Forums: Discussions for entrepreneurs and small business.

Hi everyone,
I found this site through an article online about turning a hobby into a business. I have been designing and manufacturing little girl`s ballet/dance/skating skirts on and off over the last 4 years.

It began with a skirt that I made for my daughter. The other mom`s loved it and told me that I should make them and sell them. I sold a few here and there at the dance school then put the rest on ebay. They all sold very well, but I realized that I had them priced so low, that I wasn`t making a profit at all.

I really love this hobby of mine and if I can turn it into a successful business, that would be great. I do have a vision of selling them via a website (already registered a domain name, but that`s it) with a shopping cart feature. I just have so many questions and I`m hoping that I can get some good advice and direction here from this group.

If you can help me out with what to do next, that would be great and I thank you in advance!

Joy


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Designer/Owner, Katchy Kids Dancewear I make every skirt with love! www.katchykids.com

Your next step, which should always be the first step, is to make projections of expected costs and revenues over a certain time period.  Be realistic about all expenses (COGS, SG&A).  Do the appropriate research so the estimates are as accurate as possible.  Can the business support the type of income you need?  If so, then it is on to the next step.

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

One thing that`s come out of our interest in SuN (Startup Nation) has been the concept of bootstrapping and pricing. Bootstrapping is essentially where you have no money to invest in the business, taking money from initial sales to make that growth (rather than a loan or investor).

The standard way of accounting proposes that you include your labor as one of the costs in the startup. That`s fine, until you start looking at sewing (and other similar situations). A seamstress makes $15/hr., for the sake of argument. Suppose it takes you 1 hour to make this dress.

Now look at the materials, and let`s say it costs you $8 for all of that. Without factoring in the room, utilities, machines, wear-and-tear, you`re already selling at $23. But what if the market doesn`t support that as a startup?

Is it true that if you sell the dress at $15 you`re "losing" either the eight dollars in hard costs, or the labor charges? I don`t think so.

Suppose you sell the dress for $25. Many business analysts would say you`re gaining a $2 profit. However; that includes the $15 labor cost, which is going to YOU! So not only are you being PAID $15, you`re also earning a profit on that work.

Are you really earning a $2 profit, or is that a semantic argument? Is your salary really a salary, or is it money you`re earning from the sale of the item?

Yes, if you start selling 1,000 dresses per month, you`re going to have to develop the standard process. At that point, you`ll have to farm out the sewing, and you`ll have to handle employee costs, taxes, and related issues. But at the very start, it`s your choice as to how much you want to be paid for your labor.

One solution we`ve started experimenting with, is to say that our sale price is the "wholesale" cost. We offer no discounts on volume, because AFTER we add in the labor, the items would cost significantly more than we`re selling them for. At the moment, being an unknown startup, we believe we can`t afford to sell them at that "fully-developed" price, because we don`t think the market will support it.

It comes down to how much time is it taking you per dress, and how much money do you want to make before you get fed up with wasting your time. What`s the dollar amount you want, where you only reduct the hard costs of fabric and thread?

(Just saw this related thread on how much do you draw in salary from a startup.)

First, welcome to the family!

Second, I suggest just breathing this website for a month or so. Trust me, any question you may have about starting up is going to be answered somewhere.

I literally spend hours just listening to the podcasts. ALso pick up the "Open for Business" book the Sloan brothers put out (Free plug here...now do I get my free StartUp Nation cap?). Seriously, Follow the 10 steps and you will have the beginnings of an awesome business and it will help you more define the questions that you need to ask and that is where this community is most beneficial. Once you get ready to develop a website, there are designers in here that would love to help you, and once you get it up, run an ad in the marketplace section (plug # 2... Does this get me the matching T-shirt? Jeff? Rich? Joel? Heather?)

Again, welcome to the group and it won`t take long for you to get addicted.

To save space, I wanted to post a thank you to all 3 of the people that replied to my post. I am finding all of them very helpful. I do have many questions and they are mostly about getting a website built so that I can start to sell my beautiful skirts. I listened to a webinar yesterday by Tom Antion and he mentioned getting a website designed for $50 (maybe I misunderstood). It sure can be overwhelming, all the stuff you need to look for when shopping for the right website design route to go.

