I recently attended an introductory ‘School for Startups’ session in Exeter led by the legendary Doug Richard and found myself putting my hand up in response to one of his questions. Suddenly I was suddenly transported into the parallel universe of ‘Dragon’s Den’ as Doug threw question after question in my direction, putting me on the spot, and forcing me to answer some very pertinent questions about my ‘business’ in front of everyone! I was terrified. But there was no letting up until he had drilled down far enough to find the stumbling block to future growth…namely my pricing structure….but more about that later.
Although I was incredibly nervous during this grilling, I knew that it was an amazing opportunity. I knew also that I just had to be brave. There was no point attending one of Doug’s seminars if I wasn’t going to throw myself into it. You get out what you put in, as they say. And I learnt so much!
The first thing I learnt was that I actually have a business. Until that point I had been very confused about whether it was a hobby or a fledgling business. Doug made it very clear (resulting in lots of audience laughter at my expense) that my venture was indeed a business. I found this very reassuring. I also found it reassuring that I apparently am already doing a lot of things right:
a) I am selling on ETSY (although I didn’t know at the the time that Doug has been involved with ETSY); Folksy; my own website; and have recently started selling through the new Country Living magazine online store.
b) I have a clear ‘image’ (coastal inspired textile products) and was able to articulate why customers might want to buy my products and how my work stands out.
c) I offer free p&p on my website (and on ETSY and Folksy) and ‘absorb’ at least part of the cost of the postage into the price of the product.
d) I know exactly how much it costs to make each product (in terms of the materials used such as fabric; buttons; thread; bondaweb; labels etc)
e) I have a two tiered pricing structure (direct to the customer prices and trade prices)…..
…..and that’s where it started to fall apart.
“And how much do you charge for your labour?” asked Doug and I was silent. “How long does it take you to make a cushion?” he pressed. “And how much should you charge for the time it takes to make it?”. “If you landed a big order tomorrow how much would you pay someone per hour to help you make the 200 cushions ordered?”. And I stumbled.
It’s easy enough to include some labour time into my ‘direct to the customer’ prices but my trade prices don’t take labour into account at all. For some time now (in fact three years) I have been selling to local shops. My trade prices have covered the cost of materials with a little extra on top (£2.50ish per cushion). No wonder I’m not yet a millionaire!
I have told myself that it doesn’t really matter. Sewing is my hobby and isn’t it nice that successful shop owners want to buy my products. And as long as I cover my costs……
But Doug’s grilling has taught me that if I want my business to grow I need to attend to my pricing structure and I need to include labour time in my trade prices. This, I realise, will mean that the cost of my products should increase quite dramatically. As Doug said on the day, “You already know that a customer will pay £30 for a cushion. You don’t know that they won’t pay £50”.
I have been doing lots of research, finding out how much other designer makers charge for similar products. And I have been doing lots of talking to the owner of the local gallery shop who stocks my products. We are working towards a gradual price increase which feels like a step forward in the right direction. I’m told that I need to be careful about increasing my retail prices too much as I am just starting out and am not yet ‘known’ (in the way that people like Poppy Treffry and Jan Constantine are known).
But I imagine that this journey is one that many of you have found yourselves on. I would love to hear your story and how you went about getting your prices right.