Selling on Consignment

Q: I am concerned with the high consignment rates I have seen around Toronto. What is a fair consignment rate to pay and how can you ensure that your product is being marketed well in the venue? Where do your own merchandising opinions end and where does the store's begin? Help! - Stephanie

A. Many people are surprised to find out that stores keep 40-50% of consignment sales. This seemed outrageous when I was starting out. But now, having run 3 stores over a decade, I know that if I ran a shop strictly on consignment, covering the expenses and trying to make a living off 40%, I'd be sunk.

Take a look back at my pricing column to review the pricing breakdown. In a nutshell, 25% of retail covers the cost (materials and labour), 25% covers the work of getting it into a shop and other overhead, and 50% of retail goes to the retailer for all their work and expenses. If your pricing formulas are right, you should be able to make a 60/40 or 50/50 split work just fine, at least as a way of starting your business, getting your product out there and building some brand recognition in the public's eye.

(I've heard rumours that some stores in Toronto are offering less than 50% to designers, which I think is an arrangement just not worth pursuing.)

Store owners need to pay the rent every single month, whether the city is in a deep freeze, having huge snowstorms or heat waves. They have other expenses such as repairs, staffing, hydro and property taxes. Then there's the 24/7 worry in the back of their minds. I've had about 10 middle of the night phone calls because the alarm has gone off at my shops. Only 2 of these were false alarms. 8 times I flew down to the store at 3 am to find a broken window which cost between $400-600 to fix, and a wasted day the next day as I tried to catch up on sleep.

As well, successful store owners put in endless work staying in touch with their customers, promoting the shop, re-merchandising and working on window displays as well as totally unfun tasks like mopping up flooded basements and calling a repairman AGAIN for a broken air conditioner! My husband always teases me that I'm going to "sit around at the store all day" because he knows I almost never sit down! If I'm there, I'm folding, ironing, helping customers, making sale signs, marking down, changing mannequins and generally in constant motion on my feet.

All this is to shed a bit of insight and show that running a shop is a huge amount of work, risk and expense.

When I did consignment in the early years of my business, I did a 50/50 split with most of the stores. I felt it was worth the extra percentage to know the shop owner was motivated to sell my stuff, and helped the relationship stay successful over time. I had one creative relationship with a shop, where it was a 50/50 split most of the time, 60/40 when we agreed to mark things down, but as well, I worked in the shop for free on Saturdays in exchange for 100% of the sales of my product on that day. Some days I ended up working for free, but sometimes I sold 2 or 3 sweaters or more! The best part of this arrangement was giving me a home base to meet my customers on a regular basis and build up my own clientele, while helping to direct that clientele to her store. I was able to tell people to come in on Saturday for a custom order fitting, and just generally promote my line and her store all in one go. The relationship thrived because we both benefited so well.

Lately, when I think about what makes a business work, the word "relationships" keeps popping up. Every time you deal with another person, you start a relationship, whether it's a customer, a supplier, an employee, contractor or store owner. A business is a series of systems, that once set up, continue to function to serve the business's needs, and good relationships are the best systems out there!

Just like personal relationships, when one party's needs aren't being met, the relationship starts to break down. Similarly, your relationship with a store has to answer both your needs equally. To keep that system working, you need to put effort into finding out what your store owner needs to sell your stuff. Just listening is a huge part of finding out what you have that can help them. What you probably don't have to offer (yet) is a super sell-able product with a following and brand recognition.

We know they need money, so consider a 50/50 partnership. But they may find fresh stock sells better, or signs that you make up in your own style make their store look cool and help communicate product info about your stuff to the customer, or a sell-off of your old merchandise (at a different split 60/40 or 70/30 depending on the price) brings people in and helps pay the rent in sleepy January. A special display you build with a gorgeous mirror that helps sell your stuff and make their store beautiful may be welcome. They may want to host a trunk show or fashion show for you, or be into you taking on the work of an amazing window display ( heavily featuring your stuff, of course.) They may love the idea of you publishing a newsletter for them (again, peppered with features about your product!) to give out at their store or email to their customer base. You could also give out the newsletter at craft shows you do, bringing in a whole new clientele to shop at their shop, and buy your stuff there as well.

It's important to be creative to make the relationship work! While there are standard ways a consignment arrangement works, it really is much more than that. It's a great opportunity to start a long term relationship with a store owner that will answer both your needs in ways you didn't see at the beginning.

You may think, "Ugh! I don't want to have to do all that!" but this isn't just more work for you! It's a fabulous opportunity to work on and grow your business! All relationships take time, effort and nurturing, but after a while you start to see the opportunities present themselves. For example, by stopping by your stores often, and staying in touch, you may notice the window display hasn't been changed in a while. By chatting with the owner, you find she doesn't have the time, and feels she doesn't have the knack for putting together a good display. The next time you come by, you could present a sketch, and ask if she'd let you try to make a great eye-catching display.

Once you understand the concept of getting successful systems started for your business, you want to multiply them. If you can bring in $200/month in consignment sales in one store, you want to find 10, then 20 to make the same systems work at. Then a new system comes into play; rotating your stock. It makes sense to spend a day contacting your stores to see what new stuff they need, then a day running around town to exchange your merchandise. Doing this every month or two is a great way to maintain the relationship, which is a big piece of the puzzle of making this work.

Like many things in life, you get out what you put in. Because I run the shops as collectives, I'm always concerned about keeping the members happy. A couple of years ago, two of our kids designers left our shop to open their own. Since then, I focused a lot of energy on the kids section, creating new products of my own to keep the one remaining kids' designer in a "nice neighborhood" and make the section attractive to customers. As it turned out, over time my own sales of kids' stuff quadrupled! And when this designer decided to move on anyway, I had such a strong, focused kids' line, I was able to take over the rest of the space myself. I really had put the effort in to try to have something to offer for her, and yet, it came back in big rewards for myself.

These good relationships mean a lot more than selling your stuff well at any given shop. You develop a network of people you can ask advice of, get help from on one project or another and generally rely on for a bit of camaraderie when times seem tough.

