This business sold brooms, kitchen utensils, earthenware and various other items made by local artisans. Prices on all the products were high during that time… but towards the end of the War… the prices started to be discounted rapidly.
However… the business owner wouldn't sell his products below cost. In fact… when he died, the inheritors found a clause in his will which stated that under no circumstances should the inventory be sold for less than he paid for them.
His heirs were cautioned to observe this wish under penalty of forfeiting all rights to the remainder of his estate which was of considerable size. The stock was left on the shelves… most of it in very good condition and nicely displayed… but over the years became worthless, and it earned his heirs no money. Instead, it had grown less salable as the years passed, and incurred costs in the form of rent, insurance and interest on business loans.
Take for instance… a fine handmade broom that cost the business owner $1 and was priced at $1.50. The interest alone on the percentage of the business loan used to buy this broom… would now make it's cost $1.05. At this rate… this broom, if it stayed unsold… would have to now be priced at $2.05 to break even.
Think about some of the craft items you have in your own stock? How long can you afford to keep them? How much of this stock is up to the no profit point now? In theory… we could say that hand made items have little in the way of costs… they are mostly a time investment. But… are you making a profit on that time?
What is the solution?
First… get this clearly in your mind. You are trying to make money. The more often you sell a product… making it over and over and selling each one quickly… the quicker that money can be reinvested into your business or spent on something fun!
Remember the banana man who paid $2 for a bunch of bananas… and then sold them that day for $3? He kept the $1 and bought another bunch of bananas for $2 every day. He never had more that $2 invested in his inventory, yet over the course of a year… that consistent reinvesting of $2 for a bunch of bananas, earned him $312!
Now if he had only wanted to make half of that annual income….he could have sold each bunch at $2.02, or in other words… have undersold every banana dealer on the street and possibly put them out of business.
Apply this to your own handmade craft business:
- Look at one article, or a set of products.
- Figure out how long you can afford to keep them in stock.
- Do this for every product in your back stock.
Keeping products down and the sales up is what makes the fast money. You must watch the quantity of stock on hand constantly if you are to get all the profit you should. You can do this… it's easy once you get started.