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Minimize Your Cost

Cost Control for Crafters

Know Your Costs

There’s a preamble to Minimize Your Costs and that is Know Your Costs. You need to thoroughly think through your crafting process and keep very careful expense records for your home business.

Know where your money's going! Don’t forget any regulatory expenses that may be required – from tax reporting to licenses, insurance and permits.

Some costs may be unknowable, for example equipment depreciation. Eventually that sewing machine will need to be replaced or that inkjet printer will be outmoded by a newer, higher quality one.

There are two ways to handle these unknowns in your business planning: estimate first and track costs over time to fine-tune your cost basis; or build a higher profit margin into your products (remembering that you are ignoring some of your known costs).

Purchasing Materials

Next, to minimize your cost, you need to find the proper quality of raw materials for your product in quantity and at the lowest possible price. That usually means buying wholesale.

One thing I must emphasize however is do not compromise quality. It is always possible to get good quality at reasonable prices, if you shop well. Without good quality, you simply will not find a market.

It may be frustrating and time consuming tracking down wholesalers who will deal with a small home business. To them 500 yards of fabric or 100 zippers may not seem like a lot. But the time you invest doing this will pay rewards over the long term.

It can be difficult for an individual crafter to generate enough business to interest a manufacturer or wholesaler. They are, after all, in business to sell in quantity.

However, some of the smaller concerns might be willing to deal with you. You won’t know until you ask. Have your paperwork in order. Make sure you present yourself professionally. Have business cards and stationery. Proper business and tax IDs will probably be required.

If you are successful establishing relationships with wholesalers, the savings can be substantial.

There is one caveat. If you do find a wholesaler of raw craft materials willing to deal with your craft business, be sure you can handle the quantities. You will have to buy hundreds or thousands of pieces of the same stock number.

Do you truly have such demand for your craft that you can actually use 12 dozen zippers or 1000 silver charms within a reasonable period of time? Or will your house fill up with materials that gather dust and go out of date?

Just because the initial cost per piece is low does not mean you got a bargain. There is a time value to money. If you pay out $500 today for 10,000 widgets, but it takes you three years to use them up, have you really saved anything?

If you have the need for large volumes of goods at low prices, certainly pursue wholesalers, but go into it with a clear understanding of what you're doing.

Read Part Two, Some Cost Control Resources to Consider.

Recommended Reading

If you’re still not sure you know how to quantify costs, here are two books specifically for crafters containing detailed sections on determining all-in cost:

The Basic Guide to Pricing Your Craftwork

and

Pricing Guidelines for Arts & Crafts: Successful, Professional Crafters Share Their Pricing Strategies to Help You Set Profitable Prices for Your Arts & Crafts.

Both contain a wealth of material on how to take your costs into account when setting your price.

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