So keep an open mind and open ears to hear where they may be an opportunity to offer something. Be prepared to dig in and work even more, and take opportunities as they arise. You'll find when you look back over time, you'll be amazed at the advantages of having a strong network of good relationships, and at all you've accomplished.

Thanks for the question, Stephanie! Enjoy the book you won, and good luck with the growth of your business!

:::::::::::::::::::

Start Your Own Jewellery Business is available for purchase at www.sailorgirl.com, where Catherine Winter is running a special for the month of January regular price is $29.95 - for this month the book is available for $25 including tax and shipping.

It is also available at www.beadfx.com (in their book section) for $29.95.

Getting Press!

Q. How do you write a (good) press release? And how do you go about getting press? Plus, have you found that it helps your sales? - Cathy Peng

A. Getting press has been one of the biggest keys to my staying in business for 14 years! I've had great articles and exposure in the press, and it's almost all because I asked for it. You have to make it easy for press people to feature your product and write about you by sending a good press release. A press release is just a way of contacting the media and telling them about you and your product. It can take almost any form: an email, a package, a DVD, or a singing telegram, but there are some points to keep in mind.

Here's an example of one I sent Breakfast Television to promote my Learn to Knit DVD (see below). On the outside of the envelope I printed a big, cute picture of me with knitting needles and a big talking bubble saying "I'll Teach Kevin Frankish how to knit". I enclosed a letter, saying who I was, what I was promoting, and generally tried to give the impression that it would make a cute segment to try to teach Kevin Frankish how to knit. It worked, and they asked me to be on and we talked about knitting and my DVD and goofed around a bit, and it was great exposure for my business.

The first step is to compile a press list. Find all the places products like yours might be featured, and get all the contact info. Think of all the angles you can approach it from. For example you make funky stuffed animals, you want them featured in gift guides and places like that. But are you also a stay-at-home mom turned entrepreneur juggling a home-based business and family? There's lots of potential for that angle too.

A key factor is consistency. Plan out a year's worth of press releases, starting with an introduction to your product and what you do. Then, plan to send out something when you introduce a new product or style. For example, Valentine's themed jewellery, Mother's Day gifts, new spring dresses or fall sweaters. Keep in mind the seasons and events that you can tap into, and realize that newspapers are much more immediate, but magazines work months in advance. Cookie magazine shot some of my kids stuff in January for the May issue. Make sure you don't miss deadlines!

Remember, every press release doesn't result in something, but keeping them informed means they'll be familiar with what you do and include you when the right opening comes up. For example, I had pictures of myself on some press releases I had sent out, and I was contacted to be a red-head interviewed for an article on how popular red hair is! And I was asked to knit mini-sweaters to decorate a Christmas tree, and be a "celebrity" tree decorator in a magazine one year. So those were spin-offs of promoting my main product line and myself as a designer.

Structuring the release like an article is a good way to show how well the info would translate, and makes it easy for them to see what they could do with it. For example, photoshop up an imitation of their typical gift guide layout featuring your stuff with catchy informative captions about your products. Give them as much as they can use as possible. Sometimes they'll want to use your pictures, and I've had phrases I've used in my release lifted right out and printed.

Keep it simple, not overwhelming them with too much reading or too many different different angles in one release. They get loads of emails and packages, all competing to be the one featured, so try to think of something new that'll catch their attention. I've sent packages with Barbie dolls in mini versions of my clothes, made handmade keychains, pins or fridge magnets and decorated the outsides of the envelopes. Yes, it takes time, but compared to the cost of paid advertising, it's time well spent. I always try to make it personal, writing the person's name on the envelope by hand, and customizing the cover letter inside. I know how unresponsive I am when I receive obvious bulk mail, but when someone contacts me specifically and personally, I'm much more likely to pay attention. And I make sure to triple check the spelling of the person's name!

While I'm all for gimmicks, some can be annoying or just silly. Stuffing the envelope with glitter or confetti would have impact when they open it, and they'd remember you for sure, every time they get out the vacuum to try to clean up the mess in their office that you caused! Think it through. Nobody wants junk, and it may actually work against you. Anything included should support the main message and have a reason for being there.

Once you have something together, ask a friend to look it over to see if it makes sense and is easy to read. Sometimes a friend will help you see your business and your product in a way that you can't and help you think of key points that you want to stress to give them something interesting to write about. Are all your items one-of-a-kind? Made from recycled materials? Think of what you can play up about yourself too. Are you self-taught? A truck driver turned fashion designer? You've been sewing since you were 2 years old? Now is the time you want to brag a bit and sound much more interesting that you may think of yourself as, and often a friend can help you see that.

Having your stuff featured in the press is one of the best ways to build your business and is an inexpensive way of getting the word out there about your work. So get started planning your media campaign today!

Legal Requirements for Your New Business

Q. This question has to do with all the technical side of selling textile goods?! I was just asked the other day if i had a CA number and I had no idea what it was! So after doing a little online research I found that to sell textiles you need a CA number and specific details on your labels... etc. So my question is at what point in a small crafty business do you think all of that stuff really comes into play?!

This might totally be a boring question for the blog... It's about the boring stuff on the business side of it all, but i just don't how badly I could get burned if i don't address this stuff early on in my business.

Thanks!

Avril Loreti
www.avrilloreti.com
www.avrilloreti.etsy.com

A. Good question Avril, and not boring! There are a lot of technicalities that can intimidate the average crafty gal out of trying to start her business! Although I don't do everything perfectly all the time myself, I do try, and I advise people who are starting out to try to get things organized when the business is small so it gets off on the right track.

For starters, the most important one is vendor's permit. You must have this to sell goods, even at craft shows. Some craft shows require proof of it, and I have heard stories of PST spies asking to see your vendor's permit, or worse, posing as a customer asking if they pay cash can they get a 'no tax' deal. Then they come back and audit you for not charging the proper tax! Yikes! Vendors permits are easy to get, and free! Check out their site. It's very straightforward and will help save you money. Some wholesale suppliers won't sell to you unless you have a vendor's permit, and by showing it and saying that it's a business purchase, you don't pay PST. (This applies to materials you'll resell, like fabric but not stuff you'll use yourself, like a sewing machine.)

