Sunday, September 20, 2009

Do the Math

As you attempt to get your home-based art or craft business off the ground, you may be approached by folks who have shows they would like you to participate in, or shops they want you to sell your products in. Here’s my special tip to help you make these important decisions- do the math! It’s very important to figure out how much something is really going to cost you before you sign on the dotted line and turn over your hard-earned money. What do I mean, how much it’s really going to cost you? Well, first and most important is the booth fee, or percentage the shop will take off the top. Booth fees are pretty straightforward.
Here’s an example. Let’s say I have heard about a show with a $100 booth fee. A fee of $100 is just that, no hidden costs, no percentages. But what, exactly, would I need to sell to make that kind of fee a sensible investment? I have often heard that a booth fee should be no more than 20% of your gross. So if I pay a booth fee of $100, I would want to bring in at least $500.
I would think about the number of hours the show lasts, the amount of inventory I predict I can have in my booth, etc. Does it seem feasible? I have found, in the larger shows I have done, that I can generally sell maybe 20-25% of the stock I have on hand. So for a show like this I would want to have at least $2000 worth of product on hand. I know that can be easily done. Now how about the hours of the show? Well, let’s say the show is just one day- a Saturday from 10am to 8pm. That’s 10 hours. Ok, so if I sold an average of $50 worth of items an hour, I could make that booth fee. Do-able? Well, probably.
There are plenty of other considerations, though. Is it in town? That means no hotel and minimal gas costs. Is it a juried craft show? I find that that is what draws the type of customers I am looking for. Is it indoors or outdoors? Bad weather can ruin your chances of having a good day at an outdoor show. Do I know anyone who has done the show? What do they think? This is a starting point, though folks have different ideas of what a ‘good show’ is.
All of these things and many more should be taken into consideration, but doing the math on that show fee is the first, very important step.
Here’s an example a friend presented me with recently- a craft mall situation where he would pay $100 a month, plus 15% of his sales. Hmmm… That sounded a little iffy to me, so I did the math for him. Here’s what I told him. Well, if you sold $1000 worth of your product a month, you would pay that $100 rent, plus another $150 a month in fees. That’s 25% of your sales. Is that sensible for you? Well, he knew from previous shop experiences that it was pretty unlikely that he would sell $1000 worth of product in one shop in a month. And if he sold less, the percentage he would be paying the shop would just go up. For me, the answer was a definite no. I don’t think he’s going to do it either.
Yes, there may be times when you just want to take the plunge, roll the dice, and see what happens. But I’d strongly suggest that you first do the math, and not delude yourself about how things will turn out financially in the end.
Hope this helps with some of those difficult show decisions!