Transcripts
1. Introduction: For many of us, working in the corporate world
does not feel like a fit. So wouldn't it be so cool
if the thing that you enjoy doing where time flies
by when you're doing it, could also pay your bills. I'm Holly Rutt, a
multi-passionate, creative entrepreneur that once struggled to decide which
business to pursue. Now I am the founder and
creative director of an e-commerce handmade
business that does seven figures a
year selling on Etsy, Amazon Handmade, and Shopify. What does every seven
figure handmade business you find online have in common? They picked the right product
and priced it properly. I'm so excited to teach
this topic because I know a lot of creatives who
want to start a business. If they could just wrap their
head around how to make enough money to justify doing their craft part
time or full time, they would have a better life. I believe it's completely
achievable with just a few little tricks
that I learned in business school that I have used in my own creative journey. In this class, we're going
to use the magical power of harnessing both your right
brain and left brain. We're going to work
on our vision, how we want our life to look, and then we're going to flip
that around and use that to inform what our product should be and what we should
charge for it. To follow along, you will need a laptop, paper, and a pen, a stopwatch like the
one on your phone, and the spreadsheets I've provided in the project gallery. This class is for you whether
you've already launched a handmade business but the path forward seems unclear
or intimidating. If you have a product
you're already making, but you're unsure
how to price it. Even if you have not
started any business and you're trying to
decide which business to start, this class is for you. I am so excited you decided to join me for this class.
Let's get started.
2. Getting Started: If you really want to be
gainfully self employed, making something by hand
and selling it online, you can do this, and I have a path that can
help you succeed. I can remember from middle school wanting to
have my own business. Like at the age that
you would think of a lemonade stand as a business, I was thinking about all kinds of other
businesses I could have in my front yard like a
restaurant or a coffee shop. It seemed like going to business management would
be the right move for me. But then when I got into school, my teachers said, don't
start a coffee shop. You're going to work 80 hours
a week to make zero money. So I wasn't sure what
to do and I ended up becoming an office manager
for some engineering firms, which was not a good fit for me. I felt really stuck in my
corporate job behind a desk, in a room with no windows. I was unhappy as a creative and I was looking for a way out. Meanwhile, I had
these side hustles, making caramels, doing wedding
floral design, making soap. I felt way more at
home with my hands on a bar of soap or working with flowers than I did
sitting at a computer. So I knew that I needed
to hustle and figure out how to make these creative
passions my full time day job. I take my finances
pretty seriously. I'm a numbers girl. I love just knowing on paper that I'm going to have enough to pay my bills
at the end of the month. As I was working in
my corporate day job as an office manager for
an engineering firm, I would spend my lunch hour, nights, and weekends writing client
proposals and estimates for my wedding floral
design business and making soap and selling
at craft fairs. But the whole way along, I was calculating what my
break even point would be, what kinds of profits I was making per bar of
soap that I sold, and I was figuring out how many bars of soap
I was going to need to sell before I could
really quit my day job. I had a target number
in mind that I wanted to save up before I gave notice and I was really motivated
to work hard nights and weekends and make sure
that every bar of soap that I sold was inching
me closer to that goal. So setting the
proper pricing and knowing what my profits
were and when I would achieve that goal was like the light at the end
of the tunnel for me, that one day I would get to do that creative work
for myself full time. You could say that I
have two passions. I am creatively passionate, but also I am passionate
about good finance. Because money,
which we sometimes don't love to talk about, can purchase for you freedom. Freedom to create,
freedom to work in your own studio space
and wear what you want and surround yourself with what makes you
most comfortable. I love spreadsheets because
I love turning a profit because I love the freedom that turning that
profit gives me. You could spend years dabbling
in different businesses, unsure which one will
make you the amount of money you need to quit
your day job like I did. But if you don't
have 10 years to spend stumbling
towards enlightenment, then take this class and let's figure out the right business
for you to start today.
