by Carolyn Edlund
Want to make a better margin on everything you sell? You can grow your profit margin in two ways – decrease your costs, or raise your prices. We’ll tackle costs in this article.
Pricing in general can be challenging for many artists, and I’ve spoken to more than a few who don’t know whether they are really making money. But if you want to build a sustainable small business, it’s essential to keep track of income and costs to have a clear view of what you are earning, and to understand your profit margin.
And to realize a larger profit margin, you have two options: lower your expenses or increase your prices. This article deals with expenses, and the follow up article will share how and when to raise prices.
Lower your expenses
The majority of expenses for your business come in the form of overhead and materials. Overhead includes set monthly costs like studio rent, phone, utilities, website hosting, etc. Materials costs are what goes into making your art. You may also incur variable costs as well, such as travel, booth fees, workshops and classes, services from attorneys and accountants, and other business-related items.
Overhead
Decreasing monthly expenses offers the benefit of ongoing savings. Some artists share studio space rather than incurring the entire cost of rent; they may set aside certain days to work, or designate individual work stations. Other artists report that they try to keep lights turned off and studio temperatures a bit cooler to save on heat – or have even gone solar, paying up front for the conversion in the interest of significant savings later on.
Reviewing your cell phone plan could reveal hidden savings you may take advantage of as well. And, revisit the cost of the shippers you use to make sure you are using the most economical vendor.
Recycling and upcycling are great ways to save. Many artists use recycled boxes and packaging materials to reduce the cost of shipping out orders. You may also find used tools and equipment locally through Craigslist or Facebook groups for buyers and sellers; these resources can offer tremendous deals.
DIY helps curb expenses, too. Stretching your own canvas over handbuilt frames saves on buying the ready-made variety. Framing your own art can also help you reduce your costs.
Next, take a look at your credit card bill. Are you paying for monthly services you don’t use, especially online tools or subscriptions that automatically re-bill each month? Cancel any that don’t work for you anymore.
Materials Costs
It can be difficult to lower the cost of materials if you have determined particular materials that you like to use. However, if you have a retail sales tax number, you may be able to purchase wholesale. Buying at wholesale can help you realize significant savings, and it also means that you pay no sales tax on the goods.
If you must purchase retail, being a repeat buyer or buying in bulk can lower your materials costs. Pay attention to sales and discounts, and use coupons when available.
Sometimes materials costs vary widely – the price of precious metals is a case in point. Jewelry designers have faced major problems with wide swings in the price of gold, silver or platinum, and they have had to use smart strategies to overcome this. They may design “petite” versions of their bestselling pieces, or create new designs that use a lot of negative space and thus a smaller amount of materials. Other jewelry artists have found a solution by using alternative materials, including brass, copper, aluminum, steel, titanium, other metals and non-metal components.
Variable Expenses
Show fees and travel costs can add up quickly, and being on the road results in lost studio time. Choose shows wisely, making sure that your events will produce the sales volume you need for your business. Analyze your income from each show and keep accurate records.
Trade shows can be enormously expensive, especially when shipping booth displays. Reduce that cost by using lightweight booth materials that can be shipped rather than trucked, or may even be disposable. Doing the same trade show year after year? Renting a storage unit near the show may be a less costly option, especially if you share it with other exhibitors. And paying booth fees upon acceptance to the show may give you a discount. Promoters often share tips for savings with exhibitors in their shows.
The expenses for each small business are unique. Evaluate your own situation for cost-cutting measures that can save you a lot of unnecessary expense and increase your profit margin.
Read the next article in this series on ways to increase your prices.
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