December 11, 2013

Are You Letting Stubbornness Get In The Way of Smart Business Decisions?

If you started your business purely because you really enjoy pulling a squeegee across a mesh screen or manually operating your vintage letterpress, this post isn’t for you. If you started your business to make money, then listen up! Every day I talk to artists who are convinced some aspect of their production methods or manufacturing materials is a must-have and that their customers care deeply about this thing they’re so stuck on.

Here’s the reality: Most of your customers probably aren’t married to wearing American Apparel t-shirts. Most of them don’t know what the heck “giclee” means. They cannot tell the difference between a notecard set that you made by hand with a letterpress vs. the set that was mass-produced using modern machinery to produce a similar effect. Your customer doesn’t view your products through the same lens as you. More often than not they are buying a product because they like the design of something, not necessarily due to the specific components or manufacturing techniques used in its production.

When evaluating your product manufacturing methods and components, ask yourself these questions:

 1. What Will Make Me More Money?
My partner and I sell t-shirts and accessories and we do not print on American Apparel; we print on blank shirts that cost about half as much as American Apparel. They’re perfectly nice and soft and well-made with a great fit, but don’t have the hipster cache of American Apparel. We sell thousands of shirts at live events every year and no one has ever decided not to buy a shirt from us because it wasn’t American Apparel. It’s very rare that we run into someone who has an opinion on our blank shirts one way or another. Mostly our customers are looking for a comfortable tee with a good fit that features a good design that speaks to them in one way or another. We also very rarely run into a customer who doesn’t like our shirts because they want a thicker, heavier weight shirt — it can happen, but it’s extremely unusual. We don’t expect to please everyone, so we try to design our products based on what will please most people.

If we chose to print on a more expensive blank shirt because we just assumed our customers insisted on it we’d make less money. We’d either have lower margins (less money for us) or we’d have to raise our prices (making our price point too high for many customers — again, less money for us). I’d print on a more expensive blank shirt if I had some evidence to support that my customers really wanted shirts made of organic cotton or a certain brand of shirts, but it’s simply not the case. I see no reason to adversely affect our income to add a product feature that the overwhelming majority of our customers don’t care or ask about.

2. What Is Scalable?
When you started your business, maybe advertising that all your products were handmade by you sounded like a charming selling point. But what happens when your order volume increases or a department store calls wanting to place a large wholesale order? Is it realistic for you to keep making everything yourself by hand when you have to sell thousands of pieces every month? Even if you could keep up with all that production, is that going to give you enough time to tend to the other parts of your business, like new product development?

A product is not inherently bad because it was made by a vendor or employees, and your customers certainly won’t enjoy the product any more or less based on who physically made the item. If your creative business is your livelihood (or you want it to be), think about how you’re going to keep up with production as demand increases.

3. How Do You Know What Your Customers Really Want?
Are you assuming your customers want you to use specific production methods or components or did you come to this realization based on their feedback? How do you really know your customers would *only* buy posters you designed if they are screen printed vs. printed digitally? How do you know your customers prefer a more expensive piece of jewelry with fine gem stones instead of a more affordable piece with faux stones? Selling at live events is a great way to get customer feedback in real time. What are your customers focusing on about the products? Are they actually interested in the manufacturing process? Are they more concerned with price than the quality of the materials? Are they buying your items specifically because they are handmade by the designer or 100% organic or 14 karat gold? Take note of what your customers seem to like about your items when they’re right in front of you, and think about ways you can lower your manufacturing costs while still producing a quality finished product your fans will enjoy

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October 1, 2012

How to Cope with Net 30 Terms

Filed under: Wholesaling — Tags: , , , — Meredith @ 7:53 am

If you sell a product to wholesale customers, you’ll routinely be expected to offer net 30 terms. (This means your customer doesn’t pay for the goods until 30 days after you’ve sent them out.) This can be a real strain for a small business, since at any given time you may be owed tens or hundreds of thousands of dollars that you can’t collect for weeks. Meanwhile, you might need to pay rent, production expenses, employees, etc. How can you survive with net 30?

1. Get terms from vendors
If you have good credit and a working relationship with suppliers and vendors see if you can get net 30 terms from them. (For example, if you buy blank t-shirts from the same supplier all the time, see if they offer net 30 terms.) This buys you some time to collect on the cash owed to you. While you might still have to pay the suppliers before you collect on the invoices owed to you, the gap in time will be smaller.

2. Sell your invoices or get PO financing
There are companies that specialize in fixing this problem for businesses. They will loan you money to finance the production of an order (Purchase Order financing) or buy your net 30 invoices from you. Imagine you did a trade show and Bloomingdales wants to buy $100,000 worth of product. Let’s say producing the order will cost you $60,000. If you don’t have the $60,000 you need you can turn to PO financing. They will lend you the $60,000 and when you get paid by Bloomingdales you pay back that lender. This of course means you’re paying interest on that loan, so instead of netting $40,0000 you might net 35k or 37k (depending on the terms and interest rate). You’ll want to keep in mind that in order to get PO financing you’ll need good credit.

