Every week as Small Biz Lady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. This show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Donna Maria Coles Johnson (@INDIEbusiness), Founder and CEO of the Indie Business Network, a trade organization providing mentoring, coaching, and product liability insurance to Makers and Handmade Entrepreneurs. Visit her website at IndieBusinessNetwork.com.
SmallBizLady: What Makes a Product “Handmade?”
Donna Maria Coles Johnson: Products are handmade when they are made with a person’s hands and minimal integration of machinery. There can be gray areas, for example, when products are made using large equipment like mixers. In any case, while machines and components may be used, the final product is unique and made by a person, not a churning factory.
When looking for handmade, look past the marketing hype for authentic human involvement. Learn how products are made in order to know whether or not something is or is not a mass-produced item.
SmallBizLady: Has Etsy’s Recent IPO Changed The Definition of “Handmade?”
Donna Maria Coles Johnson: No. Just because Etsy changed its definition does not mean that consumers or Makers have changed theirs. (Etsy’s changes are arguably a part of the reason its stock price has declined since the IPO. It left a pretty big hole for Amazon to drive a truck through, and it did. See below.)
Consumers are becoming smarter and smarter about artisan quality. They know what questions to ask. They are not going to take Etsy’s word for what “handmade” is. They are asking more questions of the Makers so they can know that a product is really made by a person. The buying public wants to do business more and more with local Makers as well. Etsy’s change is sign of how important it is for Makers to have a branded online store of their own, and to initiate and nurture relationships with people who will buy their products over and over again — and tell their friends.
SmallBizLady: How is Handmade at Amazon’s New Handmade Marketplace Changing the Handmade World?
Donna Maria Coles Johnson: Amazon’s entry brings increased credibility to the handmade landscape. Handmade is more accessible. Amazon’s special vertical for “handmade” means it sees growth. Amazon’s investment of resources specifically for handmade will raise consumer awareness. It benefits all Makers, even the ones not selling there.
SmallBizLady: What are the Differences Between Crafters and Hobbyists, and Handmade Entrepreneurs?
Donna Maria Coles Johnson: Crafters and hobbyists make products for sheer pleasure, for fun and enjoyment, relaxation. Handmade Entrepreneurs make products about which they are passionate, but the purpose is to sell them at a profit. The “WHY” is the difference. Hobbyists don’t look to recoup costs. Entrepreneurs want to recoup cost + profit.
I don’t advise handmade entrepreneurs to call themselves crafters. Be professional. Identify yourself as the business owner you are.
SmallBizLady: What are the First Steps to Turn a Hobby Making Something Into a Business?
Donna Maria Coles Johnson: First, ask yourself what kind of life you want. Entrepreneurship is disruptive. Start a business that complements your life so you don’t have to retrofit your world to accommodate the ups and downs of life as a CEO.
Be sure to talk things over (and over) with your partner and others who live with you. Your business will change their lives too, so it’s important to get their buy-in and make sure they understand how important your business is to you. Give them some benchmarks and let them know what they can do to help. They will appreciate understanding your perspective, and will be happy to know exactly what they can do to support you.
Plan your business around your life, not your life around your business. Not doing this is recipe for disaster.
Make and sell a product you enjoy making, but do your research so you know that there is a market for your product. You don’t just want to make a great product. You want to make a great product that people will pay for and that you can market and sell efficiently and effectively.
Research your industry well in advance. Know what’s working and not. Understand the regulations, if any. Google is your friend, so use it to find successful companies in your chosen field so you have some templates and inspiration. Remember: success leaves clues.
SmallBizLady: What are the Best Venues to Sell Handmade Products?
Donna Maria Coles Johnson: The best venue for e-commerce is your own branded e-commerce website. Relying on third parties is always risky. They can change the rules when they feel like it, and they can complete disappear, leaving you high and dry. If your goal is to be hyper-local, farmer’s markets and local shows are great — they can also be a lot of back breaking work. You can also do trade shows, sales reps and distributors if your goals include selling wholesale.
Sell on Etsy and Amazon Handmade only if your profit margin is not pulverized by fees, and you understand license terms … which may require that you agree to allow them to exploit your work for their own gain. Read the rules carefully, and make sure to check them from time to time, as they do change. If you sell on one of these third party platforms, I advise that you maintain your own branded website as well.
Artfire is a good and long-standing option; Local Harvest is a good option for food and produce. You might also check out Abe’s Market for “natural” products.
Platforms come and go; choose wisely. Ultimately, the best site to sell from is the branded site you own and control.
SmallBizLady: Can I Really Make a Living Selling Products I Make Myself?
Donna Maria Coles Johnson: Yes, but you must be smart. You’ll need help; you can’t do and make everything yourself and grow, even modestly. Much of your success has nothing to do with how great your product is, but how well you market and sell it. Social media is a big part of this.