You might as well register your business early on. If you are conducting business under your own name only (Jane Smith, but not Jane Smith Designs) you don't need to, but if you're serious about starting a real business, registering a name is a good idea. It costs $60 and you can find tons of info here about name searches (to see if anyone has that name already) and how to register. Once you've registered, you can set up a bank account in your business name. It's a great step for starting to keep your business finances separate from personal money, and means you can accept cheques written to your business name.

As for the CA number, I was under the impression as well that you do need one, but going to their website, I notice that maybe that's not the case. I'll have to admit I'm not an expert on this one, and I find their website doesn't do a great job of explaining what it's all about, but I'll give you my understanding of it. I think the purpose of a CA number is to tie someone to a garment (or textile product) being sold in Canada. This is to ensure that if I've labelled a sweater I made as 100% silk, but it's actually polyester, they know who to go after. Now, on their website, question 4 of the FAQ's seems to state that in lieu of a CA number someone can label with the full name and address of the dealer. I'm guessing that dealers typically opt for the CA number because it's shorter than printing the full name and address? But I'm not really sure. You can apply online, it costs $100 and takes a few days, but do you need it? For the past 10 years I thought so, and now it looks like no, as long as you still comply with the labelling requirements.

Depending on what type of product you're making, there may be specific regulations for it. I was totally surprised when I made up a few knitted pillows to try out in my booth at the One-of-a-Kind show and someone who polices that kind of thing showed up in my booth asking to see the labelling! (I had used pre-made pillow forms, so I was OK since they came with all the proper labels.) I know children's sleepwear has specific rules it must conform to. I'm sure any food items are subject to some regulations, and so on. Make sure you do the research starting out, so you don't find you just printed up 1000 labels that don't include all the info you need.

I'd say, in general, you won't go to jail if you sell an improperly labelled teddy bear at a craft show. I know someone who was found without a CA number, and she was just told to register for one. And that was the end of it. I suspect that any threats of big fines etc. in most of this kind of stuff are to prevent people from fraudulently selling misleadingly labelled products, and it would be very unlikely that it would be an anything other than a pain to be found to be doing something incorrectly when you are obviously a tiny business starting out. That said, why not just do it correctly from the beginning, as best as you can anyway?

One technicality that's super important from the beginning is getting your accounting system in order. Very briefly, you can claim all your business expenses against your income, so make sure you save all your receipts from all purchases for your business. You may want to get help when it comes time to do your taxes, as things are accounted for differently. Computer equipment, vehicle expenses, software, all your materials and a portion of your rent are all tax deductible, but in different ways. An accountant can help you save a lot on your taxes, especially when you're absorbing all those start-up expenses. In short, if you made $20,000 at your part-time job and spent $10,000 on business expenses, your taxable income goes down to $10,000.

For some people, they may read this and think "Of course!" but many people I know are so afraid of figuring this out, they just ignore it and don't realize how much money goes down the drain. Even myself, years into my business, I'd find myself not bothering with small expenses. I'd pick up garbage bags and Windex for my shop for six bucks, and then later that day take a taxi home because I was hauling too much merchandise to take my bike. While I was busy collecting up my receipts for yarn and fabric, I didn't think of these 'few dollars here and there' kind of expenses as worth tracking. Then I started to realize that just $8 a day comes to close to $3000 a year I should not be paying tax on. With that savings, I could buy a few pairs of Fluevogs full price each year! I also fell into a trap of thinking that if it was fun for me, it wasn't really a business expense. But my whole business is fun for me, so if I buy a magazine with "Top Spring Trends" on the cover, it's research for my business. If I go to the Clothing Show, my ticket is a business expense. Not tracking your expenses is throwing money away, so get in the habit early.

So all in all, my message is get your business started off right and keep it organized as you grow. It's so much easier, for example, if your first PST remittance is just a small amount, and you get used to how it works and get in the habit of getting it in on time. Then as your business grows and all the amounts of money grow, the whole thing will be just part of what you do, and not nearly as scary! It pays respect to your business to set it up right.

Best of luck with your business and thanks for the question!

Note: Guidance provided in this column is just that, guidance, but not legal advice. Please consult a legal adviser or the department responsible for licensing or registration for the final word on any of the topics discussed above.

Top tips on Applying for Your Dream Job

I recently posted a job listing, and got a flurry of applications. I was surprised by how many of them were very "by the books" applications, like you might be taught in school. For a creative job like this, I just skipped over them, and when one applicant asked for follow-up feedback on her application, it occurred to me this might be a good topic for the Crafty Business column.

If you dream of starting your own line of something one day, getting a job in the industry can be the best starting point. You gain so much knowledge about running a small business: how to produce things efficiently, marketing, financial planning and you gain valuable contacts. My assistant Jessie is launching her own jewellery line, Sugar Rush and her involvement in Fresh Baked Goods and Fresh Collective is the best small business boot camp ever!

Here are my top tips on applying for a creative job:

1) This is a 'by the books' tip, but spell-check, and proofread! Typos and grammatical errors look sloppy, and in a fashion job, it makes me wonder if you'll do sloppy work like not noticing threads that need clipping, or not be able to communicate clearly to a customer. I was surprised by how many applicants didn't do this, while mentioning attention to detail as one of their strengths!

2) Maybe it's just me, but I don't like opening attachments. As well, some of them I just couldn't open. So, if the email cover letter didn't get my attention, I probably won't bother opening the resume and waiting while my computer checks for viruses and all that. I'd prefer to see the resume cut and pasted into the body of the email. You have to realize a creative, fun job like this gets lots of responses quickly (I got over 20 in the 8 hours that my ad was up!) so I don't want to waste a bunch of time reading each one. You have to catch the employers attention quickly!

3) Read the ad carefully. I asked for a creative response including pictures of things that people had made and telling us a bit about themselves. So many included none of these things, and although they may have had perfectly applicable experience, I felt like they were not following instructions already! How could I expect them to understand what I'm looking for from them on a day to day basis on the job? Others stated that they could only send one picture through craigslist, but I included my email address and website in the ad, so a careful reading and a bit of problem solving would have helped there.

