Business Briefs

Selling Crafts

Ideas For Starting Craft-Related Businesses

There are many ways to make money with crafts besides actually making and selling items. If you think you would enjoy a job dealing with crafts but don't want to produce them, consider the following ideas:

  • Open a craft shop and sell other people's crafts. Depending on whether you buy crafts wholesale or take items on consignment, you will get from 20 to 50 percent of the retail price.

  • Manage a craft shop or work as a salesperson in a shop. If you don't want to invest your own money in opening a shop, try working for someone who owns a shop.

  • Become an agent who handles other people's crafts. Usually an agent will represent several craftsmen within a given target market. An agent will receive 15 to 50 percent of the wholesale price of the item. (If it is a production type item, 15 percent is normal. For one-of a-kind high-priced items, 50% is normal.) An agent calls on shops, galleries, and other outlets to sell the craftsmen's work. The advantage is that the agent is doing what he/she does best (selling) and the craftsman is doing what he/she does best (creating).

  • Sell supplies. Craftsmen, both amateurs and professionals, need supplies to produce their products and supplies are often hard to find in rural areas of Mississippi.

  • Teach classes. You can teach classes either through your home or through a craft shop. The amount you make will be based on where you teach and how many students you have.

  • Write magazine articles or books. If you have the ability to communicate through the written word, writing magazine articles and books may be for you. "How-To" books on making craft items are popular as well as books that focus on specific crafts and craftsmen.

  • Start a newsletter. Often, craftsmen feel isolated if working by themselves all the time. A newsletter containing information about other craftsmen in the state might be welcomed.

  • Start a mail order pattern company. If you have been making items that others have liked, you may want to share the patterns with them. Patterns for crafts that are currently popular will sell best.

  • Develop patterns for publication in magazines and books.

  • Produce samples for supply shops and/or pattern companies. Many shops have a need for samples to use in their shops. Often they will give you the materials necessary to make the item, then give you the item after it's been displayed for a designated period of time. Pattern companies need people to test their patterns before publishing them and need finished items to photograph for promotional literature.

  • Develop kits. Many people do not want to take the time or do not have the talent to select materials to use in their crafts. These people will pay extra to have someone select and package these supplies for them.

  • Organize craft fairs. Usually organizers of craft fairs are volunteers of the sponsoring organization with the profits going to the organization. Craft fairs can be sponsored by individuals with the profits going to them. If you enjoy details and organizing, this may be for you.

  • Demonstrate crafts. Many museums and publicly owned facilities have craft exhibits, which are enhanced by demonstrations. Also, many retail stores that carry craft supplies have people demonstrating at the facility.

There are many opportunities for working in the crafts industry in addition to producing items to sell. The list can go on as long as your imagination and ingenuity last.

Pricing

Are you really in business?

If you are like a lot of other craftspeople, you didn't start out in crafts with the intention of selling. First you made things for yourself, then for family and friends, and then almost without realizing it you began selling a few pieces. At that point, you were not in the "business" of selling; that happened when you made a conscious effort to turn your craft activity into a profit-making enterprise;

There are two important questions to ask yourself before deciding to enter the marketplace:

  • Is my work good enough in design and quality to compete in the crafts marketplace?
  • Can I produce efficiently in sufficient quantity to make a decent profit?

If your market research shows there is a demand for your work, you must decide on a fair price for it. This is a serious problem for craftsmen - not only because of a lack of basic business skills but also because of social and emotional factors.

The making of handcrafted objects has the status of a leisure-time activity in our society. One segment of the buying public believes that making the item gives you great pleasure, and uses time that would otherwise be wasted. You may contribute to this notion by not placing value on your time and talent.

The emotional factors that interfere with realistic pricing come from the close relationship that craftspeople have with their work. Sometimes this leads to overpricing or to the production of objects that have little demand in the marketplace.

It's important to recognize and deal with this emotional factor by realizing that price is not a judgment of you as an artist or craftsperson, but is a judgment of the cost of production and what the customer will pay.

Because of the design of the product, the quality of materials, and skill in craftsmanship, the product must appeal to a particular customer in a particular setting. You, the producer, must earn back the cost of your materials and overhead plus a reasonable profit.

For those of you who are independently wealthy, or philanthropists who can afford to subsidize the consumer remember that your selling practices threaten the existence of craftspeople who must sell to survive. You should always price your work as if you had to earn your living from its sale.

What's in a price?

The reason for a pricing system is to make a profit from your work. Profit depends on cost, selling price, and the number of items (units) you sell.

The best price is the one that will maximize the profits from your business. The price that sells the greatest number of units or brings in the most sales dollars is NOT necessarily the best price. This is because you may not realize a fair profit even with the sale of a substantial number of units and dollars earned.

Your price should: -Cover all production and marketing costs. -Make a profit. -Attract customers.

