Why So Many Handmade Businesses Fail

The statistics that most small businesses fail within the first five years is a scary one. As much as I would love to chalk it up to a “theory” and not actual stats, the truth is, there are a lot of handmade businesses that don’t stand the test of time.

Through Made Urban, I am constantly discovering handmade businesses. I always hate stumbling across an article about an amazing artist, follow the link to check out their website, only find that it’s down and their business closed. It doesn’t always mean it failed but most of us don’t start a business with the idea that it will be shut down within a few years.

There are a number of outside factors that determine whether a business will stand the test of time or not but what’s important is that the owner sets up properly and maintains the passion and drive needed to push through the hard times.

Here are 10 common reasons handmade businesses fail and pitfalls to avoid

1) REFUSING TO PIVOT

Obviously, we believe an idea is a good one to start, or we wouldn’t take action on it. But what seems like a good idea on paper isn’t always successful once it’s put into action.

>> My handmade business started with pajamas but pivoted to handbags.

>> Made Urban started as an online marketplace, but people were more interested in the blog side of the site. You can read more about that story here: 5 GREATEST LESSONS I’VE LEARNED FROM A FAILED BUSINESS

I’ve started several businesses and not one of them was successful based on the original idea; all required pivoting.

There are ways to test ideas and determine if a product will sell before investing a bunch of time and money into it. Check out: 5 WAYS TO KNOW IF PEOPLE WILL BUY YOUR HANDMADE PRODUCT

But it’s important to be open to change, no matter how great you, or others, think a product idea was.

Small business owners can get into trouble when they know the sales aren’t there but are too stubborn to change direction because they want to stick with their original idea.

Don’t hold onto an idea just because you think it’s great. It may be a great idea but a bad business idea. And if you’re on this venture to make money, then you have to be open to following the path that leads to money, even if it’s in the opposite direction you planned to go.

Let the market shape your business.

If you start a jewelry business but the sales aren’t there and you have more people at a craft show commenting on the beautiful tablecloth you made than on your jewelry, consider if tablecloths are your true calling. The market may be telling you that although your jewelry is nice, there’s a bigger opportunity for tablecloths.

Or if posting to Facebook used to get you sales but no matter how much you post lately, you can’t get anyone to like your posts, let alone click on them…let go of Facebook marketing! Try something new. Learn the ins and outs of Instagram, try blogging, and start getting people signed up for your newsletter (check out: HOW TO START A NEWSLETTER FOR FREE…AND IN 10 MINUTES)

We can never be too attached to our business ideas or stay stagnant. We have to take our egos out of it and be willing to do what’s best for our customers and our company. There will always be someone on your heels, trends will change, and new techniques will arise. Keep moving, improving, and adapting.

 

2) LACK OF BRANDING

A business without a brand has the feeling of a side business; one that hasn’t been operating very long and one that isn’t too serious.

How comfortable would you feel buying from a business with an owner you felt didn’t have both feet in, might not know what they’re doing, and could shut down at any time?

Handmade businesses often are side ventures. But they don’t have to appear that way.

Branding gives your business credibility and makes shoppers feel a sense of security and that they’re becoming a part of something unique.

What if Burt’s Bees didn’t have the story of Burt selling honey on the side of the road? What if they sold lip balm using beeswax but other products used harsh chemicals and they tested on animals? What if they didn’t carry the honeybee yellow into all their packaging and graphics, their photos didn’t have a natural vibe to them or their models had caked-on makeup and stiff hairstyles?

Their backstory changes as the company grows, and unfortunately, Burt is no longer a part of the company and it’s been bought by Clorox (which has quite the opposite branding). But the public perception of Burt’s Bees is that it’s a nature-focused brand.

Branding can add professionalism and help your business stand out, even when you’re selling a product hundreds of other businesses are selling.

 

3) NO USP (unique selling position)

Ask yourself this: if you found 2 businesses selling identical products, which one would you choose to buy from? Probably the one with the lower price. You’ll never keep a handmade business going by competing on price so you need a different tactic: offer something different.

Create a unique angle for your business.

People fall in love with handmade items because they’re unique and reflect the maker’s personality. And sometimes that unique experience comes more from the branding and less from the product.

