7 Ways Handmade Businesses Lose Money (when trying to please customers)

At the beginning of every business I’ve started, I’ve bent over backward for my customers. There’s nothing wrong with caring about your customers and their happiness, however, it can’t be at the expense of your profits. 

These are 7 things small handmade business owners often do, thinking they’re helping them make sales, but they can actually be harmful in the long run. 

 

1) Custom orders

Imagine walking into The Gap and saying to a sales associate “I really like this top, but can you make it in a yellow and just remove this pocket and maybe make it a bit longer in the back?” Do you really like the shirt the designer created, or do you like your version of the shirt?

You’re the designer in your business and if you’re making products to sell, as is, shoppers can take it or leave it.

You can’t please everyone and trying to do so will likely run your small business into the ground. 

If a consumer wanted to make an alteration to an item they purchased at a major retailer, they would have to take it somewhere else and pay extra. The business would no offer alterations for free (unless that was part of its business model).

If customization is a service you want to offer, then consider how much extra time and materials it takes to alter your handmade products and charge accordingly.

I dealt with all kinds of customers and am grateful to anyone who supported my business over the years. However, there were a couple of orders I didn’t make any money on and ended up resenting, all because I was trying to please a potential customer.

In particular, I remember one custom order I accepted that I almost instantly regretted. 

I had to make an extra trip to the fabric store and take photos of the fabrics I thought matched what she was looking for, go home, email the photos (this was before texting was a thing;), and then make another trip to the store once she chose the fabric she wanted.

That’s a lot of time spent running around for one sale. I also had to alter my pattern to make a smaller version of a purse I offered and spend extra time perfecting the new design.

In the end, I was left with extra fabric I had no use for (it didn’t work with any of my existing collections nor was it anything I would build one around in the future) and a pattern I wouldn’t use.

It was my fault.

I should have had clear policies about custom orders so I didn’t make decisions on the spot I’d later regret.

You’re in business to make money and it’s your job to ensure each sale is profitable.

 

2) Discounts

As small business owners, we often feel we shouldn’t turn down a potential sale, and we may end up saying “yes” to discounts that take away our profits. 

What do you think would happen if you went into your favorite big chain retailer and said to a sales associate “I want to buy 2 of these, can I have a discount?” or “you guys are about to close, can I have a discount?”

They wouldn’t hesitate to tell you “no”. And they bring in millions of dollars in a year!

Why should your small business be expected to offer random discounts?

My advice, if you want to discount your handmade products, is to run promotions, just like major retailers do. Schedule sales at the beginning of the year and decide when discounts will be offered instead of randomly handing them out when you’re put on the spot and could potentially lose money.

If you want to be able to offer discounts on the spot, set your percentage beforehand.

For example, your friends & family discount might by 25%, or discounting for bulk purchasing may warrant a 10% discount.

Be sure to factor discounting into your prices. If you haven’t priced your handmade products properly to start, there won’t be any wiggle room to offer discounts; you’ll end up losing money to please a shopper.

And before you can offer any discount, you must first be pricing your products so you have profit margins that allow discounts. 

Check out: The Right Way to Price a Handmade Product (Step-by-Step Formula)

In the beginning, I didn’t have a policy for discounts. Plus, I’m not great a (quick) math. So if a customer said to me “If I buy all three of these bags, would you give them to me for $100?” I’d probably say yes and realize after; at that price, I barely made a profit.

 

3) Work Hours

Did you know that 25% of businesses take 1 – 3 days to respond to emails, 4% take more than 3 days and 14% don’t respond at all (source). As consumers, we don’t expect emails to be replied to, phone calls to be answered, or to be able to shop in a store, after a business’s hours of operation.

Even though you’re a small handmade business and probably work odd hours whenever you can, it’s important for you to set your hours of operation and set boundaries with customers.

You’ll become more efficient and more profitable if you follow a schedule and block your time.

