I’m putting the finishes touches on my first ebook, a guide to wholesale and trade shows, so today I thought I’d share another excerpt. While I am adamantly against artificially low prices, there may still be cases where you need to consider lowering your prices to be competitive (or find ways to maximize your profits on prices you initially set too low.)
Here are some suggestions to lower your costs without cutting into your profits:
- Order materials wholesale and in bulk. It is hard to price your products competitively if you are buying your materials retail from a local craft supply store. Search out vendors that provide wholesale pricing, and by in bulk whenever possible to get quantity price breaks. (But be sure not to over buy – having too much money tied up in materials can cause cash flow problems.)
- Start (or join) a buying co-op. This is a way to take advantage of bulk discounts without the stress of extra materials. Join forces with several other makers to order similar products to get quantity breaks. For example, if you and three other jewelers order your silver together, you can get a better price per ounce than what you would get if you were buying alone. (And if you all live in the same area, you can share the cost of shipping!)
- Reduce labor time. This is where the old adage, work smarter, not harder comes in. Keep detailed time studies of your processes to see where you can reduce time. Perhaps you cut and sew every purse from start to finish before moving on to the next one, but you may be able to save significant time by doing the cutting for multiple bags at once, then all the sewing. Other simple changes, like the layout of your workspace, can create huge time savings in the long run.
- Hire someone at a lower hourly rate. If you need to charge yourself $50 an hour, but you can find someone to make chain for you for $10 an hour, this can reduce your costs. But beware; if you hire an employee that works out of your studio, you will have to pay additional costs such as taxes and insurance. That $10 an hour may actually be costing you $30. Instead, I recommend looking for an independent contractor – someone who can do the work for you from her own studio or home.
- Reduce your expenses. Take a hard look at your costs and figure out where you can trim. Do you really need the giant studio in the high-rent district? Can you share a space or work from home? Look at every aspect of your business and ask yourself if there is a way to trim excess spending.
Just remember if you need or want to lower your prices, do so in a way that doesn’t cut into your profits or your hourly rate. By finding creative ways to lower your costs, you can keep your prices competitive and still make a profit.