7 Ways to Make your Craft Business More Profitable
If you’ve started selling your crafts, it’s likely because you want to build a profitable business.
Many makers realize, several months into running their business, they’re not profiting.
Here are 7 ways you can squeeze more profits out of your craft business.
1 – Lower production costs
To keep things simple, your craft business’s costs and expenses can be broken into two categories: production costs and overhead costs.
The first step is to look closely at your production costs; how much money are you spending on materials and how much time are you spending on production?
Look for ways to spend less on materials and speed up your production while keeping your prices the same. It’s the first place to look when you want to increase profits.
>> Here are 10 steps that may help you lower your production costs
2 – Lower overhead costs
Overhead costs are anything outside of production you spend money on to run your business. Examples of overhead costs in a craft business are:
- craft show fees
- Etsy fees
- wages for posting to social media
- paid ads
- rent for your studio space
- wages you have to pay any employees (e.g. a VA)
- insurance
- accounting fees
- memberships or subscriptions
- telephone bills
- office supplies
- shipping materials
- etc.
First, you must track all of your expenses; most small business owners ignore a lot of little things they spend time or money on.
Then you can consider ways to eliminate an expense or reduce it. Perhaps you can try QuickBooks instead of paying your accountant.
You might also be interested in:
>> 10 Costs of Selling at Craft Fairs
>> Common Costs of a Craft Business
>> How To Add Overhead Costs to Different Types of Products
3 – Retain more customers
Studies suggest that it can cost 5x more to acquire a new customer than it does to retain one (source).
Once we’ve purchased from a business, and are happy with our purchase, we now trust it more and are familiar with their products (e.g. the size we wear in their clothes, the quality of their products, their shipping times, level of customer service, etc.).
It takes less convincing to get us to buy from a familiar business than it does to buy from an unknown business.
So it’s important you keep in touch with your existing customers.
Try to get them on your newsletter list, send out postcards to let them know about new product launches, and create products that appeal to them.
If I only make tote bags, it’s unlikely a customer who’s purchased one is going to come back and purchase another next month. But if I also sell matching pouches that fit in the tote bags, bag charms, and wallets, my customers have something else to buy.
>> Here are 10 (Easy) Ways to Retain Customers
4 – Increase UPT average
Just as it’s easier to sell to an existing customer than acquire a new one, it’s also easier to sell 3 items to one customer than it is to sell 3 items to 3 different people.
Once a shopper has an item in their cart and is heading to the checkout, it doesn’t take much effort to get them to add another item to their cart. Instead of a soap vendor selling each customer a bar of soap, they might also encourage them to add the lip balm or hand lotion.
The number of items/units you sell to each customer is your UPT (units per transaction).
Many craft business owners haphazardly create products and don’t think about how each type of product fits into their product line, which leads to a low UPT.
The products you sell at a craft show or through your Etsy shop should all have a connection to each other.
>> Candles don’t have a clear connection to knitted scarves or jewelry; so they don’t belong in the same product line.
>> Candles and essential oil diffuser blends have a clear connection; both lightly fragrance a home/room.
Instead of spending more time trying to convince a different shopper to buy the diffuser blend, you can simply ask a shopper ready to buy a candle “Do you also want to add a diffuser blend in the same scent to your order?”.
The time and money you save selling two (or more) items to one customer will help increase profits.
>> Here are 5 Strategies to Increase Units Per Transaction
5 – Upsell
Another technique to get someone who’s ready to buy to spend more is to upsell them. Think of upselling as being asked “Would you like to supersize your order?” when ordering at McDonald’s.
It’s offering a bigger/better version of what a consumer is thinking of buying (and getting them to spend slightly more).
Make sure your craft business has up-selling options, and that those options have good profit margins.
>> How to Use Up-Selling to Sell More Handmade
6 – Automate sales
Systems will help you streamline your business and lower costs.
Work to find a successful formula for turning someone from a social media user who notices your content, to a website visitor, to a newsletter subscriber, to a paying customer.
Setting up a sales funnel and putting a portion of your sales on autopilot will help reduce your marketing and sales costs, and thus, increase your profits.
>> How to Set Up a Sales Funnel for your Handmade Business
>> Marketing Funnel vs. Sales Funnel: Why your Business Needs Both
7 – Raise your prices
It’s a good idea to regularly check your costs and your prices to ensure you’re still profiting.
First, ensure your prices are set properly:
>> The Right Way to Price a Handmade Product (Step-by-Step Formula)
Then keep a close eye on your costs from month to month.
As you grow, so will your costs. You need to ensure your prices are keeping up with those extra costs of doing business and that your profit margins aren’t dwindling.
Your suppliers may have slowly turned up the heat on their prices, perhaps even without you knowing. Many businesses will keep prices the same but reduce how much you get for that price. Without a side-by-side comparison, you may not notice that your supplies aren’t stretching as far as they used to.
Even if your costs haven’t increased, your brand’s value may have and you may want to raise your prices to reflect that.
If you’ve grown into a premium, in-demand brand, your prices should reflect that.
Finally understand why your hard work isn't resulting in more sales
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Hey, I’m Erin 🙂 I write about small business and craft show techniques I’ve learned from being a small business owner for almost 2 decades, selling at dozens of craft shows, and earning a diploma in Visual Communication Design. I hope you find my advice helpful!
Very insightful information. Thank you for sharing. I look forward to applying what I learned here to my business.