Hobby or Business?

If you make crafts and sell them, then the main difference to worry about is the difference that the IRS requires. Either way you can manage your accounting and keep track of your income and expenses the same way. The main difference is if the IRS says you have a hobby, then you report income, and you can subtract expenses, but you aren't allowed to report a loss. If the IRS says you have a business, then you are able to report a loss which will lower your taxes overall.

Check here for the official IRS classifications:

IRS vs. Reality

Now that you know what the IRS thinks of you . . . (the IRS doesn't care what we think of them unfortunately,) how do you classify yourself? Almost all business big and small have two sets of books. One for the IRS and one for personal use. Even if you only count as a hobby for IRS purposes, you can still do everything else as a business.

The main difference in being a hobbyist or a business is how you present yourself. If you only want to make your crafts and maybe go to a craft show or two, or sell them to friends, then you probably don't want to go to the trouble of acting as a business.

To come across to your customers as a business, start creating a professional image for yourself. Building a website is a good start. It doesn't have to be anything super. Maybe just put together a blog that talks about your business and where people can buy your things.

Then order a set of business cards. I highly recommend Vista Print if you haven't noticed already! Then when you do your craft shows, make sure everyone who buys, and everyone who seems interested gets a business card. Voila! You have a business. From there, just take things a little bit at a time to include more advertising, nicer displays, and a phrase a certain salesman taught me to live by . . . Shameless Self Promotion.

Sunday, February 15, 2009

Take Chances

If you're serious about building a good craft business, you need to realize that you're probably going to make mistakes.  Possibly expensive ones.  I once set up a table at a bridal show with a very expensive entrance fee, but didn't get a single customer out of it.  No more bridal shows for me. 

I'm trying something new this week.  It's been and will still be a lot of work.  It's costing me $200 to enter the marketing project.  I was accepted into the program last night.  I have been working on making two hundred candles and promotional materials to go with them for The Doctors television show.  I'm assuming this means my candles will actually be shown on the show.  If not, at least the candles will go to the studio audience whom will hopefully turn into customers.  It's a risk.  It's an expensive risk.  But with the possibility of my product being on a national tv show, it's a risk I absolutely have to take.

Saturday, February 7, 2009

More Benefits of Working for Yourself

Please add comments if you have any others

Work in your pjs
Wake up when you want
Go to bed when you want
Spend pretty spring days outside
Change the laundry on a break
No time wasted sitting in traffic for the commute
Go shopping when the stores are practically empty
Beat the rest of the world to the good deals
Listen to your music as loud as you want
Watch tv while you work
Have time to exercise
Have time to think
Have time to play
Play solitaire without having to look over your shoulder every five seconds
Use curse words in your email if you feel like it
Have a beer or cocktail while you work
Take a nap
Use your own bathroom
No more expensive lunches
No more required lunches with people you don't like
Fix your wedgie when it happens
No expensive day care

Benefits of Working for Yourself

You get to choose your activities and you don't have to answer to anyone about it. It's wonderful. If you wake up one morning and aren't feeling creative, then work on something different. Go out and make sales calls to places that might want to sell your items for you. Work on finding more or better suppliers. Sit in front of the tv and just think about other things that could improve your business or your sales. Sort your coupons. Look up other deals. Read blogs or magazines. Or just stare off into space in your own little world for a while. Some of my best ideas come out of nowhere that way. How many other jobs could you have that allow you to stare off into space?!!

OR JUST TAKE A VACATION DAY!!! It's your choice. It's your business. It's your life. You are in charge of it. Don't feel like working 9 to 5? Don't. Work the night shift. Work for an hour, go shopping, come home and work for an hour. Go to the library. Go to the park. Go to a movie. Take a friend or family member out to lunch. Ask them for ideas to make your business better or any ideas they might have you and yay! It automatically turns into a business lunch that is tax deductible.

One really nice thing about running your own business, since you're doing something you love, just about anything else you do can strike inspiration. Sometimes in an odd way. Who knows what will pop into your head when you're out shopping? Who knows what will come up in an ordinary conversation that will hit the trigger for that lightbulb over your head? Realize that you are an artist, not just a business person. Think like an artist and let your mood dictate your day instead of the clock.

I love it because it takes about three or four hours for a pot of wax to melt before I can make candles. So during that time, I can work on the computer or clean my house. Or play with my baby. If I time it right, the wax can be ready to go once my hubby gets home so he gets baby duty a little while so I can focus exclusively on work. But I don't make candles everday. Actually, I haven't made candles in a few months. I've not felt like it. But I've been working on many other aspects of my business. And then I'll get in the mood and probably be making candles non stop for several days.