There are certain components in all pricing requirements. The combination of components will vary from craft to craft, but YOU MUST SATISFY ALL THE REQUIREMENTS.

These include:

Materials - every ounce of metal, clay, fabric, or fiber.
Tools and equipment-purchase, maintenance, depreciation.
Workshop space or rental.
Insurance.
Utilities.
Assistants, helpers.
Taxes.
Special fees, registrations, licenses.
Shipping to customers.
Office supplies.
Transportation to markets.
Bookkeeping.
Advertising.
Subscriptions to trade papers.
Membership in guilds.
Hourly wage.
Demand for skill and quality.
etc.

How do you actually calculate a price?

Costs. The prevailing element when setting prices is costs. An accurate accounting of all of the costs that go into the craft business is necessary. In a business, the total costs to be considered include three factors: direct costs, labor, and overhead expenses.

Direct Costs + Labor + Overhead Expenses = Total Costs

These are the three basic or minimum factors that should be used for setting prices. The more exact the figures used for setting prices, the greater the chance for success.

Direct Costs -- Include all the materials, parts, and supplies that go into the actual production of the product or service. Direct costs should be exact, figured down to the penny.

Labor -- Includes all wages paid to employees. Many times, new business owners make the mistake of not paying themselves. Be careful not to fall into this trap. Labor costs are calculated by multiplying the number of hours worked by hourly wage. Be sure to include fringe benefits either in the hourly wage calculation or in overhead expenses. Fringe benefits can range from 15% on up, depending on the benefits included.

Overhead Expenses -- Include all the business costs not directly related to the actual production of the product or service. Overhead expenses include taxes, advertising, rent, office supplies/equipment, business-related travel, insurance, business permits, maintenance and repair of equipment, utilities (electricity, telephone, etc.), professional assistance (accountant, attorney, etc.), and any other costs related to the overall operation of the business.

A key concept to remember is that it is impossible to stay in business if prices are set lower than the "cost of doing business." Direct costs, labor, and overhead expenses are the bare minimum that must be reflected in the pricing strategy of any business.

Profit. Profit is the money left over after all direct costs, labor, and overhead expenses have been paid. In order to insure that there will be money left over, a profit factor or profit margin must be calculated in initial pricing. After the total costs are calculated, the profit factor is added to get the final price.

Total Costs + Profit = Price

or

(Direct Costs + Labor + Overhead Expenses) + Profit = Price

Generally adding a 15 to 20 percent (or more) profit margin is a starting point for most craft businesses. A mistake many home-based business owners make when first starting out is not adding in a profit margin to their pricing strategy. If this is not done, there will be no money for growth or expansion of the business.

Retail Pricing. Up to this point, the pricing formula will result in the wholesale price (the price you wholesale or sell to retailers who buy your product to sell in their retail stores). To arrive at the retail price for a product (the price the customer pays), a retail margin must be added, which is usually 2 to 4 times the wholesale price.

Wholesale Price x Retail Margin = Retail Price

or

(Direct Costs + Labor + Overhead Expenses + Profit) x Retail Margin = Retail Price

The percentage a retailer adds to the wholesale price it pays for an item is called the markup. For example a product that is wholesaled for $10 (Direct costs + Labor + Overhead Expenses + Profit = $10), will be marked up at least 100 percent to a retail price of $20 (Wholesale Price x Retail Margin or $10 x 2 = $20). A retailer will markup items using the best pricing strategy developed for that business.

In some cases a wholesaler may also cross over and be a retailer at times. If this is the case, the wholesaler must be careful not to compete with or undercut their wholesale customers. For example, an artisan who wholesales pottery to gift shops and also sells the pottery directly to customers at art shows or craft fairs must be careful when it comes to pricing. The artisan should sell the pottery at retail prices at the art shows and craft fairs --- the same prices the gift shops charge. If the artisan retails directly to customers at a substantially lower price than the gift shops, the artisan will lose the wholesale accounts.

A word of caution to small home-based businesses that are wholesaling to retailers or selling to retailers through a distributor or "sales rep." Many times a retailer will ask for discounts when buying in bulk and distributors will ask for a percentage of what they sell. Both of these are overhead "costs" that must be incorporated into the original pricing formula.

In summary, the primary purpose of operating a craft business should be to make a profit. Prices should be established from an accurate accounting of direct costs, labor, overhead expenses, and profit margin. Consider all the factors that may have an impact on the business as a pricing strategy is established. Pricing is a skill that must be developed and continuously monitored in order for a business to be successful and profitable.

Craft Shows & Fairs

Craft fairs are one way craftsmen have to sell their crafts. It is important to understand all of the issues associated with selling at craft fairs before deciding to do so.

Cost of Fairs

Sales made at craft fairs are retail sales - that is, you receive 100 percent of the selling price. But how much of that is actually profit? What must be considered is the cost of the booth, commission and/or registration fees as well as travel costs, overnight lodging, display props, among other things.