Another thing you can do is sell your invoices. There are companies that will buy a net 30 invoice, pay you up front and collect on the invoice when it’s due. Again, you are giving up a portion of the value of that invoice to do this, but it’s a way to get cash right away if you’re strapped.

3. Early payment incentives
You might be able to get your customers to pay their invoice before the invoice is due if you give them an incentive. You can offer a deal like 3% off for paying within 7 days, 2% off for paying within 14 days and 1% off for paying within 21 days. Not all customers will go for this, but some will and it gets you paid faster. Again you are giving up some income to get paid faster, but sometimes this is cheaper or more viable than the alternatives.

4. Personal credit
If you’re totally strapped and you can’t get paid fast enough falling back on personal credit is also an option. Check your credit cards to see if any have a low or 0% APR balance transfer option. This would allow you to pay for the production of an order with credit card A, balance transfer to credit card B and then pay off credit card B when the invoice is paid. (Still a better deal than paying 18% by just leaving the balance on card A.) Make sure you read all the fine print before attempting something like this so you aren’t hit with unexpected expenses.

You might also be able to draw cash from a home equity line of credit if you qualify. Interest rates for that cash are typically low and any interest you pay is tax deductible in the US.

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July 10, 2012

Just Say No to Spec Work

Filed under: Uncategorized — Tags: , — Meredith @ 7:10 am

I wanted to bring up a topic I hear a lot about on some design forums, but that gets little discussion from makers, and that’s spec work. Spec work means doing work on the speculation that you’ll get paid. I’m against you doing it and I’m against you asking other people to do it.

First of all, spec work comes in all sorts of forms. Sometimes it’s someone outright asking you for it. You’ll hear a story like “I’m starting a new business and if you do my website for free I’ll give you 1% of the first months sales” or “I want a new logo so I’m having a contest, best logo design wins a free prize”. Design contests are pretty much all spec work. You’re going to do design work and they’re only going to pay you if they decide they like the finished product.

Imagine if the entire economy worked this way. What if I decided I was only going to pay my dentist if I felt my teeth looked sufficiently white after a cleaning? Imagine if I told my divorce attorney “I’m only paying you if you get me 75% of the assets.” Other professionals don’t work under these conditions and designers/artists shouldn’t either.

Here are two of the most compelling reasons to avoid doing and asking for spec work:

1. It devalues design
If you’re one of those people who’s always pissed when someone criticizes your pricing or complains about how artists are underpaid, you should be the last one to do spec work or hire on spec. There’s a very good chance of the artist/designer doing work and getting paid nothing, which is about the worst deal you can get as an artist/designer. Even if you are looking at entering a design contest for a well known brand because you want the bragging rights or exposure, please know that neither of those things pays your bills.

Anyone seeking spec work is showing no respect for the artists’ work or time and thinks that you should work for free. Don’t encourage this mentality by actually doing it. It only perpetuates the belief that design/art is ubiquitous and no one need pay for it.

2. Good designers/artists don’t do spec work
While there are exceptions to this rule, generally speaking good designers and artists won’t do spec work. They usually value their own time enough to not get involved in that kind of work and they have enough paying customers to actually keep their schedule full of work that is paying them.

What this means for you is that if you are trying to get work done on spec (for example holding a logo design contest) you’re not going to get the most talented people submitting work. People willing to take on spec work might be too inexperienced to know better or not really be skilled/talented enough to get enough paying customers to occupy their time. Even if you have a good designer doing spec work, you’re not going to get their best work since you’re not really working with them. The best contracted design (whether it’s a logo or t-shirt design or new website) comes from a client working directly with an artist or designer and going through feedback and rounds of revisions.

If you need design work done check out portfolios on sites like Coroflot or Behance. Look for a portfolio that represents the kind of work you want done on your project and then contact that artist or designer about doing the work for you. If you can’t afford their rate wait until you can or keep looking for someone whose rate you can afford. Accept that this is a cost of doing business and be willing to pay for design work that you need done so you can get a product that serves your business the best.

