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Career change: how to turn a hobby into a business

I attended Country Living magazine’s Spring Fair to hear tips from women about how they’ve set up their own small businesses. I had my eye on two seminars in the ‘business zone’ – ‘get your jam into John Lewis’ and ‘start your own business on a shoe string’. Setting up a business is something considered by many midlife women, some are forced into it by circumstances, others have nurtured a lifelong dream of turning their hobby into a way of earning a living. These top tips are what I gleaned from both seminars.

The event is a retail fair crammed to the rafters with small businesses and designer-makers selling artisan crafts, home furnishings, food and fashion. A newcomer section included thirty traders exhibiting for the very first time, hopefully this post will let you decide if you have what it takes to join them next year.

 

1. Work out pricing

The difference between a hobby and a business is that you need to be able to make a profit on every item you sell in order to balance the books and pay yourself a salary. In order to discover if your idea is viable the very first thing you need to work out is pricing. Lots of advisors talk about business plans and that puts a lot of creative people off but all you really need to do is work out how much it costs you to produce something and how much you can sell it for.

Cost of production includes:

  • Raw materials, packaging, deliveries and couriers, transaction fees, electricity etc.
  • Hourly rate for your (or someone else’s) time
  • 15% Wastage (time, materials etc that are naturally wasted in the process)
  • Cost to achieve sales: marketing (such as branding, website and time spent on social media), cost of stalls/stands for direct trading at retail fairs or markets, advertising, credit card transaction fees etc.

From this you will work out the actual unit cost to you. If you sell this item directly to your customer (at a market stall, retail fair, online or to friends etc) you can choose a price which you think is appropriate, deduct the unit cost and there you have your profit margin. If you are selling through a third party such as ‘Etsy’ you will need to account for their sales and transaction fees too. Etsy and online stores like Not on the High Street or All by Mama are a great way to get your products in front of customers already looking to buy from independent makers like you. Lauren Aston, one of the panel and founder of Lauren Aston Designs, makes the oversized chunky interiors knits (shown below) and she found selling through Not on the High Street helped establish her name which then directed traffic back to her own site where people now buy direct.

 

Images from Lauren Aston‘s blog

 

If you are selling to retail (shops and online shops) you will need to work out a recommended retail price (which will include VAT at 20% in the UK). Different retail sectors have their own margins (mark-up on your trade price) so you will need to do some research on the margins in your sector. For example my design company Broadbase have designed and sold several ranges of greetings cards into shops and museums where the pricing formula has been something like this:

Retailing selling price = £2.50, VAT is 48p of this, so retailer gets £2.08, they want a margin of at least 60% (approx £1.25). This means they will pay 83p per card to us of which approx half of that is the cost of production.

Once you’ve looked carefully at the pricing you can be realistic about planning for growth and profit.

When deciding on a retail price remember that if something is beautifully crafted and handmade it may also have a value far beyond what you or your friends would (or could) pay for it. One of the biggest problems is that designer-makers undersell themselves and it is much harder to put your prices up than it is to offer a discount to bring them down. Research the market thoroughly and find out what people are willing to pay for a luxury version before you try to compete with the mass-produced market.

 

2. Stay lean and slim

It might be some time before your business idea will return any profit so you need to think about how you will survive in the meantime. Some people use savings or work part-time to finance the early stages but whatever the circumstances you will want to minimise costs wherever possible. Branding and marketing are two areas where creative people can take advantage of technology to do-it-yourself. Drag-and-drop website templates can easily help you build an online presence (though I would recommend a self-hosted wordpress site if you’re a little more computer savvy) and social media is a great way of getting your message out there on Facebook, Twitter and Instagram.

‘Beg, borrow and barter’.

Is the advice from Emma Jones, the founder of Enterprise Nation on getting started without much capital. She gives 7 useful tips for UK start-up businesses on the Business Advice Service website.

 

3. Tell your story – build your brand

Even if you start by making jam in your kitchen you can still tell you’re story in an engaging way and this will connect with customers and the press. One member of the panel, Catherine Piddington, who founded Piddington Jam does this very well and her website is a great example of how to build a brand with distinct personality. She uses a clever stapline, ‘Jam with a bit of mischief’  which immediately sets it apart from everyday jam and makes the customer want to taste it. Branding, remember, is not just your logo but about who you are, what your product is, where it is made, how it is made and even how much you enjoy making it.

The Design Trust is a very useful resource for designer makers and I wrote a guest post for them on creating a brand strategy which might help you start thining about the branding process.

 

4. Research, listen and learn

All of the panel admitted to making mistakes (usually with their pricing). The point is to be flexible and learn from your mistakes so that you can more accurately respond to what your customers want. You’re idea is just that and it’s only when you go out and test it that you can really see how the market responds. Do pop-up shops, market stalls, christmas fairs and listen, listen, listen. It’s often eavesdropping on what people say that makes you realise that the type needs to be larger on your label or the colour is wrong. Being confident isn’t about sticking to your guns no matter what – its about knowing when to make changes to improve your product or service to make it better. Start with small batches so that you are not left with stock you cannot sell and this will allow you to tweak and change as you learn. Don’t worry about everything being right from the beginning. It won’t be!

 

5. Plan ahead

What happens if you suddenly need to fill a big order? Catherine Piddington found a manufacturer who could take over her production on a one-off basis if a big order came in.

Catherine can make a staggering 200 jars of Jam a day in her kitchen.

Which means she can make 1000 jars a week but when she got an order for 22,000 jars from an online gourmet shop she already had her back-up production in place. Work out how to upscale well before you need to, that way when you finally get that big order you’ve waited for you can actually enjoy it.

 


I would love to hear from any gals who’ve turned their hobby into a business and have advice to share, please leave your comments below.

The gorgeous sheds at the entrance to the fair are by The Posh Shed Company.

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