Depending on the fair, you might pay a booth fee or a commission. Some fairs have both. Booth fees vary from five to hundreds of dollars, and commissions vary from 5 to 50 percent of all items sold at the fairs and orders taken while at the fair. On top of these fees, some fairs require a jurying or registration fee.

Juried Versus Nonjuried Shows

In a juried show, participants are asked to submit examples of their work via slides or photographs. A panel of judges then selects the work of craftsmen that best fits into the format of the fair. This ensures that high-quality items are sold at their fair. Shows that are not juried may include church bazaars and a variety of other community "arts and crafts" celebrations.

Although both have their place, good quality, high-priced items may sometimes be difficult to sell at nonjuried shows.

Advantages and Disadvantages

One of the best advantages of selling at a craft fair is that you receive 100 percent of the selling price even though part may be lost to the commission and/or booth fee. Other advantages are:

  • Because you are selling directly to the public, you meet the people who are buying your items.

  • You can test market new items.

  • You can test prices.

  • You can gain confidence in selling and meeting the public.

  • You can enjoy the festive atmosphere of the fair.

  • You meet people who can help you with your business.

  • You meet craftsmen who can give you support.
The major disadvantage of selling through craft fairs is that it takes away from production. While you are selling, nothing is being produced. Other disadvantages are:
  • Fairs can become expensive when all expenses are considered.

  • Fairs can become boring when slow.

  • Information given at fairs can get repetitive.

  • Traveling, setting up and taking down displays can cause fatigue. Display equipment can become costly.

  • You must overcome the image of the fair as being a flea market where people give little respect to established prices.

  • Since you come in direct contact with the buyer, you may have to cope with negative feedback.
What to Look for. . .

Before entering any fair, find out about the fair. Do this by talking to someone who has exhibited there before, by visiting it yourself, or by questioning the organizers. Ask yourself these questions:

  • Does your work complement others in the fair? Is it compatible? You would not want to sell items costing $50 while others are selling lesser-priced items.

  • How many craftsmen will exhibit, and how many others will be selling the same product you are selling?

  • How many people are expected to attend? How many attended last year? Are there any other events that conflict?

  • How much publicity does the fair get and what kind? Do the organizers pay for any advertisement? Relying on free publicity isn't very effective.

  • Is the fair juried? If a fair isn't juried, you may be surrounded by flea market-type crafts.

  • How big are the booth spaces? Can you set up your display in that amount of space, or do you have to obtain new display equipment?

  • What types of people are attracted to the fair? Do they or will they spend money at the fair?

  • What other activities are being held at the same time? Can you compete with a carnival or an antique car show?

  • How much does it cost to enter the fair? Do you pay a flat fee, or do you pay a commission on the amount you sell?

  • How far do you have to travel? How much will it cost to spend the night?

  • Is the fair indoors or outside? If outside, will bad weather ruin your craft items or display?

  • Do you have the time to build up your inventory? If you attend shows too frequently, you may not have time to make more items for upcoming fairs.

  • How many years has the fair been held? New fairs need a lot of publicity to attract customers.

  • Do you have the proper licenses to sell at fairs? A sales tax permit is a must for anyone selling to the public. You will be required to collect and report sales tax on the items you sell.

  • Do you have to man the booth personally, or can you send a representative? Some fairs require that the maker must be at the fair.

  • If desired, is demonstrating allowed? Usually, it is encouraged. Are electrical needs available for equipment?

  • Are electrical outlets available for extra lighting, etc.? Is there an extra cost?

  • Is there security? Can you leave your booth set up overnight?

  • Do you have the necessary supplies - bags, sales slips, moneybag, price tags, etc.?

  • Will you need help at the fair? If you do it by yourself, will fair officials watch your booth on occasion?

  • If you do not do well at one fair and your product is good, keep trying until you find the locations and clientele that are best for your product.
Other Considerations

Be sure to take plenty of merchandise. A good rule is to take twice what you expect to sell. Your products should vary in price from a few dollars to more expensive items. Although you may specialize in expensive, one-of-a-kind items, develop a less expensive item(s) that will appeal to more people. They will help sell the more expensive ones.

It's best to have a helper as it may be hectic at times. Also, there will always be someone there when one of you needs to leave for some reason.

Create a professional image by being well groomed and appropriately dressed. Many sellers wear special costumes in keeping with their total display or line of goods. Have business cards and brochures to promote your business.

Even if you hate to sell, remember that is what you're there for. Salesmanship involves looking people squarely in the eye, smiling at them, talking to them. Above all, don't sit around reading a book or looking bored.

Be prepared to handle any and all questions that may arise, from "Do you sell on consignment?" to "Can you make it in blue, instead of red?" and "How soon can you deliver twelve dozen?"

