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Thursday, January 22, 2015


This week’s topic was “The Business Plan”.   
And the conversation started at the most logical point, with someone asking , “What is a business plan?”

And as Tammy Adams voiced her opinion, I felt it probably spoke for a lot of us: “…There are so many things about the business side of selling jewelry that I have had my head in the sand about. I'm ready to pay attention to them, but can't quite figure out where to start.”

Many members spoke up about wanting to do this, so I am very grateful to Katherine Gingrich for putting this info together for us and keeping us on task.

So back to, “What is a business plan?”  I first took a quote from wiki: “A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals.”

Then added a quote from this website, “Recently someone asked me why they needed a business plan if they were getting all the funding they needed from friends and relatives. It sounded to me as if they were thinking of a business plan as just a fund-raising tool. In fact, a business plan is much more than that: It's a tool for understanding how your business is put together. You can use it to monitor progress, hold yourself accountable and control the business's fate. And of course, it's a sales and recruiting tool for courting key employees or future investors."

Marcia Zammit stated, “Yes I do have a business plan although the one that I have for my jewelry is not as formal as the other ones that I have for my other online businesses. It's still very focused nonetheless - especially this year's. I know where I am and I know where I want to be. I have a plan on how to get there and I also know what it's going to take to get me there. “ 

Later Marcia went on to add: “A business plan is simply knowing where your business is right now and figuring out where you want it to be in the coming year/s. It is essentially what you're going to do to get your business where you want it to be.  Because if you don't know where you're going, how are you going to choose the road that will take you there and how are you going to know that you got there. “

Dana Hickey shed more light on the subject of what and why, “It might be easier to think of it as long term goals. What do you want for your business. What do you need to do to make it happen. Then break it down into manageable steps. Your business plan is something you can check in on to be sure you're still on track, and heading towards your goals. It can be used to get you back on track if you're not meeting your expectations. It is as flexible as your goals are.”

Katherine got us formally started with this post: “It's easy to get caught up in the creative process and forget just how expensive running a business can be. Writing a business plan and doing periodic reviews will help you make more money which is a very good thing. It will also help keep you from investing in equipment that won't help your bottom line.

The overall parts of a business plan are outlined in the
U.S. Small Business Administration's website. This is not the order in which you will write your plan. It's the order in which the final printed version is shown to investors. 

A business plan is an ever-evolving process rather than a single document (unless you are looking for investors). At the end of each year, I review my sales data with a CPA and make changes to my plan as needed.  You may or may not need a full-blown Business Plan.  Even if you don't complete the entire plan, there are some sections bear some scrutiny to increase your profit margin as much as possible.  Ultimately, this is going to be your business plan so you need to do the research and write your own plan. I will discuss some of the things you may want to consider in your plan.

Finally, everyone has a different method of writing a plan. I tend to write my personal business plans on half-sheets of paper so I can shuffle parts around. It's portable and writing by hand helps me organize my thoughts more effectively. Others use word processors such as WordPerfect or Word. There are some free programs out there like Open Office. Google Documents is another option if you need more than one person to read/write your plan.”

I then remarked that, “… with such a daunting task ahead it's easy to get all "deer in the headlights" and just freeze... and do nothing.

Nohline L’Ecuyer added, “Writing a business plan can be a huge amount of work and particularly for a lot of people who live off creating, I can understand how writing a business plan would draw time away from "making things to make money". That being said however, a business plan is a useful tool to keep you on track. We had done one in our management company but it was'nt updated fro several years. I had to do one for my graduate degree and that was a huge job that involved some serious market research. To be quite honest, I don't want to spend that amount of time writing a business plan. I do however think that a quick, really no more than 2 pages, plan for our kind of endeavours would suffice. But I will refer to Katherine on this one, she seems to have far more experience.”

Katherine then gave us the typical parts of a business plan and numbered them based on an idea of what order we should tackle them in.

  • Executive Summary -- 7
  • Company Description -- 1
  • Market Analysis -- 3
  • Organization and Management -- 6
  • Service or Product Line -- 2
  • Marketing and Sales -- 4
  • Funding Request -- Probably not needed
  • Financial Projections -- 5
  • Appendix -- As needed

“Since this is the SRAJD, I'm guessing that almost everyone here already makes jewelry and/or jewelry components. We'll start with that premise. I would write the sections in the order above because that would make the most sense to me. Other types of businesses may write in differing orders.

You don't need to sit down and write your entire business plan in one swoop. I did that when I started out. You can just put it in with the maintenance portion of your week or month. Whatever time you can devote is going to be beneficial. Even just looking at a specific bit of your business such as online venues would help. It's easy to get lost in the creative process and lose track of the bottom line.”

