End of Year Accounting

I really want to write the post that shows how much I've accomplished this year and talks about some goals for the coming year, but I can't really do that without a detailed understanding of what actually happened this year.

This is the time when we tend to look back and see what the previous year has brought us. In a business, it's also time to see just how it was brought and how it can be brought even better next year.

It's time for accounting!

I've been at it for a number of days now, and I think this is the last day of it. Here's the process that I go through to close out my books for the year. Much of this stuff should have been done earlier, but at least it's done now.

First, I snapped digital photos of each receipt using a system called Lemon. It does optical character recognition and enters the information from the receipt into a digital report. It's pretty magical, really! I then do some aerobics to get that report into QuickBooks. Yes, using Lemon adds an extra step, but it gives me a digital photo of each receipt on my desktop so I can pull it up to answer any questions without wading through the paper receipts again.

Then, it was time to enter actual invoices for every sale. Thankfully, I record all sales through a point-of-sale app called RingItUp, so I just had to create a detailed report of sales and wade though, entering them by hand, and generating an accurate payment record for each one. Then, I recorded the deposits of those payments and entered a record for the merchant fees taken out of each deposit.

If there are any questions (as there always are), I have the stacks of credit card settlement slips on hand.

Then, I had to account for the Kickstarter fundraiser, even recording the fees charged by Kickstarter and Amazon. To do this, I just pulled up the database that I created in Bento from the backer report generated at the end of the project. It tells me who donated how much, what they wanted for a reward, what they got, and when it was shipped.

Each donation got recorded as a "credit memo" when the project was funded. Fees were taken out on the day that the money was deposited to my account. Then, I went through my fulfillment records and entered invoices on the shipment date, applying the appropriate credit memo to each one. And, just like that, the whole affair was reduced to a series of straightforward sales as far as the IRS is concerned. No "gift tax" or other such nonsense for me this year.

Of course, there were questions about shipment dates for particular recipients. Those were easily solved with this stack of USPS label records and customs declarations.

And finally, after everything was entered, it was time to reconcile from bank statements. This is the last chance to catch any mistakes, and catch them I did! There were a couple of loopholes where people were buying things without a sale being recorded, paying partially with gift certificates, and other minutiae. I got them all wrangled and created new operating procedures for next year that will prevent this stuff from happening again.

I used the cash section of the Lemon report as my Petty Cash account statement. I couldn't believe it when it actually reconciled! I guess my little slips of paper for every financial transaction are the way to go.

I then went through the whole year and correlated income and expenses to specific sales venues. (Using classes) This tells me in one report how profitable each sales venue is and gives me a baseline for assessing new sales efforts.

The last thing I have left to do is to record inventory creation and reconcile it against my inventory records. By using the manufacturing version of QuickBooks, I can actually track the yarn (raw materials inventory) converting into garments (assembly inventory). I'll have to account for items traded away at shows as an advertising expense. And, I think that's it! Then, it'll be time for the exciting analysis! It's that analysis that will let me write the "what I did with 2011" blog post.

Booth Shots

Yesterday I ticked off another dependency for my 2012 show season. Before I get into the good shows I need to apply to them. Before I can apply, I need good photographs, including one booth shot.

It's tough to take good shots at a show. By the time my booth is ready to photograph, there is too much traffic to set up a tripod and lighting. I realized that you'd never see a booth at a show with no neighbors, so I set up my jankety old canopy "next door" and put some walls on it. The shots look much better with just that one context cue.

After about eight hours of setup, shooting, teardown, and photo processing, here are the two shots that I consider useable.

Even still, I'll probably only use the first one. The corner shot just has too much going on. It's tough to see how customers would interact with the space.

And, did you notice the thing that changed since Roseburg? I got rid of the two-bar hanger rack and put in the four-panel gridwall display that I designed at that show. It does indeed show the scarves better while opening up more floor space.

Shipping!

After months of trickling Kickstarter rewards out to people who helped me survive my first show season, I finally had time to look at the fulfillment rate. This whole thing was one big lesson! I couldn't send rewards out faster or I'd run out of inventory that I needed to have successful shows. And, I never sat down and projected when people would get their rewards so it turns out I was sending them out too slowly. It was a classic catch-22, but this week I'm making it right.

I've slowed production to give me time for reward fulfillment and preparation for the next year of shows.

If you're one of the very few people who are still waiting for your reward, you will be receiving it in the next week at the latest. There are a couple folks who have not responded to the survey. I'm sending you a private email to be sure that you get what you want.

I'm grateful to everyone who helped out and sorry that it has taken me so long to get these packages mailed out.