3. Visioning Your Future: I'm going to teach you how a process called
visioning can work like magic to help you achieve your heart's desire in
business and in life. Using the definition from
Ari Weinzweig's book, A Lapsed Anarchist's Guide to
Building a Great Business. A vision is described as a description of success at a particular point in
time in the future. Described with enough
richness and detail that it becomes emotionally
engaging and meaningful. This is the idea that
completely changed my life. In 2013, I attended a Zingerman's Zing
Train Visioning seminar that was led by one of
the founding members and he taught this technique where you use a method called hot pen to quickly get your thoughts onto paper
kind of like a brain dump, but you're writing as
though it's present tense, but it's a time in the future. I did as he said
and wrote my vision and wrote and wrote
for the 20 minutes that we had set on the timer. At the end, he asked, were there any
volunteers willing to stand up and share their
vision with the class. I had been surprised some of
the things that I confessed onto paper after I got the first few obvious
things out of my head, there were more
things that my heart had wanted that had not
admitted to myself. Because it can be scary to admit to
yourself what you want. What if you don't get it. But I raised my hand
trying to be courageous. I shared with my fellow aspiring
entrepreneurs this vision I had to leave my house and walk to a barn and renovate
it into a studio, passing rows of
lavender that were growing on my flower farm. Meet up with an employee who would support
me in preparing the farm for a farm
to table dinner that night and in packing
my online orders. I shared it and got goose bumps because it just felt like a
possible real future for me. Before long I was
attracting to myself everything I needed to
realize that dream. In under three years, I had achieved everything that was in that
vision and then some. I do this exercise
anytime I have an interesting
project I'm working on or something
I'm nervous about. I even wrote a vision for the success of
this skillshare class, which you can read in
the download section. Writing a vision can be a little scary because
getting very specific about what
we want can be scary. Once we admit to our heart's desire there's always the chance that
we don't get that. Once we tell someone else, what I really want is to quit my day job and do this
creative passion full time. We even feel like maybe it
would be embarrassing if we don't then achieve it after having shared
that we wanted to. But it's time for us to get
really honest about what we want so that we can
start having that life. Not being honest with yourself and pretending you
don't want those things, that's not the path to
the life that you want. Effective visioning
will help you get clear on things like
lifestyle preferences. How big or small do you
want your business to be? Do you prefer to work from a
she shed a home office from a shared space downtown or virtually while
you travel the world? Do you want a small business
that only you work in or do you want to hire a team that supports you in
growing your business? It will also help with
your financial picture. Is this something
that's going to help you put your
kids in a sport, help you retire early, get out of debt, or
maybe travel the world? Is this going to support
just your income? Or maybe you'll have a team of five or six employees
like I do now. First we're going to
write a list of points. Take five minutes and
write down a bunch of past positive achievements this will get your brain in
a positive headspace. We're going to use a
technique called hot pen. The idea is to keep writing as fast as you can
without stopping. Even if you can't think
of something to write, just write blah, blah, blah until the next
thing comes to you. This is going to help override that part of your brain
that wants to fix grammar, punctuation, sentence structure forget
about that for now. The idea here is to go quickly writing as fast as you can. You want your true
unguarded thoughts to outpace any self editing. Insights, dreams
and desires might emerge that you have never fully confessed to
yourself before. Get into the future but
write in the present tense. It's gonna sound like this, it's August 15, 2028, and I'm leaving my
house walking past beautiful flowers to meet
my employee at the barn. Go for something
great. This should be an inspiring vision. Get personal. Include
your passions and dreams. Describe things that you
see, smell, and hear. This should be a
vivid description of your preferred future. Let yourself go. You do
not need to figure out how you're going to get it just write what it
will look like. As an example, let
me share with you a little bit of the vision
I wrote years ago. In my original vision I wrote, it's July 15, 2018, I'm leaving my
house walking past bees buzzing and
rows of lavender on my way to meet my team at the
barn turn soap studio where I will work to get ready for tonight's farm to table
community dinner. I feel the sun on my skin, I smell the lavender
I hear chickens. I feel nervous but excited. It's your turn. Take 20 minutes. Pause this class, go
and write your vision, and then come back
and I'd love for you to share it in
the project gallery. Or find a safe
person in your life, a friend, who won't be
critical to share it with. Now that we have worked
on creating your vision, let's move on to
picking your product.