Try to demonstrate your craft. People who demonstrate at a fair usually outsell those who don't.

Create an attractive display.

Brace yourself for negative feedback from critical people who do not appreciate fine craftsmanship. It's part of the business, and one of the few disadvantages of direct selling you must learn to accept. Listen carefully to your critics to get new ideas on how to improve your work or make it more salable.

If you take a check for merchandise, be sure to ask for identification and note the individual's driver's license on the check. Also get their telephone number and address, if it's not printed on the check. Don't cash checks for anyone, and don't let them write a check for an amount larger than the purchase, requiring you to give change. To protect the checks you do have, endorse them on the spot, "For deposit only."

When customers pay with cash, never put a large bill into your cash box until change has been given. Don't give them an opportunity to say, " But I gave you a twenty, not a ten." Prove the fact by showing them the original bill, still lying on top of your moneybox.

If you decide to accept credit cards, arrange with a local bank to obtain a merchant number and the necessary equipment. Unless you can get special compensation, each charge you accept will cost you a small percentage of the total. This charge is tax deductible as it is an expense of operating your business. You must decide whether it is better to "lose" the percentage than lose the sale. The best advice it to incorporate this cost into your pricing formula as an overhead expense.

Remember to keep accurate records of all other expenses incurred in preparing for and attending the fair, since most are tax deductible. Include your mileage by writing down your odometer reading before you leave and noting it when you return. You should also keep a record of meals and lodging and all other expenses.

Record keeping is a very important tool to determine which fairs were profitable. A small businessman will not continue an activity that is not profitable. Keep detailed records of how much and what sells and the expenses (including fees) as well as time you spent. If the fair is not profitable, drop it.

Where to Find Craft Show Information

The Crafts Report, a national newsletter, publishes a monthly list of fairs across the United States along with other craft-related information. The National Crafts Association is an information and resource center for the arts & crafts industry. Both web sites contain some educational information for entrepreneurs.

The following is a list of agencies for Mississippi and surrounding states. These agencies may have information regarding craft shows and fairs in their states, as well as information regarding the sale of craft items produced in their states.

Alabama
Alabama State Council on the Arts & Alabama Artists Gallery
201 Monroe Street
Montgomery, AL 36130
Ph: (334) 242-4076
 Fax: (334) 240-3269
Email: staff@arts.state.al.us
Website: www.arts.state.al.us

Arkansas
Arkansas Arts Council
1500 Tower Building
323 Center Street
Little Rock, AR 72201
Ph: (501) 324-9766
Fax: (501) 324-9207
Email: info@arkansasarts.com
Website: www.arkansasarts.com

Arkansas Craft Guild
104 East Main
Mountain View, AR 72560
Ph: (870) 269-4120
Email: arkcrafguild@mvtel.net
Website: www.arkansascraftguild.org

Louisiana
Louisiana Crafts Program
Box 44247
Baton Rouge, LA 70804
Ph: (504) 342-8180
Email: arts@crt.state.la.us

Louisiana Division of the Arts
Box 44247
Baton Rouge, LA 70804
Ph: (504) 342-8180
Email: arts@crt.state.la.us
Website: www.crt.state.la.us/arts

Mississippi
Craftsmen's Guild of Mississippi
1150 Lakeland Drive
Jackson, MS 39216
Ph: (601) 981-0019
Fax: (601) 981-0488
Email: mscrafts@mscraftsmensguild.org
Webiste: www.mscraftsmensguild.org

Mississippi Arts Commission
239 N. Lamar Street
Suite 207
Jackson, MS 39201
Ph: (601) 359-6030
Fax: (601) 359-6008
Email: hedgepet@arts.state.ms.us
Website: www.arts.state.ms.us

Missouri
Missouri State Council on the Arts
Wainwright Office Complex
111 N. Seventh Street
Suite 105
St. Louis, MO 63101
Ph: (314) 340-6845
Email: moarts@mail.state.mo.us
Website: www.missouriartscouncil.org

Oklahoma
Oklahoma Arts Council
Box 52001-2001
Oklahoma City, OK 73152-2001
Ph: (405) 521-2931
Fax: (405) 521-6418
Website: www.state.ok.us/~arts

Tennessee
Tennessee Arts Commission
401 Charlotte Avenue
Nashville, TN 37243-0780
Ph: (615) 741-1701
Fax: (615) 741-8559
E-mail: cdavis@mail.state.tn.us
Website: www.arts.state.tn.us

Tennessee Association of Craft Artists
Box 120066
Nashville, TN 37212
Ph: (615) 385-1904
Email: taca@mindspring.com
Website: www.korrnet.org/taca

Portions adapted from materials written by:

Mary Saylor, former Extension Specialist, University of Pennsylvania

Sharon Heidingsfelder, Crafts Specialist, Cooperative Extension Service - University of Arkansas

A black line that separates the body text from footer information