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.
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tara - scoutie girl
more great advice! megan, i’m wondering if you can address the independent contractor issue further. perhaps an employment lawyer would be interested in guest posting? i have ideas for doing some outsourcing… but want to make sure anything i do is on the up & up – and that i’m being fair to whoever i hire.
kerin rose
yes! done!…thanks Megan, its always great to revisit this stuff, and I love the super organized way you present it!
kerin rose
Tara has a good point…someone told me once that even with ‘outsourcing’ to an independent contractor, there are still certain, ‘labor law’ that have to be followed, and certain responsibilities you might have, even if the contractor is not doing the work in your physical space!
jenn
great tips!! i feel like i’m constantly working at #3.
Daniellexo
#2 has so much potential! Any tips on starting or joining a buying co-op??
Anna
Another point I learned the hard way about buying from craft stores: not only can it be more expensive, but it can also leave buyers second guessing your handiwork. Even though I make jewelry, if I see a necklace I like I might still buy it. However, its an automatic turn off when I look at a listing and can tell what craft store they got it from. Its also very depressing when I would price items…only to find the charm I was using was used on four or five other pieces within the same price range. I think wholesale or bulk lots have a tendency to have more unique items. Has anyone else experienced this, or perhaps the other way around? (where pieces found in bulk are more common then items bought individually from craft stores)
Veelana
Thank you for this insight! Since I work at home and my materials cost next to nothing (for my paper stars, at least), I really need to cut the time I take per star – or pay myself less, wich I’m not willing to do. I’ll do some assembly line style crafting tomorrow and see how it goes 🙂
Hugs from Vienna
Vee
Colleen (bcharmer)
GREAT post! With regards to buying groups, there are MANY purchasing co-ops on Yahoo Groups. I belong to several and have only had one dud. It’s a fabulous resource if you’re smart about it!
Ariel
As I understood it, in essence, an independent contractor is bound only by contract for a project to, in this case, make X number of Y objects for Z amount of dollars in T number of days. In return you grant that independent contractor an indemnity against copyright/design/trademark infringements and an understanding that they do not replicate your designs in any other way/venues without your written express permission. That contractor is responsible for their own taxes, insurance.. etc and they can take on any number of projects they like unless something is worded into the agreement.
Feel free to correct me if I’m wrong.
Kathleen
Ariel, that is pretty close to the nutshell version. Or rather, I should say was.
:::Unfortunately::: now a demonstrable chilling effect has arisen. As word becomes known of a recent federal circuit decision, contractors are going to be more reluctant than ever to take someone’s work.
Briefly, the US Federal Circuit Court of Appeals has decided contractors cannot be indemnified for various forms of infringement. The short version: no indemnity for contractors regardless of due diligence!
This is sheer insanity. It strikes me as a subterfuge strategy to legitimize the defunct (for all intents and purposes) DPPA. Meaning, contractors are now going to be required to hire intellectual property attorneys to scrutinize the product concept of every customer who comes in the door if they don’t want to be sued later by a third party. Do you have any idea how much this is going to cost? Tons of money and who will pay but the customer?
If this decision stands, it can only mean the end of manufacturing in the US meaning yet more people will become unemployed. Surely the court could have exercised a bit more foresight regarding the devastating and unintended consequences in this troubled economy. If it’s difficult to find contractors now, much less at an affordable price, it will only get worse. Far worse.
Melinda O'Keefe
I run a small manufacturing studio, handcrafting and assembling jewelry. I’m walking that tightrope now, hiring people to help make jewelry for wholesale and retail orders. 2009 was the first real big year I had and issued three Misc 1099 to freelancers for the first time. I’ve been told that I won’t be able to do this much longer so I’ve had people work out of their own studios and pricing things out as piece work, as that’s what it is. I’m so afraid that if push comes to shove, I cannot fathom paying out disability, worker’s compensation, social security, FICA, ect. The paperwork! All I need is another form to fill out and keep track of. Ugh. I’m not that big of an enterprise. It would kill the bottom line as I couldn’t imagine passing on these costs to the customer for what I do to cover these expenses. I’m sweating it out now, hoping for the best. How do small businesses survive this? I want to make sure to dot all my i’s and cross all my t’s. I want to help my community by offering jobs to local people. I don’t want to make any mistakes. I want to keep this handcrafted jewelry assembly in the USA. I report all my income to the Uncle Sam and pay the taxes that go with it. Can’t my freelancers do the same if I’m reporting their income to the government?
Melinda
Melindesign.com
Penelope Bridge
phew thank goodness canada hasn’t caught up to the US precedent vis a vis contractor/indemnity! we are still operating basically as Ariel has described. i think that it makes sense to understand the relationship from the contractor’s perspective as well – you are always on the lookout for the next contract and time is money for them too!
Janine Golbert
Great tips! I enjoyed tour post very much thanks!
Dawnaurora
Hello,
thanks for this post. I love the tips. I am outsourcing some of my business aspects and I love it. It is worth the cost and reduced stress.