Photo Backdrop

I found a few hours to get started on the more professional photography that is required for the better shows in the midst of planning for next year while shipping out Kickstarter rewards, weaving purple cloth, and preparing for the next beam.

Above, you can see how much I learned just today. My first attempts to hang the backdrop were pretty dismal. The wrinkles completely obscured the subtlely of the mottled backdrop.

I was hanging the backdrop like a shower curtain, allowing the top edge to be slack, and allowing those awful wrinkles to appear. Finally, I removed the "curtain rod" and tacked the backdrop directly to the wooden frame of the booth structure, every 6", taut as a drum.

The other thing I needed to test was the full range of garment colors. They all worked! Each color looks just like it should and has the right amount of contrast with the backdrop. This is WAY better than the white drapes I used for my Etsy photos. I mean, look at the difference! (Note: the colors are different because these are different garments.)

Inventory Levels And Production Schedule

And finally, this round of data analysis and projections for 2012 is over. Today I came up with a simple method to estimate the required production rate for next year.

Here's how it works... I created columns for "expected sales", "new inventory", and "total inventory". The sales column is a high-weighted average of my guesses for show income from the yesterday's calculations. (expenditures require no inventory, hence the zeros in the second column) The new inventory column has only one entry per month, all identical, containing the retail value of my average monthly production amount. The final column is a running inventory value that drops when I sell and goes up when I produce.

The graph is another time-accurate scatter graph of the total inventory value after factoring in sales and production. The width of that swoosh shows the margin of uncertainty in the timing of my sales and production.

Once this system was set up, it was a simple matter of tweaking the "average monthly production" number until the graph looked right. These were my goals:
1. End the year with twice as much inventory as I have now.
2. Don't drop below my current level at any point. (My racks would look empty with less)
3. Make sure I can produce what I need with my time between shows. Yes, I have friends who help, but I want them to be free to do other things without dropping my inventory to dangerous levels.

And, I did it! I think I found the sweet spot where I'm not working like a dog, but I am producing enough to bring in the income that I need. It's tough to maintain production this time of year when the shows are so far apart, but this chart shows that I need to do just that. I NEED to work hard this Winter so that I have the stock built up to sell this Summer. And now I have a nice visual representation of my goals to remind me why.

Projected Cash Flow Analysis

To continue in the theme for this week, "planning next year's production and sales", I did some more work on my list of shows and application deadlines. My goal was to determine whether it was likely that I could actually pay all of the fees to get into these shows. The answer is "maybe".

Before I show you what I did, I want to familiarize you with a thing called "The Fermi Method of Estimation". In a Fermi problem, you use whatever information you have and make educated guesses about the rest. For each value in the equation, it helps if you use a margin of error. In my case, I like to create an upper and lower bound on the probable values. Since this problem involves simple addition and subtraction, I can be extremely confident in the result. You read more about this method of estimation at Wikipedia

So, what I did was to sort my whole list of shows and deadlines by date. Then, I estimated what the fees would be for each show. (I don't want to take the time to look up the actual show fees for each show if I'm going to have to drop some to stay solvent.) Then, I estimated the income from each show after travel costs. Again, I created a lower and upper boundary on these values. Next, I calculated three columns from these values: the running lowest balance which assumes that the shows were expensive and didn't make much money, the highest running balance which assumes that the shows were cheap and made a lot, and the average of the two, which is likely to be pretty darned close to what will really happen this year.

The worst case is pretty grim. I would be thousands of dollars under water by May 15th unless I dropped more than half of my shows. The best case is great! I never have any financial difficulty at all. And, the average case is just right. I need to come up with some extra income or drop a couple of the more expensive shows to keep my available cash from going negative. It looks like I'll be trying to find another way to promote my Etsy store to come up with that thousand dollars.

Here's a closeup of the trouble period, from now until May 15th. In this view you can see how it is that I correlated these values to time. I created a column in the spreadsheet that counts the number of days from today and then used a scatter graph with that value for the X and the cash balance value for the Y. This lets me see if there are multiple show fees due on the same day, for instance.

See the yellow marks? This is likely to be the real situation - a couple of show fees that would drop me below zero without another income boost before then.

One last thing to notice is how the values diverge dramatically over time. Obviously, if you compound unknown on top of unknown, this is going to happen. I'll be updating this document after each expense and income and watching the resulting values converge. By July or August, I should have a pretty clear idea of exactly how the year will end up. And, then, each year that I do this the unknowns will be fewer and fewer until I can predict pretty darned well what that year will hold. In theory, at least.