Let’s go back to Burt’s Bees for a minute.

Lip balms using beeswax and bath & body products using natural ingredients is nothing new or really all that unique anymore. It’s Burt’s Bees’ branding that made the company a success and helped them sell millions of products. Not a ground-breaking formula.

You don’t have to invent a product no one has ever thought of or offer something completely different than any other business.

Your unique selling position can come from your unique perspective, which has to be built into your brand.

USP (unique selling position) is just one of the important lessons covered in my free 5-day challenge: BEAT LAST YEAR’S SALES. You can sign up for the FREE email challenge below:

4) IT’S TREATED LIKE A HOBBY

If selling crafts is a hobby for you, that’s great. But if you do in fact want it to be a business, you need to treat it as such.

Most people fall into their handmade businesses, which is why they don’t take the steps they would if they were opening a restaurant or brick and mortar store. You make something as a gift, your friends tell you to start selling them, you sign up for your first craft show, and go from there.

It’s great to get excited and take action but be sure you take the time to write up a business plan, register your business, get the proper permits, draft a partnership agreement, set budgets, etc.

Need help in that area? Check out:

• LAWS FOR SELLING HANDMADE
• THE SUCCESS PLANNER

Not only does this get you organized and set up for success, but it also forces you to be committed. When you invest the time and money it takes to get properly set up, you’re less likely to throw in the towel on a whim.

 

5) NO FOLLOW-UP

You can’t forget about customers after a sale.

Make your customers feel like it’s more than just a sale and it’s more than just a product they’re getting. Show them why it’s so much better and more fulfilling to buy from a handmade business owner than it is to buy from a big chain.

Follow up to ensure they’re happy with their purchase and actually using the item. This can all be automated and doesn’t have to feel intrusive or bothersome to your customers. It’s all covered in HOW TO SELL BEYOND FRIENDS & FAMILY.

Make use of your newsletter and keep customers in the loop of new products or promotions they might want to take advantage of. Check out:

• HOW TO START A NEWSLETTER FOR YOUR HANDMADE BUSINESS
• 365+ NEWSLETTER IDEAS FOR YOUR HANDMADE BUSINESS
• WHAT TO SEND TO YOUR NEWSLETTER LIST TO MAKE A SALE TODAY

Your products should also be planned with the idea of repeat customers and selling more than one item per transaction. Check out:

• ADD-ON PRODUCT IDEAS
• ENTRY-LEVEL PRODUCT IDEAS
• UP-SELL PRODUCT IDEAS
• DOWN-SELL PRODUCT IDEAS

 

6) TRYING TO BE EVERYTHING TO EVERYONE

I started my handmade business with the mentality of: the more products I have at my craft show table, the more people I’ll attract, the more choice they have, and the more likely they are to find something to buy.

It sounds good…on paper. But let’s imagine this theory applied to any other product or service industry that’s typically a one-person show.

Do you think a singer would sell more CD’s if there were 12 songs on the album and each song was a different genre? I’d have to say no. How good could one person be at writing and singing country songs, pop songs, punk songs, etc.? Not to mention, they wouldn’t really give the impression of a singer who has a strong identity and is being true to their style. They would seem as though they’re trying to make a quick buck.

What if you came across a repair person who claimed they could repair your refrigerator, car, and computer? Would you have complete faith that they could actually fix everything properly or would you feel more comfortable hiring a refrigerator repairman to fix your fridge and a mechanic for your car?

Find the people you want to serve and choose a niche that appeals to them. Get comfortable with the idea that you can’t please everyone and everyone will not be your customer. Even the biggest companies in the world don’t try to carry products for everyone.

 

7) HAPHAZARDLY CREATING PRODUCTS

If you want your products to sell with purpose, you must design them with a purpose. How will people use your products together? Why will people who already own one of your products want to buy again from your new collection? How will each product in a collection work together to create a vibe, tell a story, serve a purpose, etc.?

Plan product collections. Choose the months you want to push sales, design products based on the month, and plan product launches along with a marketing campaign.

 

8) IGNORING NUMBERS

Math. Not my favorite subject but it’s extremely important when running a business.

