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 and merchandise.
• Put in your expected income for the month, including interest earned on savings.
• 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 or Quicken 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 you’re charged interest only when you draw out funds, it’s 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.

Be tightfisted

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 equipment’s 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 you’re 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.