The step of the planning that I need to do today is one that I've never done before, estimating my production requirements to meet the average-to-best-case sales estimates. The end result should be a production schedule that tells me when I need to order material and the deadlines by which that material needs to be turned into finished merchandise.

It's funny how far removed these mental exercises are from the joy and fulfillment of creating beautiful cloth and sending it out into the world with people who love it. While I'm doing all of this business planning stuff, I just have to remind myself why it is that I do this...

Calendar Sudoku

The last six months of shows has taught me many things. Among the most important lessons is to choose my shows carefully. It takes just as much time and energy to do a show with little sales potential as it does to do a show with buying customers.

Part of the reason that I've done the shows I've done is that I didn't know how to tell the difference and I got such a late start applying that I had to do whatever shows would accept me on such short notice. I have a plan to get myself up to the next level of shows, and it's going to take planning and money. I've just gotten my new photo backdrop to allow me to take photographs that will be acceptable to stricter juries. And now I need to choose the shows I'm going to try to get into, and make sure that I apply before their deadlines.

While I've been doing the shows this past season, I've spent lots of time talking to other vendors and finding out where the shows are that have customers who can afford my work. I take notes after our conversations. After every show I take those notes and research the shows, entering my findings into my management system. Well, all of this careful organization has really paid off today. I started yesterday, entering the show dates and deadlines for every show that seemed to have potential and that didn't already have those details entered.

Today, I printed two documents from that data - a calendar of the year showing all of the potential shows and a linear list of all application deadlines and shows. This lets me see the two pieces of information that I need to make a decision: the show dates, and the dates that their show fees are due.

I then went through and decided which shows to enter. I set up a travel schedule that's not too grueling, chose between conflicting shows, and got to see when the shows' fees are due.

Here's a lesson for folks doing this for the first time: most of the good shows have deadlines from January to March, right when there is little income to pay for them. It's going to be extremely tight for me to pay for all of the shows that I want to get into, and I'm even going to try and beg my way into another little show in March just to help cover those fees.

Making the hundreds of little decisions that I made today really did feel like playing Sudoku. "If I'm traveling to this part of the country for this show and there are two other quality shows in that part of the country at that time, then I'll do them, too. If I'm doing them, then I can't do the nearer shows that overlap them and I should really have the weekend before and after a three-week trip free as well." After about six hours of this, I whittled my list of potential shows down from 49 to 21. It'll get whittled down even more once I see a calendar with only those events on it. I'm sure there are times that are packed too tightly, but I just can't see them on the cluttered calendar.

The next analysis to do is to project my ideal income from each show, starting in December and going backwards, and determine what my inventory levels need to be in order to sustain that level of sales. Then, I can start from now and move forward with my production requirements to be sure that I don't run out of inventory, especially during the three back-to-back shows out of state. If there's a danger of running out of stock, then I'll have to see when that might happen and cancel a show at that time to stay home and weave. The last thing I want to do is to commit to a show and pay for it only to cancel at the last minute, lose my registration fees, and damage my reputation. I really want to catch this potential before I apply.

Another task left to do is to use the management system to its full capacity and notate why a show was not entered. This way, when someone asks why I didn't do a show, I can go to that show in my system and review its history, seeing that it was skipped because of a conflict. (I also keep detailed notes on my research and can see at a glance if there was some other reason I dropped that show from the running.)

I use this management system because I have a TERRIBLE memory. And today it saved me. Nobody would know how bad my memory is to look at my beautifully laid out show plan. Yay, technology!

More Booth Enhancements Needed

Boy, oh, boy, this was one dud of a show! Other vendors say they've never seen it so slow. Part of it seems to be location. I was in the furthest building from the entrance. It's a nice building, but people seem to be "spent" by the time they reach us. I've visited the other buildings and see far more engaged customers there. Live and learn, eh?

The time I didn't spend with customers was still put to use, though. I planned out the next set of booth enhancements. One of them is free, and the other will be cheap.

Here's the problem I'm trying to solve: people can't see my scarves. The way they're displayed, the edge is pointing toward customers.

My quick and dirty solution was to hang some on the wall so people can get a feel for what the rack contains. A better solution would be some sort of rack that lies closer to the wall and has lots of room to display scarves.

I thought Sunday might be slow so I brought a measuring tape to plan these enhancements. In this sketch you can see three tries to get a gridwall layout that works. The first one is too shallow and would fall over. The second one is too deep and would obscure the scarves. The third one is juuust right. It's narrower than the first one, but deeper to make it more stable. This solution won't cost anything because I already have the gridwall panels. It also makes packing easier because the gridwall stacks on the floor of the van. The rack that's there now always packs awkwardly.

