Profit: how much is enough?

You know you’re making enough to pay the bills because, well, you’re paying the bills. But do you know whether you’re making a profit on each order? And how much is a good profit margin for a small creative business, anyway?

In this brave new world of online selling, especially for designer makers and small creative businesses, there isn’t much out there about what makes a good profit margin. It’s a bit like the salary question – not many people talk about it.

And just like when talking about salary, a “good” profit margin means different things to different people. Big enormous retailers, for example, look for 40% profit, if not 60-80%. There’s the widely known fact that popcorn is one of the most profitable products ever, with about 97% profit margin – the cost of corn and the heat to pop it being so small.

Anyway, for small creative businesses, I’m going to come out and say it: if you’re not making at least a 25% profit margin on each product, you need to increase your price or decrease your costs. Let me repeat that:

25% is a great minimum profit margin. Aim for that.

So how do you calculate profit?

In simple terms, profit is the total price the customer pays, minus all your raw materials, packaging, postage costs, commission charges, and – where applicable – VAT. I recommend doing this for every single product, so that you’re confident that you’re making a profit on each order.

For a more detailed spreadsheet and approach to calculating your pricing, register for Pricing for Profit (and Sanity!) here.

Other considerations

One of the things I feel really strongly about is adding in the cost of your time to your profit calculations. Even if you’re not paying yourself, and simply take profit as your payment, it’s really important to know whether your products themselves are profitable, with your time factored into the price. Checking this will ensure your profit is true profit, and it’ll help you to decide whether to employ someone – you’ll know how much their time should cost, and whether it’s worth it.

And there are other costs you’ll need to factor in beyond your per product costs, such as rent and bills. I prefer to do this after you’ve calculated the per product profitability – keeps it simple. So make sure you look at how many items you’ve sold this year, how many you’re likely to sell, and times that by your per product profit. Then take off your annual bills, rent and other costs, and see your final profit for the year.

Need more help?

Pricing and profitability are absolutely key to your business success. Check out Pricing for Profit (and Sanity!) – my mini course on pricing. The course includes loads of resources to help you find your best pricing bracket for your products.

You may also find ongoing group coaching helpful, which is available via Progress not Perfection. You’ll receive Pricing for Profit totally free when you sign up!

Here's the thing: creature comforts

Little things: my favourite coaster, and favourite mug
Little things: my favourite coaster, and favourite mug

Every Friday I post a “here’s the thing” blog. “Here’s the thing” is something my mum (and many other wise people) like to say when they’re about to make a good point. Hopefully these posts are also good points.

There have been lots of big shifts in my life recently: how I work day-to-day, how I get paid, how I manage my time and – not insignificant – where I work.

Working for a big company, even one as lovely as notonthehighstreet.com, is a very different environment to working from home, on your own, every day. There are things I really love about it, like being able to listen to my own music, and having the windows open as much as I like.

There are other things that have been an unexpected challenge. And it’s not just about my desk and chair and temperature.

I’ve discovered that, for most of my adult life, I’ve ignored some of the basic needs of my body while I’ve been working. And I know I’m not alone in this.

It sounds (very, very) silly, but when you’re working in fast-paced environment, sometimes it’s easy to “forget” to go to the loo, because you’re about to head into another meeting or you’re in the middle of a conversation with someone important who never replies to your emails, so you just have to talk to them now.

And you eat the cake and chocolate because it’s there. And you forget to go outside because you need to do five more minutes of work. (Okay, I’m still guilty of that one.)

Now that I’m out of the office environment, and broadly in charge of my own time, I’ve been trying to notice what my body needs, and when it needs it. Like eating when I’m hungry, resting when I’m tired, drinking when I’m thirsty – not exactly complex stuff, but it can be so hard!

One of the things I achieved last week was buying a pair of shoes that actually fit. I’m really not a shoe person – I never wear heals, and I’m pretty fussy about what I like – but it wasn’t until the weather got a bit warmer and I couldn’t bear to wear my worn-out heavy trainers for my daily walk. Last Friday, a new pair of Birkenstocks arrived, and finally – finally – I have something I can wear that doesn’t rub my toes or squeak or leak.

And doesn’t that seem silly? But I know, I just know, that I’m not alone in dismissing the need for new shoes, or a tidy workspace, or a loo trip, or a glass of water, or (god forbid) a lunch break. We can all get caught up in being busy or thinking that we matter less than keeping other people happy.

