I've been meaning to write this post for about a month, and a blog entry from Laura Fry pushed it to the front of my mind. You can read her blog entry here: Niche Market/Saturation
Before my three shows in Washington I raised my prices. A lot. My most popular item, a fringed, hooded ruana went from $300 to $400 plus tax. And I started charging 15% more for anything in black cover the very high cost of the yarn.
Why did I do it? Well, I've found that in the year and a half since I set my prices, my costs have increased substantially. I now carry a huge liability insurance policy, which is required by most shows. I'm paying way more in fuel to do bigger and better shows which are, unfortunately, much further away. The bigger and better shows have higher standards for entry and for presentation at the show. This means paying for photography, graphic design, web design, copy writing and more. It's all so complex now that I need a bookkeeper to track it all and help me save money on my taxes.
I kept running into the same situation: I would weave a bunch I cloth, do the work to sell it all, and come home to find that I had just enough money to pay the bills, pay for a few improvements and get to the next show. I kept thinking that the "improvement" expenses would eventually disappear, that they were startup costs, but alas, the company continues to need improvements.
One answer, obviously, is to increase the amount of inventory that I have on hand so that I'm not always scrambling to keep up. This meant hiring a seamstress so I could focus on weaving. And she needs to be paid. And then there are the apprentices who can help me make cloth faster than I sell it. And guess what? They need to be paid, too!
You might wonder what happened when I raised my prices... Not much. The people who couldn't afford my work before still can't afford it. Those who can still can, as far as I can tell. I sold the same number of garments as I expected to sell based on my experience with other shows. The difference is that I brought in 33% more money.
And why didn't I do it sooner? Well, it's time for a dire admission: I'm not that careful about analyzing my current financial reality. This will change when I have a bookkeeper to generate monthly, per-show, and per-item profitability reports.
Since I don't really look at that stuff regularly I didn't notice that there just wasn't much profit there. I made the decision to raise my prices somewhat emotionally. I saw the prices that others were charging for their work and projected how much cash and how much inventory I would have for my Autumn shows if I sold out in Washington. It just didn't add up! If I sold out, I'd have to cancel some of those Autumn shows, but after paying all my bills, I'd still be broke.
So I raised my prices and brought in some money while retaining enough inventory that I haven't had to cancel any shows. And once the bookkeeper gets going and can help me analyze things a little better, I wouldn't be surprised if I have to raise them again.
I haven't mentioned that raising prices is terrifying, have I? The only thing that makes me able to do it at all is my experience running other businesses. If you make sure that the quality and desirability are there, the only thing left to do is to find the customers who can afford what you have to sell.
And here's a bonus for reading my blog. If you've been holding off on buying something from me and you find that it's now totally out of your price range, email me and let me know. I'll honor my old prices until the end of the year for my blog readers. This is even true at shows. Just tell me you want my "friends and family" rate and poof! You get 25% off! (And yes, the math works. An increase of 33% is reversed by a discount of 25%. Weird, huh?)
I realize that raising prices was only a tiny part of Laura's post. Most of it talked about rolling out new designs regularly. Check! I can hardly develop a new product design and bring it to market before a new one comes knocking on my skull.
When I've come back to a place where people have seen me before they ask me things like, "What's new since I saw you in Seattle?" I do, in fact, have a couple of people who collect my work. One of them collects colors, but another collects garment designs. This year I've rolled out a shorter ruana, a line of housewares including throw pillows and I've got a couple of other things in the works. Of course, I'll let you know as soon as anything is finalized!