The first thing you’ll need to double check is your mindset. Run your business like a business, not a hobby. Connect with other Makers and Handmade Entrepreneurs. Educate yourself about the industry you’re in. Put yourself in environments that force you to go outside your comfort zone. Hone your leadership skills and build your confidence.
Buy ingredients and components in bulk where possible to save money. Make in bulk where possible to save time.
SmallBizLady: What are the Most Common Mistakes to Avoid When Starting a Handmade Business?
Donna Maria Coles Johnson: Mistake No. 1: Not discussing your new business with spouse and/or significant others is a recipe for family disaster. Get their buy-in first.
Mistake No. 2: Making too many products is a huge mistake I see a lot of people make. Don’t compete with Big Box stores. Have a manageable product line so you don’t confuse buyers and so you are not spending all of your time making things. You will usually spend more time marketing than making as a Handmade Entrepreneur.
Mistake No. 4: Lack of niche. Have a narrowly targeted niche so you can market wisely. Don’t be all things to all people.
Mistake No. 3: Not researching your brand name in advance so you can choose one that you can register as trademark. Do this early on so you don’t have to change it later, when it’s more costly to do so.
Mistake No. 4: Not knowing your costs. You must know the cost to produce something or you can’t set a profitable price.
Mistake No. 5: Poor product photos, especially for online marketing. Poor product photos lead to low sales numbers.
Mistake No. 6: Not learning how to sell. Your number 1 job is to sell. You must build sales confidence or you will be broke.
There are other things, but if you can master these, you are off to a good start.
SmallBizLady: How Do You Scale a Handmade Business?
Donna Maria Coles Johnson: There are 2 basic ways to scale: scale by volume or scale by profit margins. Consider the type of life you want when deciding. You don’t have to grow big to go big.
To scale by profit margin, make luxury or one-of-a-kind products where the profit margin on each is extremely high. Examples of scaling by profit margin: custom wedding bands, one-of-a-kind furniture, ultra-high end cosmetics.
To scale by volume, hire people to help make products with and for you. The products are still handmade, just not all made by you. Examples of scaling by volume: basically, make hundreds at a time … soap, letterpress products, jewelry.
You can either make a smaller number of products and charge lots, usually direct to consumer, or you can make more products and sell to stores at a lower price and make it up on volume. Start with end in mind. Do you want to create a business with big presence and lots of products? Or do you want a smaller business with fewer sales but you keep more profit? (Some say “Stay Small and Keep it All.”)
SmallBizLady: What Social Media Tools Are Best for Makers and Handmade Entrepreneurs?
Donna Maria Coles Johnson: As of this date, Facebook, Instagram, and Periscope are the best social media tools for Makers and Handmade Entrepreneurs. Facebook is most useful when you buy ads. Instagram is more organic. Use the right hashtags and nicely styled images for traction. You can buy sponsored posts on Facebook and Instagram.
Periscope is a great new tool because you can show people your products and your making process in a live, engaging and interactive way. People love that!
Don’t forget about the best social media marketing tools ever: your own blog and your own newsletter! Social media is owned by third parties. Use your core marketing tools first (blog, newsletter), and layer social media on top.
SmallBizLady: Is the Handmade Market Flooded? How Do You Stand Out in a Crowd of More and More Makers and Handmade Entrepreneurs?
Donna Maria Coles Johnson: More and more local artisans start a business every day. The current job market and economy almost demand it. An otherwise “flooded” market does not matter if you have a niche. Drill down. Be unique. No one else can be YOU. Be laser focused and avoid shiny objects. Create community around your brand. Be aware, but don’t fret about a flooded market. It doesn’t matter. There was tons of coffee in the world, but that didn’t stop Starbucks.
SmallBizLady: What Do You Think the Future Holds for Makers and Handmade Entrepreneurs?
Donna Maria Coles Johnson: Opportunity after opportunity after opportunity!
Cities continue to do more to support local and handmade, and they show no signs of slowing. Shows like The American Made Show, Renegade Craft and Southern Makers are popping up everywhere. Local pop ups are gaining traction in cities and towns nationwide.
There are currently 7,864 registered farmer’s markets (which often accept handmade non-food products) in US. There were 1,744 in 1994. Now that’s what I call an upward trend!
Small Business Saturday and similar movements are shining a well deserved spotlight on Makers and Handmade Entrepreneurs. Martha Stewart’s Annual American Made Summit and Contest continues to gain traction.
Now is the time for the Makers and Handmade Entrepreneurs! They are the future of handmade commerce is here, and the fun is just beginning.
If you found this interview helpful, join us on Wednesdays 8-9 pm ET; follow @SmallBizChat on Twitter. Here’s how to participate in #SmallBizChat: http://bit.ly/1hZeIlz
For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.