4) I look for a certain energy and spunk. I have found that the best employees are the ones who are excited about the job and thrilled to be getting their start in fashion, so enthusiasm about the whole thing works on me. Since we're a creative and slightly wacky business, I respond to that type of tone in the application. Plus, part of the job is retail, so I look for a personality that will fit in to our style. I need a person who is confident when talking to customers, and sends out the right energy. On top of all that, I want someone who will be fun to spend the day with and who will fit into our workplace where we discuss pressing issues such as the latest episode of America's Next Top Model and start business meetings with the phrase, "You know what would be cute...."

*****Even in a plain email you can find a way to show some spunk and personality********

5) One time I hired someone who had impressed me by repeating and addressing everything I had mentioned in the ad. Even things that she didn't have she addressed, like "although I don't have fashion retail experience, I feel confident that my experience in waitressing has taught me to juggle a lot of customer requests at once without getting stressed, and think on my feet when need be. I loved showing my customers a good time and really realized that I love working with people! It's fun to put together cute outfits for myself, and am sure I would be great at helping customers find clothes and accessories that suit them. I look forward to learning more about fashion sales and learning the skills needed to blah blah....." That kind of thing. It made me feel that she understood what I was looking for and was willing to learn, work hard and grow with the business.

6) Any employer is going to love you showing knowledge about the company. Although it takes extra time to do this for each application, you'd be wise to check the website and then demonstrate some knowledge about the business. As well, match the tone of your application to the type of business. If you apply to Betsy Johnson, for example, a pink resume with curly writing and an opening sentence like "I started in fashion making dresses for my Barbie's and it's always been my dream to work at Betsy Johnson's!!!!" You need to show your personality and stand out from the crowd. And an application to Calvin Klein would be totally different, of course.

I'm always surprised at how many people apply with their totally standard resume, which states their career goals as "Using my skills to further the objectives of the company" or other such nonsense cliches. It makes me feel they'd be just as happy to work with me, or with Office Depot. They just want a job. Maybe that's OK for some jobs, but if you really want a fun, creative job, you just have to offer more than a live human!

7) Many applicants stated that they had co-op experience at various local businesses, which is great. Real work experience is better than any education in my books! Make the most of your co-op placement! So many students just do what they're asked and do the job, but this is your big "in" in a new industry! What are you interested in learning there? Step up and ask for more responsibility! The more initiative you show, the more likely your placement might turn into a job. And even if you don't get hired on there, you can take your successes with you. I had a lot of applicants say something like, "I worked at a co-op placement at Boutique X, and learned some sewing there."

I'd rather see something like this, "At my co-op placement at Boutique X, I started learning to sew. Although I had never sewed before, I found I really loved it, and practised at home. By the end of the placement, I had made a skirt and a top for myself and still continue working on learning more complicated techniques. I also approached the owner of the shop with some sketches and ideas for a window display. I was very excited that she put me in charge of three window displays, and I had a lot of fun planning and setting up the windows. I was proud that several customers commented that they liked the windows and bought the outfits right off the mannequins! I really enjoyed my co-op placement, and learned a lot, and look forward to being able to apply my skills to another creative fashion job." This tells me a lot more about what type of applicant I'm getting than just a standard resume listing the facts.

So, what did the successful applicant send in her email? I felt her tone got her personality across, and the skills were there to back it up. She had retail experience, good sewing skills, eagerness, and a sense of fashion. Actually, she didn't even send a resume, or have any fashion education other than grade six Home Economics. The pictures were worth a thousand words. Here's her letter:

Hi there!

I just came across your posting on craigslist and I really, truly, think that this is the perfect job for me! Seriously!

First, let me tell you a little bit about myself:

My name is Siân, which is pronounced 'Sharn'. It's Welsh and tends to confuse people so I usually just say that my name rhymes with barn. I'm twenty one years old and am living near High Park with my cat, Wesley Snipes. I love all aspects of the fashion and beauty industry. I actually work part-time as a makeup artist, but love clothing and fashion just as much. Perhaps even more, if you judge my overflowing closet!

I had actually considered a career in fashion design when I was in high school. I wanted to go to design school and then open up my own clothing store on Queen Street. I originally learned how to sew back in my 6th grade home economics class, and my mom has helped out with tips and techniques since then. I used to create my own one-of-a-kind outfits back in high school and made a couple of dresses, including my prom dress, which was this gorgeous bright fucshia ball gown.

I lived in New York last year, which was an amazing experience. While there, I ended up getting a part time job at an Urban Outfitters. It was a crazy, hectic job, but it really helped to develop my fashion and sales skills. I also worked on the merchandising team, and did some shipping/receiving and inventory.

I love putting unique outfits together and turning heads when I'm walking down the street. And it's a personal goal of mine to never wear the exact same outfit twice. My obsession with fashion magazines (my faves including Nylon, Zink, Strut, Lush, Paper, ID, Italian Vogue, etc) keeps me up to date on the latest trends also.

Lastly, I just want to mention that I've been a fan of Fresh Baked Goods and Laura-Jean, Knitting Queen for years. I first discovered your work when I was googling for local Toronto designers. It would be an amazing experience to be part of the team. :)

Sian included some pictures of the dresses she had made and some pictures of makeup work she had done. Overall, I just got a sense of what she was like, and already felt confident that she could represent my business to my customers.

I hope everyone out there finds this advice useful to help them land that first fun job that could end up taking you down the road to your own exciting creative business! Just remember to stand out from the crowd, let your personality shine through, and show that you have the skills, willingness to learn, energy and enthusiasm to offer to back it all up! Good luck!

Your First Hire!

Here's a question from one of our designer/members at Fresh Collective. Nicole from Precious Pink Designs, has been designing jewellery for years, and is now adding a clothing line, which she is also selling at our shop. She's at the point in growing her business where she's ready to hire help.

Q. I have a friend who sews and she'd like to sew for me when I'm ready. Is there a standard industry hourly wage for sewers? Do you know of a fair average?

A. Being ready to hire help is an exciting point to be at in your business, but there is a lot to consider. First, you want to pick the right person. Then you need to figure out how much to pay them and how much they will work, as well as whether they will be a contract worker or employee. You need to decide exactly what their duties will be, whether they will work at your place or their own, and whether you pay by the hour or by the piece.