4. Picking Your Product: You've created your
vision. Now what? In this lesson, we will use your vision to help
determine your product. Deciding what you will make also determines how this business
will affect your lifestyle. You may choose to make
something that you can only produce three to
five units of a week. This might never be a
full-time job for you. This may be your passion, something that you do
out of the love of it, and let me help you price
that product so that you can continue to buy all of the art supplies
that you want. Maybe have a she shed
that's fabulous, or work a few hours
less at your job. You may have written into your vision that this
is your full-time job. If that's true, I want to help you pick a product
that is scalable, profitable and will move you in the direction
of that dream faster. A scalable product
is a product that you don't necessarily have
to make all by yourself. For example, with
this bar of soap, I came up with the
original recipe. I picked the
beautiful packaging, I designed the label
and printed it. I took a light airy photo, I wrote the product description. But now I was able to train somebody else to
make this bar of soap. Someone else makes it,
another person wraps it, another packs and ships it. It's still my design. It's still handmade, but
it's scalable because if at the holidays I start selling 5,000 units of this item a day, I can totally ramp up production
to keep up with demand. Let's think through some
examples of how you could take what you're already doing and make it into
a scalable product. For example, if you're a potter, maybe you could make a farmhouse-style
Christmas tree ornament. Say it's a cookie-cutter
star shape. Something that you
can design to be cute and true to your aesthetic, but you can train somebody
else to make it for you. Maybe they can produce 100 a day easily with your
guidance and oversight. Or if you are a knitter, you could design a
gorgeous pattern, knit one beautiful hat, and then possibly sell the
pattern for that online, we started making
this lip bum 25 at a time with a rubber band around using a pipette
to fill each tube. But as demand increased, we needed another way. We found someone
who produces a tray that we could click
225 tubes into, flip it over, and pour
the whole batch at once. This eliminated the need to clean the outside
of the tube and it went from an hour to
make 25-50 lip bums, to less than an hour to
make over 200 lip bums. My vision revealed that I
wanted to hire a support staff, have a firm, build a beautiful studio
outside of my house. In order to achieve
all of those desires, I knew I needed a product
that was scalable. I was going to need to find
something that I could make from my three or four Etsy
shops I currently had going. I was making caramels, but this was not something
that was profitable enough, and I didn't have a
full-scale kitchen to produce it en mass. I was making jewelry, but it really had to be
me that was making it. Because I was sourcing all of these unique parts
all of the time, and it was not
easily reproducible. I was making boutonnieres for
people, for their weddings, and the story I was telling
myself was that I couldn't really train someone to do it just the way I was doing it. But the soap business, soap was something everybody needs. It had high profit margins. It was easy to give someone
else the recipe and show them how to
make it the same way that I was
already making it. This stood out as a
business that had scalability and
potential to grow. This was the business that was going to help me
achieve that vision. Imagine you design a product
that's starting to go viral. You're selling 2,500
units a day on Etsy or Amazon Handmade
at $5 profit per unit. That's $12,500 a day in profits. Say this is happening for the two weeks leading
into the holidays. That's $175,000 in profits. Dream realized, right? You definitely have enough
to hire a support staff, build your beautiful
She Shed studio, or start a lavender
farm as long as you're able to ramp up production
enough to meet demand. This is where picking a product that's scalable
is so important. It's great to have something so incredible that
it goes viral, but you have to be able
to reach the demand. Let's say that in your vision, you wrote about something
that you love making, that you're passionate about, an art or a craft
that you enjoy doing, but you don't want to put pressure on it to
pay your bills. I totally respect that. Let's assume that this is never
going to be your day job. This class can still
be helpful to you. We can help you
decide how to price that product so that
you can always make at least enough profit to buy all of the craft
supplies or art supplies of your dreams and maybe even
work a few less hours at your day job to free up
