Business Flip!Flip Business Flip

ElaineZimmermannWays to Wealth

Rochelle: I have a hobby that I would like to turn into a business. I have sold a couple of my handmade items to friends who seem to love them, but I don’t know how to make a business out of it.

Elaine: From the information you provided in your question, it appears you already have a product that consumers are interested in and are willing to pay for. Because you have been able to sell it, it must be a product that is either unusual enough or of such good quality that your consumers are willing to buy it from you instead of at a retail outlet. All of these are good indicators that you might have a product that you can build a business around.

Without knowing your product, my first concern is the amount of time it requires you to make each item. I suggest you keep a log of the number of hours you work on each item and the cost of your materials for each item.

Let’s say each item requires 21/2 hours and $1.53 worth of materials. Now imagine you receive an order for 300 items that must be delivered in four weeks. You would have to hire people to help you make the products.

Using the federal minimum wage of $7.25 times 21/2 hours equals $18.12. Adding the $1.53 for materials equals $19.65 “cost of goods” per each item if you continue to make each item by hand and in your area. If your retail client wants to sell your item for $39.95 and is willing to pay you $23 per item (including shipping), you would “net” about $3 or less per item. This does not include the cost of packaging your item and other miscellaneous costs, including accounting, state taxes and other costs associated with a business.

But don’t let this discourage you. Many businesses begin with razor-thin profits on their initial orders. Sometimes the first order merely proves there is a demand for your product.

Once a demand for a product has been established, you can explore having your product manufactured rather than made by hand. Or you could consider having your product made by hand in a foreign country where labor costs are much lower.

Or you can consider both — having your product manufactured in a foreign country.

Before you become overwhelmed, I would like to suggest you read “The One Page Business Plan for Women in Business” by Jim Horan and Tamara Monosoff (mominvented.com). More than 500,000 businesses have used this system of outlining the vision, mission, objectives, strategies and action plans for starting and building a successful business.

According to Monosoff, “No matter how good your idea is, no one will read it, understand it, or implement it unless you can get it on to one page.”

Monosoff is the author of several books for “mom inventors” and has successfully designed and launched innovative products for moms.

Questions? Write Elaine at Elainezimm@aol.com. Her Web site is elainezimmermann.com.

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