How to Make Money from Selling Handmade

The handmade movement is booming all over the world, and is becoming a real force in the market. Aimed at countering mass-produced consumerism, “buy handmade” has become a mantra of many disenchanted consumers, and owners of small handmade businesses are benefitting. People want less stuff, and they want to feel connected to the stuff they DO buy – they want to know things are ethically produced, they want to feel as though they KNOW the person who created an object. They’re tired of mass-produced crap.

But handmade businesses just can’t compete with the prices of goods from China, and the economies of scale for larger companies mean most small business owners are struggling with increasingly small profit margins.

As an example: two brightly colored wool hats sell in a clothing store for $30. One hat was made in China, shipped to the country and sold to the retailer by a large hat-buying chain for $15. The retailer makes $15 and that hat-buying chain makes $8. The costs of shipping, storage, freight and packaging add up to $7.5 and the Chinese hat maker earns about .50c.

The second hat is made by a local knitter famous for her awesome hat designs. She sells the hat to the shop for $15, of which she must deduct $5 for materials. She doens’t have the numbers to be able to buy wool in bulk, so she pays a premium for high quality wool. It takes her 1 hour to knit a hat, on a good day. She doesn’t have to pay for shipping or freight, but she does have to walk down to the shop herself and check on her sales. She also has to supply packaging, tags, washing instruction labels, etc. And then she needs to pay tax on the money she’s earned from the hat.

If you’re looking at this example, you may have realized this means the knitter is making less than $10 an hour after tax. And I suspect an hour to knit a hat is quite a conservative estimate. This also doesn’t take into account time for sourcing materials, doing book-keeping, designing new products and maintaining a website/mailing list/blog/Social Media. So you’d be forgiven for feeling rather skeptical about how someone running a handmade business could be making any money.

I don’t have any easy answers, because every business is different. But what I can tell you is that a handmade business needs to focus on a very different business model to a big box retailer. Here are some ideas:

Raise Prices

Handmade should be all about quality – not just quality of the materials and workmanship, but quality of the experience. And quality experiences demand a higher price tag. The hat made by the local knitter about could easily have it’s price doubled or tripled to reflect it’s unique nature and superior quality. The important thing is to stop thinking you’re competing with the $30 hat market – you’re not, and you shouldn’t try to, because you won’t win. Your market is the high-end – the $60-$100 hat market. Think there isn’t a market for $100 hats? I’m telling you there is. (I own a $100 knitted hat, and it is luxurious).

Of course, you need to offer an experience that demands a higher price. This means superior customer service, beautiful displays and packaging, a first-rate website and stunning workmanship. You have to show customers why your products demand a higher price.

Look Outside the Direct Market

One of the things a lot of small business owners don’t realize is that handmade businesses are often driven by personality-based marketing – that is, you’re selling yourself as a brand people want to buy into just as much as you’re selling beautiful products. This is why so many handmade businesses have found success by starting blogs and using social media – these platforms are great for personality brands. What you notice happening over time with personality-based businesses is that less and less of the percentage of your income is generated through your primary product, and more is generated through other avenues.

For example, say you are a jeweller. You create beautiful jewelry from ethically-sourced gemstones. But you are also a prolific jewellery blogger. So you decide to start writing for trade magazines about the jewelry industry. Then you decide to submit a few project tutorials to craft magazines, and you send a letter to a blogger asking if they’d be interested in collaborating on an imaginative photoshoot idea. Now you’re earning money from these articles, and the photoshoot was very popular, and has led to other bloggers approaching you about collaborations, leading you to take on a couple of styling jobs and start an affiliate program for your jewelry (bloggers get a little commission when people buy your jewelry through their sites. This drastically reduces your advertising budget as you’re seeing enough sales from the affiliates you don’t need to buy any more ads, so you decide to invest in creating a jewelry-making workshop, which is a hit. You write about all your successes for a major magazine. Now you’re starting to get press enquiries about your business and your methods. You realize you really enjoy writing and create book proposals for 2 books – one of craft projects, and one for jewelry business owners. Now you’re making money from selling your jewelry, from your writing, from your classes, from styling and from book royalties. You might hire a couple of apprentices to take over the day to day making of the jewelry pieces so you can concentrate on creating new designs and finishing your latest book.

There are literally hundreds of things you can do to drive your business outside of the direct market of selling products to consumers. Here are a few I’ve come up with:

  • Teaching Classes
  • Coaching Other Businesses
  • Submitting tutorials to craft magazines
  • Writing a book
  • Creating downloadable patterns
  • Offering Wedding Services in line with Wedding products – eg: wedding planning, celebrant, table design)
  • Columnist for magazines
  • Creating digital products (such as digital scrapbooking services)
  • Putting together craft kits
  • Providing services (for example, styling)
  • Collaborate with other creatives on new products that you can offer as a designer range for a higher price.
  • Illustrating (for artists) – for example, children’s books, greeting cards or commercial illustration.
  • Teaming up with other creatives to offer packages (such as a makeover service or a “high tea in your home”)
  • Organizing events (craft shows, conferences, local arts events)
  • Participating in events like local art shows and installations
  • Writing about the business side of handmade
  • Working as a curator to promote art and craft in your community
  • Creating a business e-course
  • Opening a joint studio
  • Writing a magazine or popular blog and selling ad space

I’m sure you can think of hundreds more.

You’re right in saying you’re not going to get rich by knitting hats. But that doesn’t mean your hat-knitting business can’t become a successful, viable earner that can provide for your family. The important thing is to approach the business with the right mindset, to stop trying to compete with mass-produced stuff, and to branch out your thinking to incorporate more money-making activities that are perhaps not directly related to your product. And above all, to produce a product that lovers of handmade can get excited about – something that’s unique, creative and awesome.

That’s not hard, right? :)

If you want more tips about marketing art and handmade products, I’m now a columnist at Empty Easel, and I have an article up every week on small business advice for creatives. Here are my articles so far:

Don’t miss all the fun! Sign up for the Grymm & Epic Gazette – you’ll get my FREE ebook “Unleash the Beast: Release Your Inner Creative Monster”, as well as a monthly dose of creative inspiration. Grymm!