While working on a talk for the Society of North American Goldsmiths (SNAG) on Creating a Culture of Profit, I got a little stuck.
So I called my friend Tara.
“What’s your definition of profit?” I asked
“It’s the money that’s left over after after your business and personal needs are met.”
“That’s mine too.” I replied. “But I don’t like the phrase left over. It makes profit feel like an afterthought.”
Light bulb.
Here we are, championing profit. And yet, we weren’t working off the best definition.
Profit is not something to add on at the end, it’s something to plan for at the beginning.
This major revelation (plus another minor one) means I’m reworking everything.
I’ve scrapped my old formula (mostly) and am working on a new model that puts profit first. As artists and makers, it’s not enough to hope that there’s money left over. We need to make sure profit is part of our pricing strategy from the beginning.
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this is one of the biggest errors folks new to business make….they think they will raise their prices ‘later’ after they make it bigger, or they figure that the narrow or non existent profit margins will matter less when they sell more…but truthfully, if you have no profit margin when you design a product for a business, then you don’t have a business, you have a hobby that pays for itself…lovely just the same, but not a biz!
A business without a plan for profit is not viable. I mean, without some profit (I believe it’s 2 out of every 5 years) you can’t even legally claim a business on your taxes.
But too many artists seem willing to forgo it. Many people on sites like Etsy price their work as low as possible to encourage sales. But sales are relatively meaningless if they don’t include profit. Artists should not favor the momentary thrill of “I made a sale!” over the more real and sustainable thrill of “I’m profitable!”.
I often find myself confusing real profit with ‘getting paid’. When I first started my business, if I managed to pay myself $15 an hour, I considered it to be a wild success. It took me at least a full year to believe I deserved to be pricing my work to create a profit beyond the pitiful hourly wage I had calculated for myself. Now that I’m pricing my work more appropriately, not only is it easier to pay my bills, but I also have more pride in my business. I can’t wait to learn more about your ideas on this topic!
Just watched your Etsy talk and just raised my prices 🙂
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Hi Megan,
Thank you so much for your encouragement. I watched “the art af pricing for profit” workshop, with you and Tara and just loved it.
So, I started to raise my prices, and now I have to find my new market niche. I wrote a blogpost about this and I would really love that you, and your lovely followers, stopped by my blog and shared your opinions with me and my followers.
I’ll be waiting for you,
Raquel
http://notonbyraquel.blogspot.pt/2012/06/my-market-niche-o-meu-nicho-de-mercado.html
WOW! Total mindshift moment.
I love this. I have to share this with everyone I know.
Thanks for blowing my mind.
This is a total light bulb moment. Never noticed how it was just my left over. I need to change my thought process and put profit first. There has to be a better way. I have made a list of things that need to change and I believe with those changes it will make running a business become smoother.
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