It sounds like you're talking about a contract labour situation. There are a lot of details to determine whether someone is an employee or a contract worker, but, in short, if your friend were to take home sewing and sew it at home, invoicing you by the piece, this would be a contract situation. Generally, if the person works on your equipment at your place, and is paid by the hour, that is an employee situation. You can find info on the details that define those situations here.

This can be a great way to start out, because you'll only need bits of help here and there. There are downsides to a contract labour situation. One is that your worker may get busy with other work and leave you high and dry just before an important show. You tend to pay more per hour for the work, and often find yourself shipping out the sewing but spending lots of your own time doing mundane jobs like putting on price tags and packing boxes. As well, if you're not careful, you can multiply your mistakes. I recently had 30 skirts sewn, and I had given my sewer the wrong information about the seam allowance. I got back 30 skirts that were two sizes too big! If we had sewn those here in my studio, we would have noticed something was wrong on the first one and saved ourselves a lot of hassle. At the same time, the plusses of contract labour are many! Your worker supplies and repairs her own machine, you get an invoice and pay it (rather than deal with the paperwork and expenses of payroll) and you don't have to keep her working more than you want or need to.

Your friend may be a good match for your job, but I hired friends to help out here and there in my early years, and found it didn't work out great. I didn't know how to go about finding and selecting someone, and friends were just there, needing work and offering to help. It quickly fizzled out though, because their interests were really somewhere else and they just wanted a job (not this job). I did have one good match, however, who was a friend of a friend. She loved doing crafts, and was an actress with a few auditions a week to go on. I was able to offer her the flexibilty to take an afternoon off here and there to audition, or book a job, and she was able to earn a bit of money with a job that was pretty fun, so that worked out for a couple years for both of us. Don't make the mistake of hiring the wrong person just because they're there offering help.

In a contractor situation, pricing is to be determined between the two of you. Often, you give the sewer one sample. After sewing it, they tell you a price, which you can agree to, or negotiate. Sometimes a bulk order can bring down the price, or the style can be simplified. I usually go into it with a price range in mind that I'd be willing to pay based on how fast I can sew it and how much I think I can sell it for. If something took me 20-30 minutes to sew, I'd want to pay around $5-8. I figure a professional sewer is probably going to be faster than me, so they can make a pretty decent hourly rate.

You may feel like you need more of a general assistant, to do a bit of whatever needs doing around your studio. In this case, you'd be taking on an employee, which makes you an employer, with lots of responsibilities. First, you have to set up a payroll account with Revenue Canada. You'll be responsible to make deductions from the employee's paycheques and submit them to the goverment. These deductions are not only for income tax, but also CPP (Canada Pension Plan) and EI (Employment Insurance). You also have to add to the CPP and EI contributions, which will be an extra expense to take into account. Not only all that, you'll have to pay into WSIB (Workplace Safety Insurance Board), which is the insurance fund to protect workers if they are injured on the job. This is a seperate account you have to set up with them, and you pay a percentage of your gross payroll. The percentage you pay is determined by the type of job you offer and how likely injury may occur. (I pay a little over 1%.)

Ok, yes, this is a pain to set up, but it's not rocket science. You can do it yourself or if you have someone helping with your bookkeeping, they may be able to help you set these accounts up. Another option is hiring a payroll service, possibly through your bank. Many artists feel intimidated by the process, and are tempted to just pay cash under the table for part-time help. Not only could this land you in hot water, you miss out on the chance to count it as an expense. Payroll can easily be your biggest single expense, so doing it properly and writing it off will save you a lot of money and headaches in the long run.

I have to mention that I have the dream team of employees. I'm so lucky to have Jessie and Sian putting their all into their work. They are both just a great fit for me, and I love knowing that I have help every day with whatever needs doing. On top of all the obvious reasons employees are great, I just love the company! It can be lonely working away in your studio all day, and I really find having people around keeps me inspired and focussed and gives me someone else to bounce an idea off of, or ask an opinion of.

But hiring employees has problems too. Once someone is depending on you for their living, it can be stressful when money's tight. You really feel responsible to keep them working, and that may mean paying for supplies and making product you don't really need right now. You can really end up in a pickle financially, and may find you need to lay someone off. Cutting someone's hours, or a temporary lay-off means you risk losing your valued employee to another job. I did find myself in this situation once, and the employee had become a friend too, so it was a big crazy cry-fest! In the end she used it as the push she needed to start her own business, and everything worked out great, but at the time I felt just horrible!

When determining how much to pay an employee, honestly, unless you have a super profitable business or are just plain wealthy, start out very low. I usually start a bit above minimum wage. You can always raise it, but you can't ever lower it. When you're paying someone hour after hour, day after day, it can add up quickly, and they depend on their job whether your business is doing well or not. I'd rather start out low and raise as I can, than have to lay people off because my payroll costs are killing my business. One thing to consider is how much you pay yourself for all the hours you put in. I bet it's pretty low, and maybe a wake-up call to what your business can afford.

Don't forget that you have expenses other than the hourly wage. There's that employer's CPP and EI I mentioned before. You also have to pay vacation pay (4%-6%) and holiday pay (you pay them to not work on holidays!) As well, you have to factor in breaks and lunch. For example, if a worker can make one skirt in an hour, she will not be able to make 8 in an 8 hour day. Maybe 7 if you're lucky. So, a $10 an hour wage may actually cost you closer to $13 per actual hour worked. On top of this, there will be a lot of training in the beginning which will cost you your time and money.

For a general assistant, I look for someone inexperienced, but with the right personality. I can train a crafty person to do anything we do in my business, and I mostly want someone who is going to love the job and give it their all. If someone is interested in what they're doing, they're likely to do a good job. At Fresh Baked Goods, there isn't much room for career advancement, at least at this point, but I do offer a great chance for someone to take on a lot of responsibilty, a variety of tasks, offer a lot of input, and learn a lot about having a small business. For someone who wants to own their own shop one day, or design their own line, the job has more value than just the hourly wage.