When I made a new product I would often compare it to my other products and set a price based on whether it was a bigger or smaller size and what I thought people would think was a reasonable price.

Big mistake.

I started getting more strategic with my pricing when I landed my first wholesale account (selling my items for 50% of the retail price) and realized I was barely profiting.

I knew I wanted to grow the wholesale side of my business and get my bags into multiple retailers but I also knew I couldn’t run a successful business with measly profits.

It took even more time for me to realize there were many costs I wasn’t accounting for or covering. I didn’t really put a value on my time, think about how much I wanted to get paid per hour, or what my profits needed to be for me to reach my dream goal of working on my handmade business full time.

I couldn’t just raise my prices to boost my profits and earn the hourly wage I wanted. I’d be pricing my products out of the market. I had to find ways to buy materials at wholesale prices, reduce my production time, and be selective of what I spent my time on.

Sell at a craft show I received an invitation to? It would normally be an immediate “yes!” and feeling flattered I was asked. Eventually, I started researching and making sure the crowd the event attracted was the same crowd that would be interested in my products and that the organizer had a good marketing plan in place.

Even if numbers aren’t a strength of yours, don’t ignore them. Know exactly what’s being put into your business and what you’re getting out of it.

THE SUCCESS PLANNER will help you get your business organized, understand the numbers, and make a plan to reach your financial goals.

 

9) RELYING ON SOCIAL MEDIA FOR MARKETING

Growing your following, increasing likes, posting more, etc. It can be gratifying to post a photo of your new product, get a bunch of likes, a few comments, and maybe even see your follower total grow. But is any of it translating into sales?

Social media can turn into a bit of a like-for-like playground. Other accounts like or follow your account in hopes of being noticed and getting a like or a follow back. Not great for sales.

It can also be an easy way to support someone, without having to spend money. How many friends, family, and followers like your photos vs. buy your products? A social media “like” is a nice ego boost but it doesn’t pay the bills.

Social media has some of the lowest conversion rates when it comes to turning lookie-loos into actual customers. Email marketing has a much better conversion rate (Check out HOW TO START, SEND & GROW A SUCCESSFUL NEWSLETTER). As does organic traffic from search engines like Google.

That means, instead of spending hours posting to Facebook or tweeting on Twitter, your time would be better spent writing blog articles that boost your ranking in search engines, encouraging people to sign up for your newsletter and sending quality newsletters each month.

 

10) LACK OF DIRECTION & PURPOSE

It’s easy, once you get caught up in the day-to-day operations of running a business, to stop setting goals.

If you’re feeling bored in business, think about what would excite you and ignite some passion.

In the beginning, attending your first craft show and bringing home a full cashbox puts you on cloud nine. Once you settle into that phase, what’s the next step that will give you that “I can’t believe it!” feeling? Maybe getting into boutiques, expanding outside the province/state, being featured in your favourite magazine, or even getting into a major retailer.

Money is an important aspect of every business, but having a purpose, aside from making money, will set your business apart and keep you motivated.

Instead of thinking about what you should make for an upcoming craft show or to update your shop, think about who your customer is, how you want to impact them, and what they would like to see.

Where do you imagine your customer wearing, using, etc. your products and how do you want them to feel? Let “making your customers happy” or “improving their lives” or “helping them solve a problem” be the focus and purpose behind each product, rather than pumping out stock to make a buck.

If you’ve reached your capacity and no longer have goals to expand, what about branching into a different area? Adding new products to your line, working with new materials, or even partnering with another business could be lofty aspirations.

Dream big and be realistic about where you want to be in 1 or 2 years. If your goals don’t excite you, set new ones.

Continue to challenge yourself in your craft each day. Take new classes, learn new techniques, make new products, and meet new people. Making the same products and going to the same craft shows becomes safe, easy, and comfortable but that’s when we tend to get bored.

It’s the reason people get sick of any job; they feel stagnant. They’re not striving towards a new promotion, achievement, or goal, and day-to-day tasks become mundane.

 

At the end of the day, we all want to be happy. And when we really think about what makes us happy, they’re the things that excite us. Find ways to stay excited about your business each day to ensure it stands the test of time.

You may also be interested in: 5 Things I Regret Doing as a New Business Owner