Business Budget Tips for Crafters

Running a home business is different than working for an employer. The top reason is because you have to watch your expenses more closely.

When you are paid a salary it is easy to put things on your credit card until your next paycheck comes in. This is not a luxury you will have because your payments between customers will vary.

Some months you may earn more and other months you may earn less. That is why you need to have a budget.

Your income will vary from month to month

Basically when you work for yourself you are an independent contractor. You work on a project by project basis. Another reason to keep your rates high to make up for the slow periods.

Believe me I had to learn this the hard way, now I get paid more than what it will cost me to do each piece so it is easier for me to see a profit right away.

Some of my best clients will pay me on retainer, meaning that I will receive my payment for the month up-front and then I just have to finish the work by a deadline.

Sometimes this works like a charm and other times it puts me under pressure to get things done when I am running short of time.

The best way to earn a income is to find a way to receive residual payments. That way if you are not working you can still make money.

Income - is when you get paid for your services and it is how much you charge for your skills.

Expenses - is what you will spend to finish the project and the cost of art supplies.

Increase the amount you charge per hour so that you can see a profit right away. Tell others about your plans and then follow through.

I will show you other ways to be successful with your business budget with easy to follow tips.

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Calculating Your Rates

When you first start marketing your craft business you will be tempted to do freebies and to lower your rates to get customers.

This is a mistake because you will end up spending to much of your valuable time and money to get the work done.

Some think that it is a smart way to get the word out about your skills by offering it at a discount.

I disagree, I think you should set your rates from day one and stick with them.

If need be increase your rates over time as you get more popular. You are a business person and you need to stand by your talents and get paid for your value.

Finance Formula I use

1. Calculate how much it will cost you to complete the project.
2. List out your expenses
3. Take the total and times it by 3
4. Charge your client 3x's what your expenses will be

For example:

If your hourly rate is $50 dollars and your expenses to complete the project is $80 dollars and it normally takes you 2 hours to complete each order, then your total will be dependent on how many orders you received.

Lets keep it simple and say you received one order.

$50 x 2 = $100 + $80 = $180, (hourly rate times number of hours equals rate of your time plus expenses equals your total cost)

$180 x 3 = $540, (your total cost to complete the project times 3 equals what you will charge the client)

$540 - $180 = $360, (subtract your cost amount from your invoice amount it will equal the profit you make on each order).

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As you can see if you get in the habit of doing this you will have more money in your budget the following month when you have less clients.

Also the expenses will be non-existent once you accumulate a sufficiant amount of art supplies, plus you will want to buy in bulk or wholesale to get a better value on your embellishments.

It is important to note that I made up these figures, in order for you to know how much to charge a client will depend on a few factors.

1. How many orders you receive
(the more orders you get from the same client you can offer a discount rate)

2. Where your client is located
(if they live in a high net worth area you can charge them a little more per project)

3. The time and effort you will need to put into completing the order
(custom orders for special occasions such as weddings, baby showers or graduations could cost more of your time)

Study your competitors, look at what they are charging and see what the market can bear. Even if you out price the market you can offer a higher quality product.

Do You Think Your Rates Are Too Low?

When I first started to offer services to clients one of the things I noticed was that I would find other small business owners who offered the same services I did for 50% less and the quality of their work was much better than mine.

I do good work but I am constantly learning how to improve and make it better, plus I am a newbie in the craft business. These other ladies had decades of experience on me and had some really incredible art work that they did.

For some reason they were afraid to raise their rates because they had built their business on being cheap or discounted. I told one amazing artist that if she would just raise her rates by 10% she would see a significant increase in monthly income and she would not have to market for new clients as often.

I guess everyone has to work in their comfort zone, just do not let that happen to you. Start high and keep increasing until you are able to work with less clients and enjoy your business more.

Photo: pixabay

The end of the month is going to be when you can assess how your doing with your budget. Remember some expenses you can write off on your taxes, such as business lunches or purchases for the office.

You may be able to write off mileage to if you have to drive a lot during the month. Keep a running log of your income and your expenses.

It sounds easier than it really is, sometimes you will forget to write things down or save receipts and it is critical that you document everything.

If you have a client who pays you on retainer, you still need to keep track of your spending.

Even if you do not spend any money on supplies, it is best to write down an estimate of how much it would have cost if you did not already have the items in your storage cabinets.

The reason is because you do not want to cheat yourself out of your income. Remember how the formula works you will have to charge 3 times your time and expenses.

So if you have no expenses give an estimate. Another reason for this is because you will have slow months, and you will be glad you followed my advice.

I have been there and done that and it always comes back to bite you and you end up not making a profit 3 months down the road.

To successfully run your business you need to have a savings account where you can keep your income.

Treat your home-based business seriously and it will pay you well, treat your business like a hobby and it will pay you peanuts.

Photo:pixabay

Once you find out what works keep doing it. Do not make the mistake and thinking there is a bigger and better mouse trap. Believe me it will cause you lots of headache.

Stick with your winning formula and do not allow other people to talk you out of it. You will encounter some people who will try and get you to lower your hourly rate.

Others will try and tell you that you do not have a viable business strategy, and sometimes the people you love most will not support your efforts.

Do not listen or pay attention to any of it. The reason is because this is your sand box and you can play in it anyway you want.

The results you achieve will be based on what you BELIEVE not on what other people say you can accomplish. Does that make sense?

I hope so because I would seriously hate to see you not go after your dreams because the people around you do not UNDERSTAND you or your dreams.

If you find someone who is successful doing what you want to do, learn from them and duplicate their plan of action. Because if it works for them it will work for you to.

Follow the masters and be a good student, it will reward you if you do. One of the tricks I use to save money is that I save all my coins when I go shopping, especially if I use cash. Fill up a jar and after 3 months time cash it in and use if for something in your business.

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