ROCK YOUR CRAFT FAIR SEASON

Transcription

1 ROCK YOUR CRAFT FAIR SEASON Your Guide to Pricing and Profit Optimization Pamela Grice

2 WELCOME Hi there! Welcome back to part #2 of my training series, ROCK YOUR CRAFT FAIR SEASON. My name is Pam Grice, founder of the ROCK YOUR CRAFT FAIR PLANNER and Crochetpreneur.com. I am so glad to be back here with you! In this e-guide, we re gong to talk about pricing and profit-optimization for handmade products. But, more importantly, I am also going to show you how this training will help you better plan for an awesome and profitable fair!

3 In part #1, Creating a Booth Display that Sells for You, we talked about branding your booth and building trust with your customers by creating a selling space that screams, My products are awesome! I also shared how your professional, branded space was going to help draw customers into your booth and increase profits. So, if you haven t downloaded that e-book yet, go back and grab it now and then, come back here for this guide. Today, I m gong to build on what we ve already learned by talking about pricing and profit optimization. I know, it s not a very sexy topic, but it s a necessary one and it ll help you break free from the WISH AND A PRAYER pricing strategy that is running rampant in the handmade industry and get you on track toward rocking your craft fair season and transforming your handmade business into one that is thriving and profitable. We have a lot to cover today so be sure you have some paper and a pen ready to take notes and follow along.

4 The truth is that pricing products can be frustrating at times: There are so many pricing strategies out there that it can be mind-boggling to figure out how to price your product fairly and with a business mindset. We all want people to buy our products, but if we don t keep profits in mind, we won t make money and we won t have a business. And that means, if you ve ever faced these issues before, you re totally normal. Even so, you can t let those frustrations stand in the way of your planning, executing and profiting from the time and talents you invest in your products. That s why I created the Handmade Product Pricing Calculator and the ROCK YOUR CRAFT FAIR PLANNER so that these frustration don t have to become part of your everyday struggles.

5 Instead, you ll simply plug in some numbers to calculate your product price. Then, you can determine your profit-optimization strategies and either add the item to your regular product line or not. So, in this guide, we re going to get super practical and talk about product lines, and a pricing formula that works (almost) every time to get you a profit margin that makes sense for your business. Now, be prepared I ve gotten rid of all the fluff and I m giving you just the information you need to take action and get down to business. Are you ready to dig in?

6 YOUR PRODUCT LINE Curating a Line Your Customer will Love

7 Selecting a Product Line Before we start talking about pricing, we need to select the products that were considering for the fair. Now, you need to hold these products loosely in mind. If it ends up that the products aren t profitable, you ll need to be willing to delete them from the line. What we re gathering now is a general idea of your perfect line. Here, let me step you through it The first six steps of product line selection are: 1. Stick with one (and only one) target market. If you don t already know who you re marketing to, use the KNOW YOUR CUSTOMER worksheet to get dialed in on this.

8 2. Be sure your products address a pain point for your customer. Now, this pain point can be that she wants to look and feel great, that she can never have enough fashion accessories or that she is always cold just think of YOUR customer and figure out how your products help him/her. 3. Select a range of 8 12 products. Any more than this and your customers will be overwhelmed by their choices. Just 8 to 12 products. 4. Select a median price range.the majority of the product in your product line, six to eight items, will fall in your median price range. At this point you ll guesstimate we re just looking for a ballpark median range. 5. Select one or two coordinating items that will be your high price-point add-ons. 6. Select one or two coordinating items that will be your low price point add-ons.

9 Coordinated Sets Sell

10 A Range of Price Points An example of including high and low price points would be in a coordinated set. In the example on the previous page, the hat and boot cuffs would be in the median price range. The cowl, which takes less time than the other items, would be in the low price range and I might add a poncho to the line, which would be the high price point. OK, great! Now that you ve got your 8 12 coordinating items that your target customer is going to love, it s time to take a look to determine the profitability of each item. But how?! There are so many pricing strategies floating around out there. So often, we hear of artisans just selecting one of these simple formulas and going with it. This is what I call the wish and a prayer pricing strategy.

11 They wish their customer would buy the thing and pray that it brings in a profit. This is not the way to run a business.

12 PRICING STRATEGIES The Struggle to Find a Win/Win Pricing Solution

13 Pricing Strategies Let s take a look at some of those pricing strategies and get to the bottom of why they just don t work. If you ve been in the handmade industry for any length of time, you ve seen these three pricing strategies floating around. We ll take a look at each method based on the same hypothetical product a super chunky hat. The numbers we re going to work with are: Supplies = $4.00 Time to make the product: 45 minutes Per hour wage of artisan: $10 Per item business expenses: $3 Note: To calculate business expenses, divide your monthly business expenses (not supplies) by the number of items you re projected to sell. This will give you your per item business expenses.

14 The Ridiculous Method The Ridiculous Method or, better known as, the 3x supplies method, ostensibly, looks like this: Using this method, we end up with, what looks like, $8 in profit when we charge $12 for the hat. The problem is the formula doesn t take into account any wages or business expenses. So, any profitability with this method is, actually, an illusion. You can not build a business using this method!

15 The Conventional Method This method employs the formula: Supplies + Wage = Wholesale X 2 = Retail The upside is that wages and wholesale pricing are accounted for. Using our hypothetical numbers, our hat would sell for $23. You can see, we still aren t accounting for our business expenses. So, these supposed profits aren t a true reflection of profitability. In fact, when selling at wholesale, $11.50, we would still be at a negative profit margin.

