Financial Tips For Your Craft Business
You started your craft business with an idea. Now take the
time to turn it into a plan. A plan that is both inspiring
and practical, that tells a story of how you began and why.
Set a time every year to review your plan to see how you feel
about the direction your business is taking. You can look
at publications like Complete
Do-It-Yourself Guides To Business Plans. which will
give you everything from the analysis and decision making
before you start, through preparing the complete business
plan document and financial projections to helpful advice
on getting financing, and samples of the recommended financial
projections for a successful Business Plan.
Create your plan with realistic goals, benchamrks and alternatives. Always have at least 1 backup idea for each goal, and
never assume that what worked last year will work again. Include both short and long-term goals.
- Changing designs and materials to stay in style.
- Identify top selling items and increase their profitability.
- Put 10-15% of your sales into a savings account. When the total reaches $1000, put that into a 1 year CD.
Keep an eye on the cash flow
Artists are often so buried in creating their crafts and doing shows, they often don't
stop to see how much they are actually making. An uncertain economy can make cash flow predictions
tricky, but try this exercise:
- Start a spreadsheet with your expected ending cash balance
for the current month.
- List recurring expenses: for example, rent, utilities, loan
payments, insurance and salaries.
- Then the variable costs: advertising, shipping, travel, materials
- Put in your expected income for the month, including interest earned
- Subtract your projected payments from the beginning balance, and
add the estimated income.
The final balance tells you whether you might need to postpone
expenditures, draw on your credit line, or use extra funds
to take advantage of a volume discount purchase. Reports you
can get when you use QuickBooks
Home & Business can also give you a good idea of how well
you a sticking to your budget. Programs designed for small
businesses like CASHKEEPER
(a Simple Solution for your Bookkeeping Accounts) Cashkeeper
Works...emphasize their simplicity. Getting a business
credit card would also be a good idea.
Repeat this exercise for the rest of the year, filling in
income and expenses, taking into account seasonal dips and
surges. This spreadsheet is perfect for planning, and you
will need to adjust the beginning cash balance and make other
changes at least every quarter. Keep your records up to date.
Learn the basics from books like E-Z Bookkeeping (Bookkeeping the Easy Way)
Cash on Credit
Having the cash when you need it can be your business lifeline. If possible,
open a credit line when you start your company. Because youre
charged interest only when you draw out funds, its a cost-effective
way to borrow. A credit card or home equity loan is NOT the best way for you to raise money unless you have a
serious plan to pay that loan off within 3-6 months.
Contact good customers and make them special offers if they purchase odd lots,
in bulk, or buy out seasonal stock.
Think about renting out unused studio or warehouse space.
Try to find a tenant in a complementary, non-competing business
someone with whom you can share services or order materials in bulk.
When times get tight, buy only the materials necessary to complete the orders you have. You
can freshen up unsold items with a new design, add recycled items for that trendy "green" style,
even visit thrift shops for inspiring items.
If you need new equipment, consider leasing, and spread the payments
over the equipments useful life. You can afford higher-end equipment
with a lower initial cost, and return the eventually obsolete equipment
when the lease expires.
Lower your costs by comparing suppliers. If youre happy with
your current vendors, let them know, and ask how to qualify for discounts,
which are often based on
payment terms, quantities ordered, and the history of your relationship.
Increase sales, not sales expenses
Any time is the right time to boost your sales activities, and when
the economy is sluggish, the best ways are low-cost.
Use your printer to make labels, coupons and flyers. Add
a special offer coupon with every order to increase repeat
business. Offer discounts on large orders, and use custom
labels to package your craft items for shipping.
Keep your name in front. Send out press
releases to trade publications. Email helpful tips and
ideas to your customers - but not more than once every 6 weeks.
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