Your time is valuable, and the hours you spend working on your business should be factored into your prices (however, the startup phase may require more hours than you’re paid for).

You’ll end up spending unnecessary hours on work if you cater to other people’s schedules. 

Set your work hours and find ways to be more efficient with them (e.g. only answering emails once a day or only shipping orders out on Tuesdays and Thursdays; not when a customer wants it).

 

4) Deliveries

When I started my handmade business, I often offered to deliver a product for free to local customers. This would okay if I had worked delivery fees into my prices, but I hadn’t. I just wanted to make the sale and didn’t consider how much it was costing in my time, gas and mileage to try across town for one order.

I’ve never had a retail employee offer to personally drop off a purchase, at no extra charge, because I didn’t feel like heading to the mall that day.

If you’re going to offer delivery as an option, make sure you’re accounting for the added costs and charge the customer accordingly.  

 

5) Deadlines

“You don’t have any more in the size I need? Can you call the warehouse and have them make one and get it to me before next Friday?” Major retailers want to make sales just as much as you do but they know their limits and they base their decisions on profits.

Rushing to make an order, last-minute for a customer is unlikely to be profitable for your small business.

When I started my handmade business, I made a bit of everything. My flannel pajamas with matching rice heating bags were popular for Christmas. I would accept last-minute orders and sew new sets to ensure customers would have them before Christmas.

The tasks I needed to complete to keep my business running smoothly were pushed aside to accommodate these last minute offers.

Not to mention, I was less efficient (which reduced my profits) due to running back and forth to the fabric store, post office, or delivering orders.

It’s great to accommodate customers and keep them happy; but not at the expense of your profts. 

 

6) Holds

One time I had the organizer of a small craft fair ask me to hold my last pair of XS pajamas for her. It was a small, slow show and I honestly needed every sale I could get.

Shortly after I put them on hold, I had a mom and her daughter come by looking for a pair of XS pajamas and I had to turn them away with my business card in hopes they would contact me after the show. They never did.

And the organizer never did come back to pay. I felt too awkward to ask her if she still wanted them so I lost that sale.

Holding something for someone seems like a simple enough task; most retailers do it. But here’s the problem; your items aren’t mass-produced. They’re likely one of a kind or one of very few.

When major retailers do allow holds, they have rules. “Yes, we can hold it for 1 hour” or “until the end of the day”. They don’t allow holds based on what works for the customer.

If you simply agree to hold an item, you don’t know if they’re planning to come back in 5 minutes or 5 hours. 

“I can hold it for 15 minutes” leaves no question in your mind or the shoppers’. If they’re not back in 15 minutes, it’s fair to put the item back out. 

Create a policy for holds that works for your business. 

If your products sell fast at a craft show, it’s perfectly fine to have a “no holds” policy. 

Or you offer them with a deposit. Or you may offer to hold an item but if another shopper wants that item, you have to sell it.

 

7) Pricing

When I first started selling my items, I set prices based on what I thought consumers would be willing to pay. I’m not even sure I factored my material costs in (yikes).

I didn’t take the time to think about and tally all the little costs that went into making, marketing, and selling my products. So those costs weren’t factored into my prices. 

I also didn’t consider wages for hours spent on my business; which was fine in the startup phase but is detrimental in the long run. 

And lastly, I didn’t think about profit margins and how much I needed (after expenses and wages were paid) to put back into my business to grow it, or to save for a rainy day. 

You can’t people please when it comes to your product’s prices. You have to track all expenses and hours, and factor in markups and profits. If consumers won’t pay your prices with those four things included, you need to find a way to lower costs.

Simply lowering your prices won’t build a sustainable business.

Check out: The Right Way to Price a Handmade Product (Step-by-Step Formula) 

And: 7 Ways to Make your Craft Business More Profitable & How To Lower Production Costs to Increase Profits

 

Do you have any other customer service situations that caused you to lose money and say “Never again”? Share your important lessons below!