16 The Profit-minded Method This strategy gets a little closer to what we re looking for. The formula looks like this: Supplies + Wage + Expenses x 1.5 (50% markup) = Wholesale x 2 (100% markup) = Retail Price The calculation for retail pricing looks like this:: Wow! Our hat, which we would have sold for $12, is now selling for $ And while all of our expenses are covered and our profit margin is great, the price is exorbitant! This strategy is not feasible for most businesses and is a clear lose for the buyer.

17 The Balanced Method We want all of our sales to be a WIN for both buyer and maker. Hence, the Balanced Method of pricing. With this method, we lower the profit margin on both wholesale and retail pricing, but it brings the price more within the range of a WIN/WIN. The balanced formula is: Supplies + Wage + Expenses x 1.3 (30% Markup) = Wholesale x 1.54 (54% Markup) = Retail Price Which looks like this for retail pricing:

18 With the Balanced Method, the hat is priced at $29. Therefore, we can pay an employee, cover business expenses, and, still, make $14 in actual profit. Compared another way, keeping supplies, wages and expenses constant for each strategy, we get a good idea of actual, potential profit (or lack thereof) with each strategy, here: You can see that the first two methods are not profitable. The Profit-minded method brings a great profit, but the likelihood of being able to sell a simple hat for $43 is not likely. The Balanced Method seems to bring the best of both worlds, a profitable product at a great price. Now, while I would love if this formula worked for every product, it just can t, and doesn t. That s where profit-optimization comes in

19 PROFIT OPTIMIZATION The Special Sauce of Product Pricing

20 Profit Optimization So, just what happens when we use our handydandy pricing calculator (be sure to download yours here), and we discover that the price for our product is outside the range our customer will pay? Well, this is the point where your creativity kicks in! We can either bring the price into alignment with our customer while maintaining profitability or we can remove the item from our product line. Yes, these are the only two choices well, the two biggies anyway. There are several ways to go about determining which way to go. Let s take a look at the 3 R s of optimization: Reduce, Raise, and Review.

21 Reduce Reduce the cost of supplies by couponing, buying wholesale, buying on sale, combining coupons, using a less expensive product. Reduce the time it takes to make the product by using a heavier yarn, a larger hook or working in an assembly-line fashion. Reduce business expenses by seeking out free alternatives to some of the services you use and always making wise choices for your business. Reduce your profit margin if you feel that the product MUST stay in your line, but do this with intention and rarely. Your wholesale percentage and split the profit reduction with your wholesaler or eliminate wholesale options altogether..

22 Raise Raise the product s perceived value with branding and copy that sells. Raise the actual value by adding embellishments, using a higher quality supply, and offering customization/personalization. Raise demand for your products by creating signature lines, reducing availability, creating unique products, touting the pain point that your product addresses, engaging with influencers to promote your products for free.

23 Review Finally, review the viability of the product and eliminate if from your product line if you simply can t sell it at a reasonable profit. For many larger items, eliminating wholesale pricing and adjusting the profit margin may be just the answer to keeping the product in your line and maintaining a win/win. See this example: For the McKenna Wrap, this is how the formula works out: Instead of selling it for $82 (retail), by eliminating wholesale pricing for this larger item, the price becomes more reasonable, but the profit margin is still viable at $22 net profit. I know it seems complicated, but I m working to make it easier for you!

24 PROFIT OPTIMIZED PATTERNS Simplifying the Business of Crochet

25 Profit Optimized Patterns Profit-optimized patterns are designed to help crochet business owners create products that are both beautiful and cost-effective. Each pattern is designed with materials cost, production time and marketability in mind. Made with a Twist by Crochetpreneur profitoptimized crochet patterns take the stress out of creating a perfect product line so you can focus on building your business.

26 When you re searching for patterns on Etsy, look for the POP piggybank symbol and you ll know you re getting a profit-optimized pattern. Or, you can go straight to the shop through and click on the shop now link in the menu. Each pattern comes with a printable suggested retail price calculation already completed for you! I m adding new patterns every week, so keep an eye out for products that your target market will love.

27 Overview OK, so let s do a quick review of what we learned today. We learned a pricing formula that takes the guesswork out of product pricing, we learned about optimizing products for profit and we learned how to use these formulas to build our product lines. It s a lot of info, so be sure to review your notes and try to take action right away! Go ahead and download your Pricing Calculator and start filling in the details for each of your products. And, speaking of taking action, before we go today, I want you to leave a comment in the Facebook Group and tell me the favorite thing you learned from our training today. In the next training, I m going to show you the exact track to run on to ROCK YOUR CRAFT FAIR SEASON. If you re wanting to transform your handmade business, this is going to be a game changer for you!

28 Speaking of rocking the season, I ve been getting a lot of questions about the ROCK YOUR CRAFT FAIR PLANNER. In the next part of the training, I ll tell you all about it and how you can get started planning, executing and profiting from your next craft fair! So, go ahead and start working on your pricing and optimization plans so you can take that load off your shoulders and enjoy the fair season. Next up, we ll talk about how to take the next step toward a successful craft fair season. I ll see you in the next training! Rock Your Craft Fair Season: Creating a Booth Display that Sells for You by Pamela Grice Montgomery Grice Enterprises, Inc. All rights reserved. No portion of this book may be reproduced in any form without permission from the publisher, except as permitted by U.S. copyright law. For permissions contact: pam@crochetpreneur.com