Tuesday, February 3, 2009

Craft Business Down Time

If you're like me, then this time of year is pretty dry with finding places and/or events to sell at. In reality, I should be working like crazy to make all sorts of candles for when the busy season for me does start up again. It's difficult to stay motivated during an off season when it's going to be a long time before you'll actually be selling things again. It can also be difficult to focus on the quality of your craft when you're working hard to build up inventory. Always remember the things that got you motivated to start a business to begin with . . . making money doing what you love! So many other things can get in the way of that. Advertising, accounting, packaging, etc, etc, etc. All of those things are important too. But the quality and craftmanship of your product so that you are selling something you are proud of is number one. And if you lose your focus, then eventually your hobby will become a job, and no one wants that. Keep it fun. If you find yourself too busy, or dreading to create, then give yourself a break, or find something that motivates you in the right way. Sometimes a handful of new supplies can do the trick.

Wednesday, January 28, 2009

Today is a Success If . . .

We all have high hopes that we'll sell more than ever before. We'll have a great event and walk away able to restock all of our inventory, pay some bills, put away some savings, and maybe have some left over for investing in additional advertising or something.

It's fine to have super great goals. You have to have dreams to ever be able to realize your dreams. And who knows? Maybe you will get your super great day that will solve all your problems. But probably not.

In addition to having your super great goals, have a minimally acceptable goal. Determine it ahead of time so you don't reach the small goal and then get disappointed when you don't meet the super great one. I usually determine my goal by taking the cost of signing up for the show, the number of days of the show, and the amount I need to order to replace the inventory that sold. Then I usually add in a bit more for profit. If the weather is bad, I allow myself to reduce that minimum. If I make a particular contact that is beneficial in another way, then I allow myself to count that as valuable so I can reduce my minimum goal. But I only find ways to reduce that minimum if I don't get there. If I exceed my minimum, then I have a realistic goal that I work to reach. That's my real goal, but I wait to hit minimum first before getting excited about the next level.

Goals are very important. Set them beforehand. Evaluate them afterwards. If you didn't reach what you wanted to, try to think of reasons why. Try to figure out what you need to do better next time to meet the goal. Keep in mind that it's not always you or your product. Sometimes it's the event. If you determine that it's the event, figure out why that particular event didn't work out for you. Try to figure out a way to determine ways to keep from choosing other events that would fall within the same standards that kept you from succeeding this time.

Making Customers Comfortable

There's a delicate balance to keeping your customers comfortable. No one likes to be watched while they're shopping. But if they have a question, they want immediate attention. Learning body language becomes very important. Typically I will bring along some busy work. A book, a crossword puzzle, my cell phone to play games, something. Something I can do, and at important moments, only pretend to do. I can happily be reading a book when I'm alone. If a customer steps up to my booth, I'll look up and smile and go back to my book. But at that point, I'm only half reading. And half watching the customer. So long as they're looking down, they're just looking. As soon as they look up, you look up, "realize they need help," and then jump up to answer any questions.

Then of course, if they start to walk away, catch them first and point out the good reasons to purchase your products. If they walk away and ignore you, no harm, no foul. You don't know them anyway and will never see them again. Don't feel stupid or rejected. And if you're able to get a business card in their hand before they walk away regardless of anything else, at least count it as a small success.

3 Types of Customers

Just Looking - these customers probably don't have any intent to buy. They may not even actually be interested in your product but are just killing time. Don't spend too much of your time on them. Give them a couple minutes to "just look." If they're still hanging out, start asking questions to guage if there is a real interest or not. If not, be polite, but just back off and let them be.

I'm Sold - these customers already intend to buy your product, they are just looking around to figure out which one they want to buy. So just be friendly, and offer help if they seem to need it. Point out specifics to help them make a choice if necessary. Find reasons to get them to buy more. Offer discounts for additional purchases, ask if they need to purchase gifts for anyone while they're at it. Point out that you take credit cards (if you do.)

Give Me a Reason - these are the people you really need to work. They are interested in your product. They want to buy. They just need a little push to make the actual decision. It's your job to give them that push. Point out why they need your product. How they can use it. If they don't need it, the kind of people it would make a good gift for. Any holidays or events coming up that it could be useful for. Tell them why they want it, and keep working that angle until they either buy or walk away. If they do walk away, be sure they at least take a card. Shameless Self Promotion.