But that’s just not true.

So here’s the thing:

We’re not robots. We need food, air, light, comfortable clothes and surroundings, and regular loo trips.

Your customers, clients, suppliers, colleagues, staff, friends, and family need you to be looking after yourself. If you’re not giving yourself even your most basic needs, how can you give them the creativity, quality, responsiveness, love that they deserve – that you want to give?

Today, this weekend, next week, listen to what you really need. Refuse to allow yourself to get too thirsty or too hungry. You might need to plan in some time to take proper care for yourself, maybe even setting an alarm on your phone as a reminder. Or you might simply need to do one thing right now.

It doesn’t have to be huge. Take two minutes to listen to what you need. Then go and get it.

I’d love to hear what your creature comforts are, whether they’re things you do every day, or something you just discovered right now – let me know in the comments!

Take care x

PS I found time this week to set up a testimonials page! If you’re interested in what it’s like to work with me, have a read.

Here's the thing: my first client

My 1st clientEvery Friday I post a “here’s the thing” blog. “Here’s the thing” is something my mum (and many other wise people) like to say when they’re about to make a good point. Hopefully these posts are also good points.

Over the last month, a number of people have asked me if I take my own advice. After last week’s post in particular, my boyfriend told me he was going to make me read it when I was worrying about not being good enough. Touché, Ryan, touché.

So I wanted to write this week’s post to say yes, I take my own advice, but yes, I also sometimes struggle with “is this okay?” and “what if it all falls apart?”

And I thought the best way to do that would be to tell you about my first ever client.

My first client is someone I’ve known for a long time. She’s inspiring, determined, fickle and stubborn. She’s a born introvert, but loves being around like-minded people. She’s more successful than she thought she’d be at this stage in her business. She’s wondering how she can keep that up.

[Spoiler alert: Before anyone gets into thinking “oooh, I wonder who she’s talking about,” or “oh god, she’s talking about me,” – I’m not. Keep reading. It’s okay.]

Here are some of the things we’ve said to each other:

Her: “Hi Jenny, I’m about to launch this new website, but I’m suddenly not sure it’s what I really wanted. What if it’s rubbish? What if no-one likes it? What if there are 50 billion mistakes in it and people think I’m stupid because I didn’t fix them?”

Me: “You’ve worked really hard on your website, with a really talented web designer who gets what you’re trying to do. Did you really know how it was going to turn out at the beginning? Not really, because otherwise it would have been that way. And you know what, here’s the secret of running your own business: if you don’t like it a month from now, you get to change it. It’s a process. This won’t be your website forever.”

Her website launched, people really liked it. But more importantly, she saw that, for her launch, it was absolutely the right thing.

Another example:

Her: “I have too many ideas and not enough time. What should I concentrate on?”

Me: “What’s going to make the biggest difference to your business today, this week, or this month? Do that first. Then do something that has long-term value – write down your ideas, flesh them out, so you can come back to them. Then, back to the first question. Repeat ad infinitum. And remember – you’ve got good intuition. You’ll know the best things to do.”

So have you guessed it yet? My first client is, well, me.

A very wise woman introduced me to the idea of thinking about it like that, knowing that I would struggle with a lot of the things all small business owners struggle with. And it remains true. I do read my own blog posts, my own notes, and I have open, honest, slightly ridiculous conversations with myself. I also seek guidance from people who get it, who I know I can trust.

So here’s the thing:

If you were your first customer, what would you need or want? Would you like your products? Would you buy them, have them in your home? Do they resonate with you?

And while you might be your first customer, you’re not going to be every customer. You will need to think beyond your own preferences at some point. Just because you like it, doesn’t guarantee other people will.

BUT making sure you’re happy with your work is the route to sanity and happiness. If you’re spending all day designing, crafting and making products you don’t even like and have maybe started to resent, well, I hope this blog is a little nudge towards creating something new that you really, truly love.

So today, this weekend, over the coming week, pretend you’re your first customer. Don’t try to second-guess yourself. Just you, your preferences. What are they?

 

PS I can’t believe it’s almost a month since I became self-employed! Time has flown by. My 25% off launch offer ends on July 31st. If you want to work together at the reduced rate, get in touch before then (even if we don’t start work together until way later).

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