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June 18, 2012

Dreaming Big? Then Spend Bigger

Filed under: Growing Your Business — Tags: , , , — Meredith @ 8:45 am

When I hear a business owner say “but it’s toooo expensive!” what I really hear is “I don’t really want to be in business.” Being in business requires spending, and growing a substantial business is going to require substantial spending. I’m not suggesting reckless or ill-thought-out spending. I’m talking about the kind of spending that takes you from small timer to next level. Here are two important ways spending small hurts you in the long run:

1. Nickel and Diming
Which appeals to you more: 50 poly-mailers for $10 or 1,000 poly-mailers for $100? If you said 50 for $10 you’re nickel and diming and it’s hurting your bottom line. While it’s more tempting to lay out less money up front, you’re paying double the cost to do this. Apply this same philosophy to other business expenses like supplies, manufacturing, etc. and you end up with less profit and poor margins.

When I have to spend money on my business my primary concern is what’s going to cost me less in the long run per piece. If I am sure I will use all of whatever I’m about to buy and then some, I’ll always opt to buy in bulk and get a lower cost per unit. These choices of course have to be made with some common sense, you might not want to buy a million poly-mailers and have all of your budget tied up in one thing that will take you years to use, but it’s important to take a close look at what your business buys. What could you spend more on up front that will drastically reduce cost?

2. Missing Opportunities
Have you ever said no to doing something you felt would grow your business simply because of the price tag? Maybe it was a trade show that was going to cost $3,000 for a booth. Maybe it was a pop up event that was going to cost $1,000.00. Saying no to things that can deliver a boost to your business is a surefire way to hamper your growth.

When you consider a business opportunity it’s important to calculate the projected return on investment, not just concern yourself with the initial outlay of cash. If you did the pop up event could you sell over $2,000.00 worth of product? If you did the trade show could you generate over $3,000 in wholesale business? When you see opportunities like this always think about how much money you can make from them after expenses, rather than just considering the initial expense.

Are there ways spending bigger could help you save money and grow your business? What’s holding you back?

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May 25, 2012

Link Love: The Most Valuable Small Biz Articles Posted This Week

Filed under: Link Love — Tags: , , , , — Meredith @ 7:53 am

Happy Friday! Settle in for a long holiday weekend with these small biz and marketing reads from around the web:

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March 16, 2012

Link Love: The Most Valuable Small Biz Articles Posted This Week

Before I get into today’s links, I wanted to let everyone know my apparel & accessories company, Ex-Boyfriend, is doing a charitable fundraiser for homeless animals. As an animal lover, this is a cause that’s near and dear to me. Anything my readers can do to help would be greatly appreciated! Check out the details on how to help.

Now on to the links…

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March 15, 2012

3 Tips for Getting Your Books and Accounting Under Control

Filed under: Uncategorized — Tags: , , — Meredith @ 3:09 am

When we started our business, we were hobbyists. We didn’t make much money and our expenses were minimal. We collected piles of receipts and stuck them in folders for doing our taxes at the end of the year. Fast-forward a few years later and we’ve had to become a lot more meticulous with our accounting and bookkeeping. Here’s how we do it:

1. Update Books Monthly
With a growing business and six figure operating budget, we’ve got to stay on top of what we’re doing with our money. Both for our own information and for tax purposes. As much as we hate doing books (yep, it’s boring and tedious), we make sure to update our books at least once per month. To ensure that we remember to do it, we set a recurring reminder on our calendars so we’re prompted to do it at the beginning of every month.

2. Use Accounting Software
We use Quickbooks online to keep our books in order. We like it because our accountant can easily be granted access at tax time and all our information is stored securely off-site. There’s no danger of losing our records if something happens to a computer in our own office. The cost is minimal and the user interface is intuitive.

3. Banish the Paper
The best thing we’ve done with taming our books is going paperless. Receipts can fade over time, and if you get audited it can go as far back as 7 years. That’s a whole lot of paper! Going digital with our expenses saves us space in our office and filing headaches. Every time a receipt goes into our hands we scan it with an iPhone using ScannerPro. This handy app scans our receipts and stores them in our Dropbox. This means every receipt we need is in one easy-to-access place and can’t be lost or damaged since it’s all stored securely off-site.

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October 3, 2011

3 Reasons To Create Your Own Characters and Leave Other People’s IP Alone

I have some really strong feelings about intellectual property (IP) in the design world. On one hand, I think some people are too quick to claim they invented the wheel. On the other hand, it’s totally irritating to watch my competitors trying to make a quick buck off another artists’ creativity, when it’s a legitimate case of infringement.

Yesterday I stumbled across a crafty business who’d based their entire branding around very famous fictional trademarked characters. The characters were not old classics in the public domain like Alice in Wonderland’s crew, they’re characters created in the last 30 years by companies that are currently running their own businesses based on those creations. The designs couldn’t even be protected by parody, they were just blatant cases of infringement. Here’s why this is a bad idea:

1. It could ruin you financially
If you’re caught using someone else’s characters without licensing, you could be sued and you probably won’t win. Being on the wrong side of an IP lawsuit can cost you a fortune. You could be on the hook for your legal fees, the plaintiff’s legal fees and damages. These costs could ruin your business and your personal finances. If your plan is to fly below the radar and not get caught, think again. Anything can be found on the internet.