more time to work on your art. Finally, take concrete steps to turn your vision into action. Share a vision with your friend. This is not a step
that you skip. This is the part where the magic happens and
it becomes really real. Sharing your vision out loud, especially in person or
maybe over the phone, but definitely not
in a text or email. You want to share confidently
with someone who can be trusted to be supportive and not critical of your vision. Once you have
written your vision, let's make a visual
representation of your vision. Find pictures on Pinterest
that represent what you have already written
down and print them out. Put them on a pinboard
and place this pinboard somewhere that
you're going to walk by it multiple times a day. Our brains are bombarded all day with information
from all over. Our RAS filters that information for what is most important
and what we should focus on. Clearly defining your
vision tells your brain this is what's most important
and should take priority. Your RAS will start searching
for people, opportunities, and information related
to what you have decided is most
important. Your vision. When I wrote my vision in that class and felt the
goosebumps all over, I realized I wanted to get
my two existing businesses, wedding, floral design, and soap making out of my
house, out of my basement, out of my kitchen,
and my living room, and into a studio
across the driveway. I didn't want to
work off campus, but I didn't want to work in
the house anymore either. This meant I was going
to have to move. Hopefully, buy a place that
had an outbuilding that could be renovated and this was all going to require money. I needed to pick between my
two businesses and focus on the one that had
the potential to help me purchase that
larger property, that larger home with
that outbuilding, and pay for the renovation. The soap-making business would go crazy at Christmas sometimes I had family and friends
coming over to help me keep up with packing
orders in December. I knew that if I put all my time and focus
on this business, I could realize that vision. I started to turn
away from wedding floral design and
really put my focus on creating more products for this business and growing
it to fulfill my vision. Hopefully, writing
your vision gave you a little bit of clarity around what your
product should be. Choosing your product and getting clear on what
you're going to make will help you take action to move forward
to the next step. I would love to share with you my vision board from
my original visioning. It's linked in the
project resources. I would also love
to see your own. So please share it
in the gallery. Now that we've written
an inspiring vision of the future and use it to decide what product
we will produce, let's switch to our
business hat and make sure we're pricing our product
right out of the gate.
5. Setting Your Price: Next we're going to dive
into some math and make it less scary for you if
that's how you're feeling. The thing about pricing your product is that you do not need to guess at this number. I can walk you through
some simple steps to determining the appropriate
price that will make sure you're always turning
a profit every time you sell an item for the
health of your business. Over the next two lessons, I will teach you some simple
formulas to figure out: A, how much to charge
for your product, and B, when you break even. For many creative makers, I hear that deciding what to charge is
really challenging. I read this in the forums, from Etsy sellers and
all over the place. This is something that does
not need to be a mystery. We can use a spreadsheet
to calculate, based on the cost of your
supplies and ingredients, the time that it takes you
to produce your product, and how much you want
to make per hour. So many creatives I know
have been overheard to say, I am not good at math. If this is the story
you're telling yourself, I want you to flip the
script and start saying, knowing my numbers is important to me as a small business owner. Trust me, you can do all of
the math you need to succeed. Start thinking of your numbers as a game that you can win. We're going to use a
formula designed to make sure that your
margin is healthy. A healthy margin is key
to a successful business. This is the money you will
need to grow your business by investing in
equipment and marketing, and this is the money
that you will need to incentivize yourself to keep
going when the work is hard. If you have better than
a 50% profit margin, then you have wiggle
room for paying referral fees to
platforms like Etsy or Amazon Handmade and for pay-per-click ad campaigns
should you need to run them. Let's start with some
basic definitions. Cost of goods sold is all of the materials that went into
making your physical item. If you're a baker, this is
flour, sugar, and butter. If you're a potter,
this is clay and glaze. Sales is the total dollar amount received from your customers. Profit is the amount left
