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11-16-2004, 12:51 PM #1
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Budgeting Advice for New Craft Businesses
Every crafter or, for that matter, any business person must learn to control spending from the very onset of the venture. As a matter of fact, you should not even be in business unless you have drawn up at least a simple business plan and budget.
Your budget should be grounded in reality and subject to change as circumstances require. In other words, if you income came in 20% below your projections, expenses will have to be cut to make up for the hopefully temporary shortfall.
One serious mistake a small business person makes in a situation like this is to assume that s/he will make up the income shortfall and continue the spending side of the budget without any adjustments.
Most small businesses are undercapitalized to begin with, so it really pays to be conservative. I have always tried to make sure that a craft is making enough money to pay for itself before stocking up on more supplies or new equipment. I try to get a substantial down payment if an order would require that I increase my raw material inventory. Everything that I do must be self-supporting.
Do some research if you plan to add a new type of craft to sell. Try to determine if there is a market and if it looks profitable. Again be conservative in your assumptions and start out slowly.
Of course, not everything works as planned. On several occasions, a craft I thought would sell well didn't. But because I didn't go too far out on a limb buying inventory, the loss was always minimal. If you're lucky you can even recycle the materials into some other project.
As time passes, you will learn what works and what doesn't. As you gain this knowledge, you should be making adjustments to your budget to reflect reality.
This is made much easier by careful record keeping. You can use a simple spreadsheet or a small business software package. You can even use paper and pencil if you can't afford the software.
If you track the cost of your materials, the costs of marketing your products and the actual income you receive, you will know if your budget is on track, if you can afford the new tool you want or if you should stock up on more inventory. You will also be able to decide if you should branch out or change direction.
The bottom line is that you cannot afford to throw money at your business. You must try to workaround obstacles in a cost efficient manner. While your budget may reflect a short period of losses at the very beginning, losses cannot be allowed to go on unchecked.
Careful, consistent tracking and a dynamic budget, one that reflects reality, should be major tools that you use constantly in your decision making processes.
If you use them, you should be able to avoid the fate most small businesses face today - failure.
For more articles on the business of crafting and how to get
started selling your crafts, please visit
http://www.theartfulcrafter.com/craft-business.html Your Craft Business Guide
BY: Eileen Bergen
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