2. It limits your ability to license
Licensing can be big bucks for designers and illustrators. If you create you own world full of original characters, you can license your creations. The beauty of licensing your original creations is that all you have to do is iron out the licensing details and let the money come in. The licensee handles all of the product manufacturing and sales. This can be a terrific income stream for an artist. If your designs are based around other people’s characters, this option is off the table for you. You can’t license what isn’t yours in the first place.

3. It weakens your brand
Successful consumer brands often strengthen their branding with original characters. This is true of clothing companies (think Paul Frank and his monkey), fast food chains (who could forget Ronald McDonald and his friends?), Travelocity (think Roaming Gnome), etc. The list of brands that have benefited from creating original characters is endless.

When you base your all of creations on other company’s characters, it weakens your brand. At best you’re seen as a one in a million licensor of a famous brand’s creations. At worst you’re seen as an intellectual property thief with no original ideas.

Still thinking about joining I Shop Indie for the holiday season? We’d love to have you. Get your products seen with a marketing budget worth over $2,000.00! Today’s the LAST DAY to take advantage of early registration pricing. Details here.



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September 23, 2011

Link Love: The Most Valuable Small Biz Articles Posted This Week

Hooray it’s Friday! Don’t forget we’ve just opened up I Shop Indie for holiday season members, get more details here. Now on with the links…

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August 9, 2011

3 Smart Money Moves for Your Small Business

Filed under: Growing Your Business — Tags: — Meredith @ 8:27 am

Running a business is crazy expensive. The bigger your business gets the more you’re going to spend. At Ex-Boyfriend, we spend tens of thousands of dollars every year on keeping our shop running. We buy manufacturing materials, pay our vendors, buy event supplies, buy marketing materials, pay for services like credit card processing and web hosting, etc. The list of expenses is nearly endless. With so much money flying out the door, it’s important to spend wisely. Here are a few strategies we employ:

1. Buy in serious bulk
When it comes to certain purchases, more is better. If you’re buying custom mailers, promotional materials, manufacturing supplies, etc. most vendors will give you better pricing if your order is larger. For example the vendor who makes our pens with our logo on them charges 46 cents per pen if I buy 100 pens. They only charge 12 cents per pen if I buy 5,000 of them. While buying 5,000 pens costs me more up front, my savings is considerable for buying a bulk quantity.

Cheap tip: If you don’t have the cash to buy in bulk, see if you can split the order with another small business. For example, if someone making 1″ promotional buttons charges 25 cents/pin for 100 pins but 10 cents/pin for 1,000 pins, see if the pin maker can do two different pin designs. Then find a partner to share the order with. That way you can have 500 pins for your business and your partner can have 500 pins for her business, and you both end up paying only 10 cents per pin. Some vendors may be more inclined to do this than others, but it doesn’t hurt to ask.

2. Comparison shop
The internet makes it easier than ever to comparison shop. Whether you need wholesale catalogs, sewing machines, or shipping supplies, you can soften the blow to your budget by finding the best price. Do a Google search for the item you want to buy and see who’s got it for less. Also be sure to check sites like Amazon, since they have such a huge selection of items.

Lastly, if you are ordering supplies online, make sure you include things like coupons and shipping in your cost estimates. Sometimes the price that seems better actually isn’t once you look at those factors.

3. Get rewards
When you’re spending serious bucks on your business, it pays to use a credit card that gives you something back. Consider getting a credit card that gives you rewards like cash back, airline miles, etc. You can use those rewards to get free stuff for your business or even a treat for yourself. To really game this system you need to follow these rules:

1. ALWAYS pay off your balance in full every month. If you’re going to pay interest on purchases you won’t come out ahead with a rewards card. I can appreciate a cash flow problem as much as the next girl, but if you must finance a purchase on a credit card don’t do it with a miles card, they tend to have higher interest rates. Instead use a card that has the lowest interest rate you can find.

2. Use your card constantly. The way to maximize rewards is by using the heck out of that miles card. That means you put every single purchase on there. I don’t care of it’s a brand new Macbook Pro or a cup of coffee, every dollar counts. If you can’t be consistent with the use of your miles card, you won’t reap the full benefits.

3. Don’t overspend. This does back to rule number 1, don’t spend more money than you have. Otherwise you won’t be able to pay your balance every month and you’ll be charged interest. For some people this requires serious discipline. Don’t think of the credit card as extra cash, think of it as tied to the sum of money in your budget/bank account and don’t spend more than you can afford. Again, if you need to make a purchase you don’t have the cash for right now, use the credit card with the lowest interest rate.

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