over after you deduct the cost of goods sold and
your expenses from your sales. Expenses are all other costs, not the physical item, but things like your
wireless Internet bill, your printer, your paper, your toner; things that you
need to run your business, but they don't ship to the
customer as part of your item. All we need to worry about
for today's lesson is using these numbers to determine
the right price for our item. Now let's figure
out your numbers. The first thing we're
going to need are your receipts for any
supplies or ingredients, anything that you've
purchased for your business. Hopefully, you can find
these in your email. Maybe you have a paper copy. We could also just look up what you paid if you did
not keep the receipt. If you haven't made
your item yet, look up what the supplies and ingredients are going
to cost you and do the math to figure
out how much of that supply or ingredient
you're going to need. The next thing you need is a stopwatch: I want
you to use this to calculate exactly how long it takes you to
produce one unit. I do not want you to guess
at these numbers at all. This is not conceptual,
this is concrete. Use your phone calculator, use your phone stopwatch, go to your receipts and figure out to the
penny what you paid for every ounce of bees
wax or every yard of yarn, however you measure
it in your industry, and exactly to the second, how much time it took you
to produce that item. Now for the moment we've
all been waiting for, I'm going to give you
a behind-the-scenes look at my exact numbers and how I come up with the price that I should
charge for my product. Here is an example. This pretty much lays out a recipe including
each ingredient, the container I'm putting it in, the label that's
going on the jar, and the labor or the time that it takes me to
produce one batch. In my example, I'm making one batch which
is 10 units of balm. I need 10 ounces of beeswax. I know from checking
my receipt and using my calculator that beeswax
costs me $0.33 an ounce. Same for coconut almond oil. My jars cost me $0.65, and the lid costs me 25. The label costs me 12. I do not leave out something
that only cost $0.12. I want to know to the penny, how much is this product
costing me to make. My labor for one
batch is one hour. I've chosen the number $20
per hour as my desired wage. This is how much I want
to be paid and no less. I recommend choosing
an aspirational number somewhat above your
first instinct. Now this spreadsheet is going
to do the math for you. The amount that goes into your batch times the price
you pay per unit equals, and you can see
this is a formula. On the form that you will
fill in for yourself, the cells that are purple, our formulas, don't
type into those cells. As you can see, if I put
Quantity 1 costs per unit, $5, it will automatically
fill $5 in for you. Then for your second ingredient, say it's Quantity 2 costs $10, not only is it filling that in, but it's also totaling
them down here. In my example of balm 10 units, the total cost,
including all supplies, ingredients, and labor
is $35 per batch. Each batch produces 10 units. This you will need to fill in, but the rest will fill for you. The magic number is $3.50. That's how much it costs
me to make one balm. I multiply that number by two to get my
wholesale price of $7, and multiply that
number by two to get my retail price of $14. If you're not planning
to sell wholesale, you could use this as
your retail price, but I recommend considering this higher number if possible. A lot of people know already
about selling retail direct to the consumer on
Etsy or on Amazon Handmade, for example, or through
your own website. Not everyone has thought
about the opportunity to sell wholesale to gift
shops in your town, or to gift shops in towns
all over the United States, where that retailer will
select your item as part of their curation and then resell it to
their customers. This is another income
stream for you, if you have enough margin
in your product to be able to market up times four. You might sell it to the wholesale customer
for $3 a bar, and then they'll turn
around and sell it to their customer for $6 in
the case of this soap, or for our lip balm, I might
sell it to them for $2.50, and then they may sell it
to their customer for $5. I have enough margin in these items to be able to
market them up times four, and so that broadens all of the places that
I'm able to sell to. Let's talk about what to do if the price you came up
with seems unreasonable. If it seems too
low, that's great. You can charge whatever your competitors are
charging, or a little more. I suggest charging
a little more. People often have a bias
around perceived value, which means that the
more that you charge, the more valuable they will
perceive your product to be. A lot of people are distrustful of low-priced