One final option for extra help is taking on a co-op student. In short, high school students get credits for working for you and learning through "real world experience", and you get free labour. Some have all day placements for one semester, and some are every other day (mornings or afternoons only) for the whole school year. While free labour sounds great, they are very inexperienced and require a lot of training and supervision. I've had some bad experiences (which I later realized I should have nipped in the bud and given them the "real world experience" of being fired from a job they aren't taking seriously!) but I also had some amazing experiences with lovely, sweet kids who work hard and love to learn. Jessie, my main assistant, was originally a co-op student almost a decade ago, and I hired her on after she finished college. Register your workplace with the Toronto District School Board and a teacher will probably give you a call in the fall to see if you'll take on a student.

Well, I hope this is a help to all of you who are thinking about taking those big steps toward growing your business beyond your own self-employment. I found the transition tricky at times, but it's a step that can really get your business growing. New people always bring a fresh perspective and new skills to your business and it's a great feeling to be able to get things done so much more quickly when you don't have to do everything yourself! And good luck, Nicole! I can't wait to see all your new fall stuff on the racks and see it start flying out the door!

Getting through the tough times

Q: I don't know if you can help me because my question is pretty vague, but here goes: I've been making things for years, but about 3 months ago, I decided to try to make it into a business. I signed up for a couple craft shows, approached some stores and now, just three months into the whole thing, I'm feeling defeated and ready to throw in the towel! I knew it was going to be hard, but I've barely sold anything! When or how do I know if this just isn't going to work?

A: Well, if you're defeated and ready to throw in the towel, you're right on track! Just kidding, sort of..... I remember talking to one of the designers who was a member at Fresh Collective once. She had a tee-shirt line, and she had researched and worked and really built a nice little business in just a few months. She was really down about slow sales and said "I knew it would be hard, but I didn't expect this!" I was flabbergasted! Here was a person who had taken an idea and made it real in such a short time. From my perspective, she had accomplished a lot! Yes, the sales were the next obstacle, but sometimes we get so impatient, we expect the world and we expect it NOW!

I laughed and replied, "Well what exactly did you think would be hard? Counting all the money you were making?!? Carrying it all to the bank??!" I find myself constantly learning from the newer designers I work with, and this incident made me realize that probably the single hardest thing we face in our businesses is mood management. A small business is very mood driven: our excitement at how great and fun it will be fuels so much, but a rejection, defeat or problem can get blown up into a symbol of why this will never, ever work and we were fools to try.

To make your business work, you need to get your mood back on track and get your excitement level back up.

First, you should address practical concerns. Is your life set up to sustain you working on your business? I think part-time work is a must (unless you're rich) to keep money coming in and your stress levels down. I always waitressed, as it provided a good amount of money in my pocket right away, and I didn't need to care about it. When my shift was done, I was done. I also found it was a good way to promote my stuff! I wore the jewellery and clothing I made, and could tell customers and co-workers about my new business!

As well, set some realistic goals for your business. Realistic is key! Think long term, then work backwards. For example, if your goal is to sell $52,000 worth of your product in 2009, you can work backwards and see that you would need to sell $1000 each and every week. That's $200 each day, 5 days a week. If that's a reasonable goal for you, great! Now every day that you work on your business, you know that every move you make should be taking you closer to that goal. Whatever it is, it helps to make your goal something you can control. Rather than "getting into more stores" try thinking about "approaching a new store a week".

Writing your goals down, and posting them where you work helps keep them at the top of your priority list. The day to day of everything often takes over, and often the goals we have involve the parts of the business we don't want to do: sales, bookkeeping, promotion and administrative stuff. Almost no one needs to force themsleves to make more cute stuff!

Get involved with other designers. When all you see is the public face of other businesses, everything looks like it comes easy to them. But every single business has its struggles, obstacles and failures. Being part of a community of people offers you so much: support, different opinions, a new perspective, learning from another's experience, a shoulder to cry on, and people to celebrate your successes with you. I see relationships forming among the designers at my 2 collective shops, and designers are helping each other out in tons of different ways including helping with computer stuff and websites, sharing expenses (like a photographer), sharing booth costs at a show, offering their expertise and knowledge with certain techniques and materials and more. But even more important, I believe, is the camaraderie and friendship. So talk to other designers at craft shows, make friends in online forums (like Etsy), and if you are interested in joining one of our shops, we are always looking for new members!

As well as other designers, it's important to get family and friends on board. Send out emails to them letting them know what shows you're doing or announcing new products you've added to your website. You'll be amazed at the support you can get when people see that you're pursuing your dream. Many times, family and friends will be your first customers, and then they tell two friends and so on. For them too, it's fun to bring a friend by your booth at a show and show off their cool friend (You!) who makes things! It'll be great to get the business support, with them helping you spread the word. And the emotional support and respect for what you're doing is one step toward getting things set up to get your enthusiasm back.

That said, if you have any non-supporters (family members who complain that you should just get a real job) who are wearing you down, it can help to address the situation and let them know how important it is for you to at least try this. Sometimes people get panicky, thinking they may have to support you if you can't support yourself for a while, but maybe you can reassure them by talking about the part-time job that will pay your share of the bills, and letting them know that their emotional support is really important to you. I think loved ones can become non-supporters without realizing it because of their own fears about taking risks and following their dreams. If they feel trapped, it can be hard to encourage someone else to spread their wings. Or they can't stand to encourage you to try only to see your heart break if you fail. For you, having understanding about their attitudes toward what you are doing can help you build up a tougher skin to their comments, if you can't get them on board.

Realizing that mood management is a job in itself sometimes can take the pressure off. The way moods work on us is by tricking us into believing them. "I feel like a loser, so I must be a loser," is the message we sometimes feed ourselves. But once you realize that you're not alone, and everyone faces these struggles, it becomes just another part of the business to work on.

I used to fall into the trap of working harder and harder when things weren't going well. My mom convinced me, during one tearful phone call, that the best business move I could make would be taking a break. "You've got to take care of you best business asset-- yourself!" she wisely said. Now I'm a little better at keeping things in perspective, and not just working myself into another meltdown.

