struggle: you'll essentially be setting up a store while at the craft fair. This includes having a card reader, seller's permit, snacks, change for those who pay in cash, a table, table cover, and displays for your products, among many other things to prepare for a long day!
  • Fees for selling can range quite a bit. The craft fairs I've sold at have varied from free to $250 for a space to set up.
  • Profit is not guaranteed. Sometimes you can show up and have a really bad day and end up in the negatives.

Product Supplies

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When I say "product supplies" I mean all the materials that go into making you products. This can even include tools if you're selling something that requires you to replace/upgrade tools every so often.

Depending on your product, these costs can add up quickly!

As an embroidery artist, my product supply costs are fairly low and I can buy in bulk. My supplies include things like linen, wooden embroidery hoops, embroidery floss, transfer pens, scissors, fabric glue, and various art supplies like a light tablet, drawing pads, pens and pencils.

However, if you're doing something more expensive like woodworking or jewelry making, these costs can vary wildly from product to product.

Here are my tips for buying product supplies:

  • Support other small businesses if you can - I like to buy jewelry and embroidery supplies through Etsy when I can.
  • Buy in bulk where you can - you'll often get a good discount!
  • Always go with a good quality, vetted and reviewed product from a trusted source. I can't tell you how many times I've bought something thinking it was a great deal for the price, only to later find the product was low quality and not as described.

Your Time

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While more of an emotional cost than a monetary one, it's important to consider how much of your time you'll be spending making and shipping your products.

This is why I put so much emphasis on selling what you LOVE and not what you think will sell. The less you enjoy the work, the less time you'll want to spend doing it and the quicker you'll get burnt out.

Your time is also worth money, though! Be sure to keep that in mind while pricing your products. If you spend 8 hours on something, do you really want to sell it for $20?

Try to pay yourself by the hour once you have production of your items figured out. This can take a few months to figure out, or even longer if you make a large range of products. I tend to pay myself $15-25 an hour, depending on the complexity of the project.


Site and Transaction Fees

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If you're not a fan of Etsy, there are loads of other places to open a shop online. In the table above, I've collected basic information about some of the most popular sites where folks sell their homemade goods. Depending on your product inventory, some of these sites may work better than others for you.

Here's a list of links to the sites above so you can browse for yourself!


Shipping and Postage Costs

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Postage Costs

This is another huge hurdle for more beginning sellers. When you're first starting out, I highly recommend shipping only within your country, as you can easily figure out postage costs there.

Instead of offering international shipping right away, add a note in your product listings saying "If you live outside [country] and would like to purchase from me, please message me your location so that I can estimate shipping costs for you!"

This way you're not overcharging the customer for shipping and you're also not spending extra money on it yourself.

Once you've had enough international orders, you'll be able to come up with average shipping costs to different regions and begin to offer shipping to those areas - no messaging required!


Shipping Material Costs

In addition to the cost of postage, you'll also need to purchase envelopes, boxes, labels, packing tape, etc. I also recommend getting a printer if you don't have one already. This will allow you to print shipping labels at home instead of running to the post office for every shipment.

I try to ship everything USPS first class mail in padded envelopes as that's the cheapest option I've found. I buy my envelopes in bulk on Etsy to save money. (Typically, one padded envelope can range between $1.50-3.00. By buying in bulk, my envelope cost is about $.50!)

Other places to buy shipping materials include Amazon, Staples and Uline.


Packaging Costs

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In addition to having great looking products, it's always nice to package them professionally as well!

If you're selling jewelry, it's lovely to be able to ship it off in nice little gift boxes. For larger items, you can wrap them like presents - I typically use tissue paper since it's cheap and comes in so many colors.

It's also a great idea to include a handwritten note or business card with the purchase!

I buy my packaging materials in bulk on Etsy to cut costs, just like the shipping envelopes.


Marketing & Advertising Costs

Marketing Materials

Business cards will be the most common cost here! I tend to make my business cards by hand, but there are a number of great companies you can work with to make them.

I recommend having a look at Zazzle.com and Moo.com - they offer quality business cards, along with stickers, envelopes, postcards and more. If you want something truly personalized, you can also try shopping on Etsy! There are many designers offering their services there - just be sure to go with a shop with lots of reviews and sales.


Online Advertising

There are many ways to do paid advertising online, but I have to say it's not something I endorse entirely.

Social media sites like Facebook, Twitter and Instagram allow you to advertise in a variety of ways - mostly by "sponsoring" a specific post you make and showing it to a wider audience of people than you could reach on your own.

Etsy and Handmade at Amazon also allow you to advertise on their platforms in a more direct way. If you pay to promote your shop and items on these sites, your products have a chance to show up in searches at the top of the page. On Etsy, these products have a small text overlay that says "Ad." On Handmade at Amazon, paid product advertisements show up as "Sponsored."

Over the years, I've spent money on Etsy, Facebook, and Instagram in an attempt to boost visits and sales, but have seen very very little return. While your post or product may be seen by more people, you may not necessarily see an uptick in engagement (or "clicks" to your store or product).

If you do decide to pay for advertising, I recommend sticking to the site where you sell instead of using the larger social media platforms. Those platforms tend to be dominated by larger companies with loads of money to spend.

In the next lesson, we're going to talk about running a successful shop.



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