products and they actually won't buy
it because they'll think maybe there's something not right about this product. Well, a higher-priced product
that has been selling, well, they'll think something must be awesome
about this product. I need to try it too. When I first learned
soap-making, the lovely woman who
trained me said, I should charge $5 a bar, or five bars for 20. I thought you must be crazy, who would pay $5 for a bar
of soap, but I was wrong. I came home and
did a craft show, and not wanting to be
disrespectful to my teacher, I charged $5 a bar. Not only were people
willing to pay $5, but they all bought five
bars for $20 and I sold out. Selling out of soap at $5 a bar made me realize
that it was possible to charge more than what
I was comfortable of paying as a starving college
student taking the bus. I wouldn't have paid $5, but I realized I'm not exactly
my own target customer. Maybe this person has a
little bit more money than I have now as a starving college
student who cannot imagine paying $5
for a bar of soap. Maybe this is me in the future after I've made a
little more money and I can afford that
essential oil soap for each bathroom in my house. That helped me to up my prices on Etsy as
well confidently. Then seeing those
products sell at the higher price I didn't
think was possible, just propelled me forward with confidence that what I'm
making is worthwhile, it's handmade, and people are
willing to pay more for it. As we just learned, the basic equation
for calculating your price is the cost of the supplies and
ingredients that go into it plus the cost of your
labor times two, if you plan to sell only
retail, or times four, if you're planning
to sell wholesale on places like Faire.com,
for example. Now download the worksheet and use that sheet to
calculate your price. Bonus, calculate your
margin in Tabs 1 and 2. Amazing job so far. Now that we've determined
what to charge for our item and calculated
our profit margin, next up, let's figure
out how to break even.
6. Hitting Break Even: Now that you've defined your vision, determined your product, and set your price, let's figure out exactly when you're
going to break even. When I was a little girl, my grandpa introduced the idea of break even to me this way. We went to the park
together and we saw a man selling hot dogs. When we got home, he sat
me down on his knee, got out a pen and
paper and said, okay, Holly, say that the man selling hot dogs purchased his
hot dog stand for $300. He needed to buy 100 hot dogs at $0.50 each and another 1,000 ketch up packets and
mustard packets at $0.05 apiece and some
napkins of course, maybe 1,000 of those for $0.05. How many hot dogs
does he need to sell to break even on
his initial investment? So if you do the math using this spreadsheet
that's provided, you see that the
total he invested in his business upstart was $500. He's selling each hot
dog for $5 a piece. So the number of hot
dogs he has to sell to break even is 100 hot dogs. When I started my business, I was thinking about
my grandfather, who had started many businesses before and I wanted to
use his example of break even to make sure that I
was actually profitable and had recouped my
initial investment in supplies and ingredients. You can see on this example
here that when I started, I spent $200 on essential oils like
lavender and lemongrass. I spent $15 a piece to have two custom molds
fabricated for making soap. I bought knives and spoons
and cutting boards, and of course, olive oil and coconut oil and things
as a soap base. My total investment was $500 the sale price of each bar
of soap was around 450. The number of soaps
that I would then need to sell to break even on my original investment
of $500 was 111 bars. Knowing this number
is so powerful, I knew that if I went
to our craft show and took 111 bars and sold out, that's it, I was in the black. I had recouped all of the
money that I originally took from my personal bank account and invested into my business. Knowing exactly how
many bars I needed to sell to break even
gave me a smart goal. A smart goal is
specific, measurable, achievable, realistic, and time bound and I want
you to be smart. Now it's your turn, go into Tab 3 of the spreadsheet
I've provided, and below my examples
calculate your break even point and then share that with us in the project gallery.
7. Final Thoughts: You made it to the
end of the class. Congratulations. I hope
you found this useful. You now know what to make, how to price it to
accumulate profits, when you'll start
making profits, and exactly how much. I am so excited to share
this process with you. I hope it helps you
to succeed too. I would love to see your
progress and your products. Please share them in
the project gallery. Thanks for watching. Goodbye.
Holly Rutt, Founder The Little Flower Soap Co