There is no formula to tell whether you're succeeding, or whether you should keep trying or pack it in. There are, however, a lot of factors to weigh to see if you really want to continue. Are you enjoying the journey to building your business? If not, could you get to enjoying the journey more? Are you able to hold your life together while doing this? Is this really what you want, or after exploring it, are you realizing that maybe a job that you can rely on will make your hobby something you can enjoy again? And did you plow into starting a business with lofty expectations of being profitable in your first 6 months, when maybe you now think it will take two years or more? If you can keep moving forward with your business and enjoy it along the way, while keeping your life together financially through part-time work or other means, that may be success for you for now, even if the progress is slower than you hoped and peppered with rejections. That's pretty much all you can hope for really, at least in the early years.

There's no shame in re-evaluating your goals, even if you see that all that's involved in having a business isn't what you want after all. But if you do want it, there's no shortage of ways to work on building your business! So get your mood back on track, and then start planning some other goals. Buy some books on sales, promotion and marketing and get to work. Ask your friends, family and new-found designer friends for some feedback on every aspect of your business: your product range, pricing, materials, display, logo, packaging, website and more. Slowly but surely, chugging along on making things better pays off. Sometimes it seems like it's taking forever, and sometimes you need a break, but I can say looking back over my 14+ years in business and say that every disaster made me stronger, more able to take risks, and more able to recover from the next disaster. I love having my own business, and wouldn't change it in for all the regular paycheques, benefits and mat leave in the world!

Funding your Start Up

How did you get he capital to start up your business?
Have you received and grants or loans and do you have any advice on how to smartly go about doing this? – Serah-Marie

Good question!

For me, I started my business very, very small. I borrowed $600 from my roommate for a used knitting machine (and this was after I had sold my first sweaters made on a borrowed machine) and set up in my living room. I wasn't even sure I was starting a business, except that I thought it might be possible. So in the very beginning, any financial risks I took were small enough that I could waitress my way out of debt, if need be. I grew by investing back heavily, selling two sweaters and using the money to make 4 more.

I kept a part-time job during the early months of my business, and gradually went down to 3 shifts a week, then 2, then thought, "Ok I'll give it 6 months and see if I can make this business work." And I never went back!

I was young, and my personal expenses were very low. I had no family to support, and worked like crazy on my business. So this approach wouldn't be right for everyone, but it worked for me.

Looking back, I'm very glad I grew slowly. I know now that if I had borrowed tens of thousands to open a store right away, I would have been way in over my head. By making my mistakes small as I went along, I learned and developed my product and my business, and never had any devastating failures.

Over the years, I've had a few expensive expansions. Most of them I financed with my personal credit cards and whatever lines of credit I could get, but always based on my personal credit. I am careful about interest, always trying to get the lowest interest rate, and using my line of credit to pay off my credit card in full each month.

When I opened Fresh Collective in 2003, I learned a lot about financing, in that I got totally overwhelmed! I've always managed to do an expansion in a big burst of energy, then pay off the debt within a year or so, but FC was a way bigger project than any I had taken on. I had big expectations about paying off all the startup costs quickly, and when that wasn't happening I suffered a lot of stress. I eventually took a step back and made some longer term plans about paying it off over several years, with manageable monthly payments and that was a lot more sane.

Although I never got any grants, or business loans (other than on my personal credit), I did get accepted into a version of the SEB program years ago when my business was very young. It's a great government program to help people start businesses. Not only do they provide support in the form of classes and guidance as you set up the business, they provide financial support! Here's a link to one site with info about it http://www.jobskills.org/seb-tn/index.htm.

Thanks for the question. I hope my answer is helpful!

Laura-Jean

Pricing Guidelines

Q. I'm trying to start a clothing line, but can't figure out pricing. It seems if I charge what I think the pieces are worth (labour, materials, overhead) I price my product way out of the market. Is there a standard pricing formula? How do I figure this out? Thank you, Sarah

A. Ah, Sarah, you've hit on the eternal question for so many of us craftspeople and designers! Balancing profitability with a price people will actually pay is one of the biggest challenges facing us all, and it's something you'll be working on for the entire life of your business. One standard formula is quadruple. Basically, it's double to wholesale, then double again to retail. That's right. If it costs $20 to make it should retail for $80. I've heard of people adding in 10% or so to cover those hard-to-quantify expenses: repairs on your machine, phone bill, etc. but that makes it even more challenging to keep the retail price reasonable.

While it may sound shocking, that "mark-up" just compensates you for all those overhead expenses and allows a smaller percentage of profit for your efforts of selling your product. If you retail it yourself, at craft shows or in your own shop, you're taking on all the expenses of the retailer (booth fees, store rent, your time to be there selling etc.), so the last half of mark-up compensates you for all that. Realize that these mark-ups are out there in everything we buy, at chain stores and restaurants, and among the dozens of craftspeople and designers- not one of us is making "too much" money! I know a lot of designers fall into a trap of wanting to offer things at "reasonable" prices, but to survive and thrive, we have to make sure we're covering all our expenses, and making enough profit to live from.

Typically, starting out designers under-price. It's easy to miss out on the little expenses that add up as your business grows: thread, buttons, studio rent when it outgrows your home, printing price tags, mistakes etc. And you tend to undervalue your time. Four hours spent hand embroidering a detail on a pile of skirts counts even though you were watching 'Lost' on DVD.

On the other hand, some people overprice, counting all their expenses and time, even though their production isn't very efficient yet and their product is totally unknown and somewhat undeveloped. It takes time and experimentation to make your product worth to the public what really went into it.

Part of the process of the business is working towards a good balance. Over time, you'll find ways to streamline your production by improving your skills or process, making more of the item at once, designing it in a simpler way and generally finding ways to cut corners. You should also find less expensive suppliers, or be able to negotiate bulk prices as your business grows. You'll find you may be able to shave 10% off your production cost in 4 or 5 different areas, which really adds up.

You need to take a step back from your product, and see where it fits in the market. Ask yourself and your friends what makes your product special. If you don't have a good answer, your customer sure won't see it, and there are malls full of cute clothes that are dirt cheap! Over time, and with experimentation you'll find ways to add value to what you make without adding a lot of cost or time to the process. Often it's a tiny detail that makes someone fall in love with it, and will get them to be happy to pay the kind of price you need to get for it.