The next enhancement will be cheap if I make it myself. I want a lintel that contains my business name. Looking at the booth from the aisle, there's nothing to keep the eye from traveling up to the truss work and lighting. The booth just doesn't look finished.

People tell me that they remember me as that guy who does the weaving. I also want them to remember that my work is related to my spiritual practice and that they can find me online by searching for "weaving monk". This lintel would give room for unobtrusive branding and help convey both of those messages.

There's no hurry for this enhancement so I'll just wait until cash flow is better before I start shopping for canvas and paint.

The Artist As A Salesman

I've had a couple of people ask why I don't post more pictures of myself. Well, I'm the one running the camera and it's tough to take good pictures. And, I just never think of it. The stuff that I do is more interesting to look at than I am, in my opinion.

But, here's a snapshot nonetheless. This is the salesman who will greet you and tell you about the weaving in his little mobile shop...

It was really tough to get this shot because there is so much contrast. I had to use HDR and add a vignette to try and hide the bright lights on the ceiling. The difficulty of photography really points out how miraculous our eyes are. They handle all of this stuff automatically.

Roseburg Christmas Show

Every show I do seems to have different requirements, but I'm starting to sort them out and come up with standard booth configurations.

Outdoor or Indoor?
Well Lit or Dark?
How many sides are open? 1, 2, or 3?
Storage space behind?
Electricity?

Here's this configuration: inside, OK lighting, 2 sides open, no storage, with electricity. I decided to put in lights just to help my merchandise and my customers looking in the mirror to "pop". I also discovered that I can use the drapes for the third wall to make a "column" on the corner and let me turn my 6-arm rack diagonally. This makes for bigger doors with ruanas aimed toward customers better.

The storage issue just makes me set up earlier and take absolutely everything extra back to my van.

And, yet again, this is my first time doing this show. I have no idea what to expect from the customers here. Crowds, I think. This show is huge, filling four large buildings in the Fairgrounds.

Holiday Sale: 20% off and free shipping!

The Holiday Sale is in full swing in my Etsy store with 20% off of everything until Monday at midnight. To thank you for reading my blog, I've set up a coupon to give you free shipping, too. Use the code "BLOGNOV2011" during checkout.

And, of course, you should come by early for the best selection.

Weaving Monk on Etsy

Photo Booth: Good Enough For Now

In anticipation of the arrival of my new photographic backdrop and in preparation for the Black Friday sale on my Etsy store, I've built a photo studio large enough to photograph my garments.

It's just my warm weather show booth with a wall from my bright white popup canopy used as a flash diffuser. The end result is a white box that bounces light from all angles.

What I've got for an illumination source is one remote flash unit that's triggered by the camera's flash. (The clip light is a "modeling light" to show me where the light is bouncing. It's too dim to actually show up against the flash.) The flash light does two things - it gets diffused through a translucent half-wall and enters through the open half of that wall to bounce around inside the studio. Since every surface is white, including the back wall on both sides of the camera, the light really travels around. It gets into every crevice so that even though there's only one light source, none of the shadows are truly black. And since the flash doesn't illuminate the cloth directly, all of the light looks very soft.

You can see the rest of the photos online in my Etsy Store

There is still a rack of items that need to be photographed and listed tomorrow in preparation for my Black Friday Sale.

I've finally solved the problem I've been having with Etsy. You see, I have not had enough inventory to let some sit aside just for Etsy. This means that I have had to take down my online store every time I go to do a show. Well, no more! I've allocated some inventory just for Etsy. It will be available even when I'm off at shows.

Tomorrow's todo list is pretty ambitious: set up a Black Friday sale on my Etsy shop, design and write a newsletter announcing my sale, including an additional discount for newsletter subscribers and Facebook followers, and finish the photography and listing on all my Etsy items before Thursday night.

If you're not signed up to receive my monthly newsletter, now would be a great time to subscribe and be included in this fantastic sale.

SUBSCRIBE

In Portland for the Weekend

Whew! We made it!

Wispr and Audrey worked long and hard beside me to get the stuff done in time for this show. We wove, cut, and sewed half a booth's merchandise in just a few weeks.

This is an intimate show with just few, high quality vendors. If you want to come and visit, all the show details are here: FACEBOOK EVENT

Aaaand, if you are awaiting a Kickstarter reward, I've got them with me. Stop by and pick it up! Otherwise, I'll be mailing them out in the coming weeks.