Now I will post, without interruption, the information Katherine provided:

7: Executive Summary

If you are looking for financial backing, you will need to write an Executive Summary. This is usually the last part of a Business Plan that gets written.  Most of us will not need to do write this section but certain elements of an Executive Summary are useful to at least look at so you can include this information in packets to be handed out to galleries/retail stores if you're going to go that route. I'll discuss some of the relevant points if you're writing for a promotional packet:

Mission Statement -- A couple of sentences that explains your company and what you're trying to accomplish. Eg. My Jewelry Company specializes in bridal jewelry for the upscale executive woman. Our designs use traditional materials such as pearls and precious metals but in unique designs that may be worn with business attire after the wedding.

Company Information -- State if you're a sole business owner or a partnership etc. How long have you been in business? Where is your business located?

Products and Services -- What types of jewelry do you manufacture? Just a brief description. Eg: pierced earrings with dangling lampwork beads.

Future Plans -- If you're writing this to include in promotional packets, it wouldn't hurt to put in some of your future plans to show that you're thinking ahead and plan to be around for a while. Artists are notorious for disappearing and not fulfilling orders. It helps to appear to be planning ahead.

1: Company Description

This is a short description of what you plan to do. What you manufacture and where you plan to market your product. What is your consumer base? How do you plan to compete in the market place?

For example: My Jewelry Company manufactures lampworked focal beads. I will market my beads both as a finished necklaces and bracelets and also as components to be used by other jewelry designers. My finished beads will be marketed to retail consumers online and through shows. They will also be sold wholesale to other retail stores and galleries. The beads will be marketed wholesale to other jewelry designers online and through brick and mortar bead stores. Although lampworked beads are currently manufactured by many others, I am confident that I will succeed because ___________________

The hard part is filling in the blank. I tend to write as an engineer. Most of the detail stuff gets thrown into an appendix. At this point, I would start files for the Appendices:

Online venues to market finished necklaces and bracelets.
List of shows I wish to attend to market finished product.
List of galleries/retail stores that may want to carry finished product.
List of components you will need to purchase to complete the necklaces/bracelets and sources for those components. eg: leather cording, clasps, etc.

Online venues to market beads.
List of wholesale bead shows.
List of bead stores currently operating in desired market.

That's why I use half-sheets of paper. It allows me to scribble down these things as they occur to me and then I can file them appropriately. Your experience may vary. This is just a business plan -- it will evolve over time. Don't get too wrapped up in making it perfect (unless you want investors).

3: Market Analysis

This is the big one and probably the most important one you'll write (in a bunch of manageable appendices, of course). Most artists have a pretty good idea of what they're going to make (whether or not it's actually profitable). This is the section that will help decide whether or not your idea is marketable and if it will make you money.

Take a good look at the jewelry industry -- historically and current state. This is an industry that rides on trends and marketing. Tiny jewelry one year. Huge statement necklaces the next. Cuffs are everywhere then completely disappear. This can make or break an artisan company. Sticking your head in the sand and making a style that's long over isn't going to help your bottom line. You need to keep current and make money to continue as a business.

Take a look at all of the markets in the jewelry business. When do people traditionally buy jewelry: weddings, engagements, Valentines, Mother's day, birthdays, special events. Women buy jewelry to go out socially. They also buy jewelry for work. Men don't buy nearly as much jewelry as women, but are easier to sell to since the market isn't oversaturated. What kind of jewelry do you plan to make? You might be tempted to "keep your options open and design for everything" but that's probably going to up your production costs significantly.

I live just outside DC, so I make small to medium size contemporary jewelry for female business executives. Biggest return on my investment in the area where I live. We also have a farm in PA. Not a chance in the world of selling contemporary jewelry in this area of Pennsylvania. I'd have to create a more nature-inspired line if I were to sell around the farm. You will need to decide what will sell best in the market you wish to conquer.

Market Analysis -- Part 2 Demographics

Determine the demographics of your potential clients. This is extremely important if you're doing shows. Whenever I book a show, I do demographics on the state and county of the show. I also do demographics on the closest towns. This allows me to determine what price points to use to fill out my inventory. It makes no sense to book a show then come with jewelry completely outside the expected price range.

I write an appendix for each show that I do. I also keep my show stats in this location. That way I can look at trends for each show in relationship to the demographics. Yes, I know. Lots of bookkeeping and statistics. That's how you make money. You turn your company into an actual business.

Fortunately, demographic information is readily available online. In addition to the regular government information, you can do regional searches for brick and mortar stores to determine if it's a Walmart area or a Bloomingdales area. Look at the local restaurants to determine cultural diversity so you can adapt your product line to the individual show.