Generally I suggest people look at what they'd like to get for an item, looking at all the time and expenses, then look at what's out there that's comparable and see what price it's selling for. If those numbers are similar, you're off to a good start. Pick a price and get your stuff out there.

If your production costs are just a bit too high, I'd pick a price you can live with and get out there selling, but know that your job over the next months is to look for ways to reduce your costs and get more efficient.

If your production costs are way high, it's back to the drawing board. Let's say your specialty is handpainted artwork on teeshirts, and you think they should sell for $80, to cover all the time they take to make. Unless they are truly spectacular, it's still a tee shirt, and a very tough sell over about $50. Maybe having a simple shift dress style to serve as the canvas would increase your cost by only $20 or so, but now a handpainted dress could be $200, 300 or more! Or, if you really want to do tees, then have the art put on a silkscreen and add a few painted details that reduce your production time to minutes.

This is an ongoing challenge that I face all the time with my own line, and I see all the designers at my two collective shops, Fresh Baked Goods and Fresh Collective, working hard to find the right balance too. The market has really changed since I started my business in 1994. Since then a lot of new chains have come into Canada offering fashion and accessories at ever cheaper prices. And it's cute stuff! So us designers making small quantities in Canada really have our work cut out for us. But there are customers out there who want something different and well-made and are willing to pay what it's worth. You just have to get out there and find them!

Good luck with your clothing line and thanks for the question!

Getting Started!

Q. I have fantasies of opening my own crafty business but I don't know where to start! Local craft fairs, etsy, my own shop- everywhere?!? And if I decide to get my own shop- what expenses can I anticipate beyond rent & supplies? Anxiously awaiting, Betty
A. Starting your own business is a huge undertaking- so huge that it can be paralyzing! I was just interviewing a new designer today, who's going to join my Kensington collective shop, Fresh Baked Goods, (to sell her gorgeous bags made from re-purposed neckties!) and we kept coming back to the importance of just getting started! It's easy to be held back by so many things, but you never know until you try.

This designer was saying she often felt held back by wanting things to be perfect. She's working on design ideas and technical sewing problems, but at a certain point, you have to feel your product is good enough to get it out there and try to sell, and the feedback you get can help you perfect it.

Yes, you only get one chance to make a first impression, but second impressions are OK too. Fear is really the biggest thing that holds us all back. I know when I was first trying to sell my line, I felt so unsure of myself, I dreaded going into a store to see if they wanted to sell my line. What if they hated it? What if I approached them wrong and offended them somehow? Oh, it's so much easier to stay in my studio and knit. I'll go out next week, I'd promise myself!

But, even if your worst fears come true, and the retailer thinks your things aren't well made, or worth the price, you can take that feedback and improve your line to make it more sellable, after licking your wounds, of course! It may even work to come back to that same store six months later, and tell them how you learned from their feedback and improved your product.

There is no perfect way to sell your line. Every business and every entrepreneur finds their own balance. I started out wholesaling. I pictured a clean process of making samples, reproducing them, and getting paid. But, as it turned out, it didn't suit me. It was very uncreative, just remaking my samples. I had some bad experiences with stores not paying, or cancelling just as their order was due to go out. I hated making the collection calls when bills came due. Also, my fantasy of the wholesale orders being big, and overhead-free was not coming true. I had a couple expensive trade show trips to New York, after which I came back and decided to open my own shop.

But I know some people who love wholesaling their line, and not needing to interact with the public too much. Everybody finds their own way that suits their personality, their product and their production process.

Right now for my business, I have the perfect balance. I love running my collective shops, and working with 20+ other local designers to run the shops and sell our own and each other's lines. I work a day or so a week in the shops, and have most of the rest of the week free to make my line in my studio. I love being able to make my line creatively as I like, and put what I want on the racks. And I love being able to interact with my customer, see them love what I made, and buy it. I'm also able to take custom orders, or alter things as needed. Most importantly, I love seeing my product through the whole process, right to going into a bag and out the door because it keeps me knowing what my customer wants. I always am doing market research, every time I help a customer. I see how my sizes are fitting, what people are shopping for and what holds them back from buying something.

But having a shop is a big expense. Much, much bigger than just the rent. You'd have to think about extra staffing, repairs, phone bills, alarm bills, vandalism (I've replaced six $500 windows over the years!) renovations and more. But the commitment is the killer. Seven days a week, and the life of the lease at a minimum. As well, any reno and set up costs take many successful years to pay off. I know that many people go into having a shop very naively, thinking people just walk in and buy, and it breaks my heart to see small businesses fail!

Before I had my tiny shop in Kensington, I had been selling my line for almost four years and building up a name for my line, so I had a clientele I could direct there. Even though my rent was cheap and the shop was small and set up on a shoestring budget, I wouldn't have survived if I had opened it earlier in my business. I knew a lot about the realities of retail but was still white-knuckling it through some tough months!

Bottom line, the main thing to getting started is just getting started! A big obstacle for many is the myth that they need a lot of money to start, but I think too much start-up money can end up killing your business before it gets started. With too much money, it's too easy to try to throw money at the problem and do crazy things too big too fast. For example, open a store too soon, and you'll stock it with all the wrong stuff! Starting small keeps your mistakes small.

We had a designer in one of my collective shops once who was making clothing, but because she was hoping to do a lot of volume too soon, everything got set up wrong with her business, and her mistakes were made in multiples. Firstly, she was tiny, so that was her frame of reference, and she was working with a contractor who had minimums of 30 pieces of each style. You can see where this is going! She invested so heavily in her inventory, which was all undersized and unsellable, that she ran out of money and couldn't respond to what her customers' needs were.

Of course, you don't want to try to 'get it out there' so early that you've got a mish-mash of crappy looking homemade stuff, but most people err on the side of just stalling out. Set yourself a goal. Sign up for a small craft show for a few months from now, then make a list of all the things you need to get done for it. That'll get your butt in gear! But realize that your business and your product is a work in progress for the entire life of your business. It'll never be perfect. Keep your day job and look for small ways you can start selling today, this week, this month. Keep your gambles small enough that you can afford to lose, and build on your successes while learning from your mistakes.

Thanks for the question, Betty and good luck with your new business! Maybe you'll become a member in one of my shops one day soon!