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How To Successfully
Market Your
Hobby Products
If you are not necessarily trying to get rich buy but would like your
hobby to at least pay for itself and perhaps grow into something
someday, try considering your hobby as small business. Even if you
don't get rich you may be able to deduct the cost of your materials.
A serviceman stationed in Alaska loved to go fishing but found it to be
very expensive sport up there. So he bought a fishing fly winding outfit
and started making his own flies to save money.
When discovered his lures were as good if not better for Alaskan fish he
decided to try and sell some of them to help cover the costs of his
"vice." he sold a few dozen to an Anchorage department store every few
months and not only made enough to pay
for his fishing, but helped his photography "habit" as well!
For tax purposes there is a fine line between a hobby and a business.
The IRS defines a hobby as "an activity from which you do not expect to
make a profit" (this makes the U.S. Government a
hobby!). The general rule is that you must make some profit in three out
of five years to legally take the hobby expenses as business deductions.
This rule is not generally applied to obvious businesses like a shoe
store on Main Street. However, it is for racehorses and leather crafts,
which they consider more likely to be hobbies
than businesses (and they're probably right most of the time).
Business expenses and losses are deductible; hobby losses can ply be
deducted up to a amount taken in, and then only if you itemize on
Schedule A.
When you make the decision to convert you hobby into a business it is
necessary to do several additional things.
First, you should figure out exactly what it costs to make each product
(including you labor at the going rate). You must be able to
intelligently predict how many you can turn out and how soon.
Keep accurate records of all business related transactions. You can only
deduct expenses for which you have records! Once you compute your
production costs, you can estimate your retail
and/or retail rates.
A general rule is 2 times your cost for
wholesale; 4 times for retail.
For example, something that costs $5 to make would be priced at $12.50
wholesale and $20.00 retail. You must be able to make a fair profit at
the wholesale price and dealers should receive about 40% of the retail
price as their profit.
Note that if you retail and wholesale both, you must be careful not to
undercut your dealers. When you say the suggested retail price is $20,
make sure you do not sell that product for any less of your dealers will
leave you cold!
It really doesn't matter what your hobby is, so long as it is a product
or service that others will buy. As you convert to a business, it might
(or might not) be necessary to alter your production methods and even
the products themselves.
If you make a nice hobby horse you will probably want to make some jigs
and figure out a way to make them more efficiently. You have the choice
of turning out one masterpiece a week for $100 or
10 good ones at $10 apiece.
Your decisions may well be influenced by demand as well as your personal
preference. If you make pillows and someone likes your work and wants a
bedspread, why not?
You can do just that one bedspread or expand your business to include
bedspreads as an additional product if it looks like they will sell
well.
Depending on the degree that you would like to go into marketing, plan
to {"showcase" your products or show them in their best possible light.
Notice how jewelry stores display their wares exquisitely on dark velvet
under small spotlights (not ordinary
florescent lights) to make them gleam and sparkle. That's showcasing!
If you are artistic and have the means to make up
a catalog to send prospective customers, fine.
Take flattering pictures of your products with complementing backgrounds
and have them
printed in brochures or booklets. Black and white pictures are better
for non-color reproductions because they offer better contrast.
Plan an on-line boutique
or store around your craft. Take pictures of of crafts with a good
quality digital camera and upload them to your webpage. Hold on-line
parties and invite all your friends. Two great resources for this Idea
are
Online Party Guide and hot conference a cutting edge VOIP software
that will allow you to hold lively and fun On-line
parties.
You can also advertise (with pictures, if available) in the local media:
newspapers, radio, cable TV, small magazines or even by mail. It is
usually a good idea to test market your products (and ad comparison)
before spending a lot on advertising.
If the response to your testing is poor it could be yours ads timing,
prices, the vehicle or that you simply haven't reached your intended
audience.
The testing period is when you experiment: try various size ads,
wording, pricing, etc.
How do you get usable advice? In some cases, merely by asking.. A tip is
to check with retailers of similar products. Since they don't make them,
they will often give you their unbiased opinion of why they do or do not
sell.
When you find one that will advise you, ask for their suggestions on
quality, pricing and potential salability of your products (this, by the
way, may help your chances of selling to them later).
Once you have determined that your product will
sell at a price to make you a reasonable profit,
make up samples and good quality photographs and start contacting
potential markets. If you -plan to wholesale, call on prospective
clients and give them full information pricing, quality and your return
policy (yes, you should have one).
A shorter method is to offer your products on consignment to local
stores. They usually won't buy very much until they know there is a
market (why should they replace something that DOES sell with something
that MIGHT?).
Remember, however, that your intent is to get as many of your products
on display as possible, so consignment is good for both you and the
store in the early stages.
If you plan to retail, you need an advertising plan for ads, displays,
notices, announcements, news coverage and perhaps prizes in local
contests. Ads in the local paper (also, radio and cable TV) might start
out with a larger (e.g. 3" x 5") announcement of your product and
possibly an introductory special, followed by smaller display and a less
expensive,
permanent classified ad.
Displays are any means of showing your product to the public, such as
renting space in a vacant store window or giving a merchant a special
deal to allow you to set up a display.
Notices can be put up on store and church bulletin boards or listed on
cable TV. Announcements can be ads, radio spots, posters, signs that
simply inform the public that your product exists.
News coverage is usually very effective and should be a major
consideration. When you place your initial ads in the local paper. ASK
THEM to send out a reporter!
Most local and small town papers are happy to do this because the
articles are local interest. Make the best use of their exposure: focus
on your products, not your ego!
When you are satisfied your market potential and ready to produce in
volume at a good wholesale price,, start contacting progressively and
larger markets.
Check on mail order companies, distributors and catalog of publishers.
If you retail, place ads in vehicles with larger circulation. Send out
professionally done brochures and price
lists among with a short but cordial cover letter describing your
product and offering additional information. Be sure to include
information on how to order. For retail customers, include a "handy"
order blank and possibly an addresses return envelope.
Depending on the product of your hobby and its acceptance, your small
business venture might keep growing. Many of today's large businesses
started out as small hobbies. Some craft products can
profitably be marketed through large catalog houses. Others are best for
local retail sales and a few lend themselves to customizing, where
customers come directly to you for personal service.
Your success in marketing your hobby depends on the demand for the
product (which you try to stimulate), the price quality, plus your
ingenuity, determination and enthusiasm.
Something as uncomplicated as renting a flea market stall once a week
may be just the ticket. It may be as far as you really want to go. But,
if things go well, you may want to expand your production and sales
efforts.
When you expand, think about buying and selling COMPATIBLE but
non-competing items made by other hobbyists (or supplied by hobby man-
ufacturers). After all, your marketing system
is in place and is working, so why not make extra profit for relatively
little extra work or cost?
One mistake many hobbyists make in the business world is to put so much
time, effort and TLC into their products that can't possibly sell for
their
actual worth.
If you are going into business, find a happy medium so you can turn out
quality products at an afford-
able price and still make a fair profit. A second tip is to be able to
separate your product from your ego. Never take rejection for it to flop
that have nothing to do with you! Keep your mind and ego clear so you
can concentrate on improving the product's acceptability!
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