Market Analysis -- Part 3 Pricing

You will need to determine how to price your items. Don't be tempted to look at similar designs and price around the same amount. Pricing doesn't work that way.

First, determine how much you want to charge per hour for your labor.

Determine how much time it takes to make a type of item in your line. For example, how long does it take to make a pair of lampwork bead earrings? Be sure to include the approximate amount of time it takes to order the components. There's also overhead time for packing and shipping if you're selling online (or time at shows otherwise).

What is the material cost of the item (include postage, etc)?

There are many formulas used to actually calculate the price of the jewelry. Ms. Laura has a spreadsheet that works well. I have my own formula in a spreadsheet form.

The secret jewelry markups are gold -- 5X material costs. Sterling 20X material costs. That's what you encounter if you walk into a large retail jewelry store. Plus labor and overhead, of course.

Whatever formula you choose to use, if you plan to sell wholesale, my advice is that your markup should be high enough so that you can wholesale at 50% of your retail price and still clear a healthy profit. If you can't do that, you need to look at your production method to see if you can make it more efficient or you need to modify your product so you can do this. Most of the stores/galleries that sell my line(s) do so because I am able to sell to them at true wholesale rates. Telling them that you'll knock off 20% probably won't get you very far. Your results may vary.

Market Analysis -- Part 4 Competitive Analysis

Here's the hard part. Now that you've got a product and a price, you need to analyze the competition. You've got a lot of it. Jewelry is one of the most lucrative DIY hobbies and there are a lot of people who are just trying to sell enough to feed their hobby.

The competition you face will depend on where you're planning to sell. No matter what venue you choose, you will need a website of some sort. Some people use a site like Etsy as their primary website. That's fine if you're planning to stay a small, independent jewelry designer. It does make you vulnerable to changes in their policies -- for example offering an IPO and changing listing guidelines to please stockholders. sigh...

In most cases, you'll want a .com type of site to call your own. Even if you don't sell off that particular site, it is very beneficial to have your own site if you plan to approach galleries/stores to carry your line(s). It implies that you've made a genuine commitment to your business as opposed to the perceived view that you've got a hobby and sometimes list stuff here and there.

If you list on sites such as Etsy, eBay, or Amazon, you need to take a long hard look at your competition on those sites. One of the easiest ways to look at this data for eBay is 
goofbid.com. For Etsy, there's craftcount.com andhandmadeology.com. I'm sure there are other sites out there for this purpose. Sometimes it's just best to type in your idea of a search phrase for your type of jewelry and see what comes up.

In any case, it's helpful to have an appendix for collecting this type of data. You'll need to categorize your jewelry -- Earrings Type 1 (E1): sterling, single lampwork bead, beadcaps; Earrings Type 2 (E2): gemstone stud set in sterling, etc. Then, look at each of your intended markets and look for the number of them in a variety of price ranges. Note little things that jump out at you when you look. For example:

eBay E1: search phrase "sterling lampwork earrings" 1/18/15
Price <$5 -- #350 ---- all from China
$5-$9.99 -- #97 -- UK, Australia, mostly made with Chinese lampworked beads
$125 - $150 -- #2 -- well known lampwork bead makers

Obviously, this data will change over time. It's also comprehensive. If you're strapped for time, you can always just look at the pricing bracket around your product (see #3 Pricing above) instead of looking at all the prices at once. I print out a little form so I can just fill it in periodically and add it to the stack of data.

From this quick look, you'll note the obvious things like stay out of the price range of under $10. While you already knew that, having this in your notes will help save you when you are desperate to make a sale and decide to "make a few bucks" by selling some earrings on eBay. Even I get drawn into "get-rich-quick" ideas. My business plan saves me from myself at those times.

While you're looking at this eBay data, you'll become aware of the sellers with a lot of inventory in your prospective market. Run these seller's names through the goofbid site and see if they're really making money or not. Unfortunately, I did not see a similar site to look at the data from Etsy.

This is just plug and chug busy work. I tend to do stuff like this when I'm eating or cooking since my computer needs to spin to do the searches.

In any case, since you have previously designed your lines and chosen prices, now's the time to look at reality and see if you need to adjust your design to a different price point.

I know that this is a lot of data to collect. However, if you have a CPA, then you can hand this packet to him/her and ask for help. My CPA told me to trash one of my product lines even though it was selling quite well. The profit margin was significantly less than my other products and I was losing money without realizing it. Yup. That was my get-rich-quick scheme that I didn't bother adding to my Business Plan. Oops!!! Had I crunched the numbers before launching that line, I wouldn't have done it.

