When will my craft business make a profit?
If you’ve recently started a craft business then you’re probably already dreaming about how to spend your profits. But the hard truth is, as with any startup business, it can take a while before those profits materialise.
If you’re wondering how long it will take for your craft business to make a profit, read on for some guidelines of what you could expect.
How long will it be until my craft business makes a profit?
There is no magic number of days, weeks or months that have to pass before you will make a profit in your craft business.
It depends on many factors, such as how much you spent to get started, how many hours you can dedicate to your business, the price of your products and how many items that you sell.
However, if you’re desperate to know when you are likely to see the pennies start rolling in then read on to find out how to create a profit plan for your craft business.
How much does it cost to start a craft business?
The first thing to consider when creating your profit plan is how much you have spent on your business to get it up and running.
Accurately tracking your expenses is key to knowing when your business will make a profit.
The easiest way to do this is by keeping a spreadsheet of all your business expenses.
Track all of your expenses in this spreadsheet, including:
- Equipment and material costs
- Branding costs (e.g. if you paid someone to design you a logo, website, business cards, etc.)
- Legal costs e.g. setting up a Ltd company, business insurance
- Marketing costs e.g. Facebook ads, booking craft fairs, getting flyers printed
- Software costs such as Photoshop for creating digital products, QuickBooks or FreeAgent accountancy software
Once you’ve made a list of these costs then you will know how much you have spent so far on your craft business.
Top tip: If you use accounting software such as QuickBooks then you can use this to track your expenses and it will generate your expenses vs profits for you.
How long does it take to make a profit?
The next thing to consider is a timeline from initial business idea to listing your products for sale.
Think about how long it is likely to take you to create a product line, photograph them, create a website or Etsy shop to sell them on or make enough to have a stall at a craft fair.
If it takes you a full day to make one item and you want to launch your shop with 20 then you need to factor in 20 days of craft time before you can even think about starting to generate sales.
You won’t be spending 20 full days in a row solely crafting either, so be sure to factor in how long it will take with your other commitments such as your job, family life, general life tasks such as cooking, cleaning and shopping, any other hobbies you take part in, holidays you may have booked and so on.
How to start making a profit
Now you know how long it will be before you are likely to be able to start selling your products, and how much money you need to make before you start making a profit.
The next thing to think about is how much money your products are likely to sell for.
It’s okay to not know exact figures at this point, but a rough idea is good. Are you more likely to sell items for $5 or $50?
Bear in mind that you may have additional expenses associated with your sales, for example Etsy take a commission of your sales as their fee every time something sells.
So, a $50 sale might actually only earn you $45. (Those number are made up – be sure to check Etsy’s policies for the exact commission amount).
You also need to factor in the cost of materials for each product. This again needs to be taken off of your total product sale price so you can work out the profit per product.
Using our earlier example, our $50 sale – $5 selling fees – $10 material costs = $35 profit.
That’s our estimated profit per product sale.
This isn’t an exact number as obviously each product will vary in terms of material cost, but for our profit timeline this is good enough.
Once you know this number, you can gauge a rough estimate of how many items you need to sell before you clear your total expenses.
When you’ve made more money than you have spent, you are in profit. Woohoo!
Creating a profit plan for your craft business
It’s time to start putting everything together!
You now know…
- Your total expenditure to date
- The time it will take before you can start selling
- How many products you need to sell before you make a profit
This will give you an idea of how long it may be before you start to see a profit.
Let’s say as an example that it will take us 60 days before we open our shop, we have spent $300 on expenses and our average profit per product will be $30.
We need to sell 10 products to clear our expenses, any by the 11th sale we should be in profit assuming that no other expenses are incurred.
Now, of course, you may have noticed that we are missing something from our timeline to profit, and that’s how long it will take to GET those 11 sales.
After all, you can’t just open your shop one day and expect the sales to come rushing in.
It might be weeks or even months before you get your first customer.
However, there are things that you can do to help encourage those sales to come a little bit faster!
- Tell your friends and family about your business
- Share it on social media and ask your friends to share
- Build a “buzz” before you launch with a Facebook page, Instagram account or other form of marketing
- Post flyers through letterboxes in your neighbourhood telling people about your business and perhaps offering a time-limited discount code (be sure to take that off your per-sale profit estimates!)
- Do some local PR to draw attention, perhaps by emailing your local paper to tell them about your business. They might choose to do a feature on you as a new start-up business in their community which is excellent exposure!
Marketing your craft business is the key to getting your first sales and then keep the momentum going by ensuring a smooth, positive experience for your customers to encourage them to spread the word and come back for more!
Before you know it, you’ll have smashed your profit plan and will be making profit from each sale!