I`ll follow your advice and hang out here for a while.
Thanks again,
Joy


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Designer/Owner, Katchy Kids Dancewear I make every skirt with love! www.katchykids.com

CraigL, great post.  It is important to understand the labor costs in COGS if you are supplying most of the labor, but probably shouldn`t be a big hang-up.  I guess the theory would be that if you had to hire out the labor when volume picked up you could off-set that "additional" expense by realizing some economies of scale.  Efficiency, supplier volume discounts, etc.  I guess it would depend on what % of COGS is going to direct labor.  Anything north of 20% would get my attention and I`d like to account for it up front in pricing the product.  Raising prices later to account for new labor charges could be a fatal mistake, IMHO.  If growth is the plan, then the business model needs to support market labor costs, or it will need to be retooled. 

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

Hey there, Grill Guy ;-)

I think what I`m seeing take shape in this particular thread, is that one of the very first "steps" in starting a business is to decide on the level of scale during the startup, and how long that level will remain the same before changing it....scaling up.

A hobby generally produces a very small amount of product. Then someone decides to "take it on the road." At that moment, they make a fundamental decision: Will they gear up to sell 1,000 items per month, or 20 items per month.

I think without that decision, people suddenly get overwhelmed. If someone is thinking global scale, but have or spend the money for local neighborhood scale, they`ll get in trouble. Just as much as if they do it the other way.

This isn`t actually about accounting, as Grill Guy points out. It`s about the "mindset" taking place during the conversion from hobby to business.

Welcome Joyous1. You`ll find this place very informative.

The proceeding posts offer some good advice about going from hobby to
business and the aforementioned challenges should be taken serious.
Here is a real world example. I know an artist who began selling his
original drawings online. He set up a site specifically to sell them. They
are small "doodles" that don`t cost very much. He began spreading the
word across the web and it started slow but was steady. Then he hit a
tipping point where all of a sudden it caught on. Great! Business was
booming and then he got 10,000 orders in just over a month`s time. Now
he struggles to keep up.

Creating a small drawing may not take as long as sewing a ballet skirt
and a ballet skirt may not be as inexpensive as his art, but there`s a
lesson to be learned. Wouldn`t you love your skirts to take off? Wouldn`t
it be great if you got 10, 15 orders a day? I know nothing of this niche
market but what if it happens? Can you keep up? What are your
processes to standardize the manufacture of skirts, if and when it comes
to that stage. Will that transition be seamless for the customer? And
most important, is that what you want? What if you no longer are doing
the sewing? Do you think it will still be fun for you?

Be creative in answering these questions. If one of your goals is to not
leave the sewing machine, then construct your plan around those kinds of
values. But be aware of how growth can create challenges to the artist or
hobbyist who`s passion lies in the actual construction of their products.

Wow, Steve. Thank you so much. What a great and helpful post. Fortunately for me, I have the vision so I have the answers to the questions you posed. I can`t wait to be able to turn the sewing over to someone else! My love is the actual designing of the skirts, the selecting of the fabric and trim.  The sewing part is just what I have to do now to bring the skirts into form. My work will be searching out other workers to put them together at a price that works within my budget. I figure that I can search around now and gather info for when and if that time comes.

Right now, I`m taking my wares around to different dance classes and selling them on my own. I get a great response everywhere I go. Someday, I hope to be one of those success stories. I don`t need to be a multi millionaire, my goal is just to have enough to live life comfortably. (Well, if I become incredibly wealthy, that will be icing on the cake!)

Thanks again. I`m still confused and wondering about what direction to go...Ebay store?  Website? If website, then who designs it? and on and on it goes.

I`m so glad I found this site, or maybe it found me.
Gratefully,
Joy


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Designer/Owner, Katchy Kids Dancewear I make every skirt with love! www.katchykids.com

Welcome, ballet lady.

Try plugging "website" (without quote marks) and "web site" (with quotes) into the search box at the top right of the page. That`ll give you a good start.