This is pretty much a case where you gather all the data and stare at it for a while. Eventually, you'll begin to see patterns and know which direction to go.

Here are a couple of sites I use to keep up with the changes on eBay and Etsy:



6: Organization and Management

The traditional approach to this section is to discuss how people are arranged and managed. Not too useful to me even though I'm a partnership company. Instead, I took Organization and Management to be the organization of my studio space to optimize production and time management.

Take a look at the steps you outlined in section 2 when describing how you make your jewelry. If you can re-organize your space to take fewer physical steps, here's where you should make those notes and implement those changes.

I also looked at time management at this point. How much time do I need to produce the work? How much time do I need to apply to shows? How much time do I need to contact retail outlets? How much time will I devote to preparing for shows, doing them, then unpacking? This is an ongoing issue for all artists. There are only so many hours in the day to work and still get things done like laundry and dishes. Keeping track of all of those business time commitments will help you establish prices for your work since you will actually know how much labor is involved.

2: Service or Product Line

Describe how your jewelry will benefit your intended customer. How is it different than your competitors? For example: Do you make jewelry for business women? Do you make jewelry that's likely to be picked up on vacation? Do you specialize in "occasion" jewelry?

Are you planning to take legal steps to protect your intellectual rights? That's something I don't do because I don't particularly care if someone copies me.

Go step-by-step through the procedures, supplies, and equipment you need to produce your jewelry. This is a great place to spawn yet another Appendix. I do a separate section for each type of jewelry I plan to produce. This is very helpful if you intend to expand your product line in the future. For example, if you are... unfocused as I am, you'll want to know what investment is needed to produce something else... like enameled metal pieces....

That leads us to the research and development part of your company. You'll need to budget resources to expand your product line in the future. If you keep doing the same thing for years, your sales will eventually dwindle to nothing. You need to keep abreast of trends and adapt your product line to keep up. How much time and money can you invest in your company to keep it moving forward.

Take a hard look at how jewelry is evolving and try to project where you will fit in the scheme 5-10 years in the future. Write it down. Re-evaluate it frequently.

4: Marketing and Sales

As as self-representing artist, you are the marketing and sales force. There's a limit to how much time you can devote to your business. Sadly, most of your time will be eaten by the marketing and sales part of the business.

It basically boils down to getting your product into locations where your customers can buy them. This part of the business will change even over the space of a few months. You will saturate markets with some product lines and will either need to adapt and change those lines or move to different markets.

With social media, it's now easier and less expensive to reach customers. Unfortunately, there's now a sea of jewelry designers out there competing with you. SRAJD has been very good about trying to keep it's members in the limelight. Thank you admins.

Usually, you'll need a combination of approaches to maximize sales. Online/social media, printed materials (business cards, fliers, catalogs,, etc.), advertising, blogspots, newsletters, publicity, promotions, shows, etc.

This is pretty much an area of trial and error. Sometimes, you just have to shake your head... power bracelets, bubble necklaces... What the heck??? Sometimes marketing and sales are just apparently random. This is when you put your nose in the statistics and try to make sense of it all.

Funding Request -- Probably not needed

5: Financial Projections

For the most part, financial projections are used for enticing investors. There are some aspects of financial projections that may be useful to you. It never hurts to see exactly where your company stands financially. One thing you will need for taxes is a balance sheet which shows your assets vs. liabilities.

-- Cash and credit on accounts to other companies
-- Accounts receivable (money owed to you by customers)
-- Inventory and equipment owned by your company

-- Accounts payable (people you owe money)
-- Taxes owed

Committing these numbers to paper will help you understand just how you're doing as a business. A surprising number of business fail to do this on a regular business. An accountant can help you out with this if you need help.

The inventory and equipment can be scheduled for depreciation (again, an accountant helps here).

Appendix -- As needed

Then the discussion continued, with me remarking on something from section 3 part 3 (Market Analysis, Pricing) where Katherine mentioned “Don't be tempted to look at similar designs and price around the same amount.”  I countered with, “I think almost everyone I know tries to price (at least at one point) based on similar items in the market.”

Katherine explained, “It's really tempting to try to do that but that method fails for several reasons. First, you don't know how your competitor sources their materials nor do you know how they price their merchandise. 

You need to independently price your items then look to see if they are marketable at that price. If they aren't then you can either decide that you're doing them anyway no matter what or you can alter your production source and methods or you can make something else. It's your decision at that point.”

I’m sure the discussion will continue. 

Katherine, I can’t thank you enough for being so thorough in helping us get started on this.  I hope to hear from some of the SRAJD members when they’ve drafted their business plans.  I’m getting started on mine today.

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