HOW TO SUCCESSFULLY MARKET YOUR HOBBY PRODUCTS
If you are not necessarily trying to get rich buy but would like your hobby to at least pay for itself and
perhaps grow into something someday, try considering your hobby as small business. Even if you don't
get rich you may be able to deduct the cost of your materials.
A serviceman stationed in Alaska loved to go fishing but found it to be very expensive sport up there.
So he bought a fishing fly winding outfit and started making his own flies to save money. When
discovered his lures were as good if not better for Alaskan fish he decided to try and sell some of them
to help cover the costs of his "vice." he sold a few dozen to an Anchorage department store every few
months and not only made enough to pay for his fishing, but helped his photography "habit" as well!
For tax purposes there is a fine line between a hobby and a business. The IRS defines a hobby as "an
activity from which you do not expect to make a profit" (this makes the U.S. Government a hobby!).
The general rule is that you must make some profit in three out of five years to legally take the hobby
expenses as business deductions.
This rule is not generally applied to obvious businesses like a shoe store on Main Street. However, it is
for racehorses and leather crafts, which they consider more likely to be hobbies than businesses (and
they're probably right most of the time).
Business expenses and losses are deductible; hobby losses can ply be deducted up to a amount taken
in, and then only if you itemize on Schedule A.
When you make the decision to convert you hobby into a business it is necessary to do several
additional things.
First, you should figure out exactly what it costs to make each product (including you labor at the going
rate). You must be able to intelligently predict how many you can turn out and how soon.
Keep accurate records of all business related transactions. You can only deduct expenses for which
you have records! Once you compute your production costs, you can estimate your retail and/or retail
rates.
A general rule is 2 times your cost for wholesale; 4 times for retail.
For example, something that costs $5 to make would be priced at $12.50 wholesale and $20.00 retail.
You must be able to make a fair profit at the wholesale price and dealers should receive about 40% of
the retail price as their profit.
Note that if you retail and wholesale both, you must be careful not to undercut your dealers. When you
say the suggested retail price is $20, make sure you do not sell that product for any less of your dealers
will leave you cold!
It really doesn't matter what your hobby is, so long as it is a product or service that others will buy. As
you convert to a business, it might (or might not) be necessary to alter your production methods and
even the products themselves.
If you make a nice hobby horse you will probably want to make some jigs and figure out a way to
make them more efficiently. You have the choice of turning out one masterpiece a week for $100 or
10 good ones at $10 apiece.
Your decisions may well be influenced by demand as well as your personal preference. If you make
pillows and someone likes your work and wants a bedspread, why not?
You can do just that one bedspread or expand your business to include bedspreads as an additional
product if it looks like they will sell well.
Depending on the degree that you would like to go into marketing, plan to {"showcase" your products
or show them in their best possible light. Notice how jewelry stores display their wares exquisitely on
dark velvet under small spotlights (not ordinary florescent lights) to make them gleam and sparkle.
That's showcasing!
If you are artistic and have the means to make up a catalog to send prospective customers, fine. Take
flattering pictures of your products with complementing backgrounds and have them printed in
brochures or booklets. Black and white pictures are better for non-color reproductions because they
offer better contrast.
You can also advertise (with pictures, if available) in the local media: newspapers, radio, cable TV,
small magazines or even by mail. It is usually a good idea to test market your products (and ad
comparison) before spending a lot on advertising.
If the response to your testing is poor it could be yours ads, timing, prices, the vehicle or that you simply
haven't reached your intended audience. The testing period is when you experiment: try various size
ads, wording, pricing, etc.
How do you get usable advice? In some cases, merely by asking.. A tip is to check with retailers of
similar products. Since they don't make them, they will often give you their unbiased opinion of why
they do or do not sell.
When you find one that will advise you, ask for their suggestions on quality, pricing and potential
salability of your products (this, by the way, may help your chances of selling to them later).
Once you have determined that your product will sell at a price to make you a reasonable profit, make
up samples and good quality photographs and start contacting potential markets. If you -plan to
wholesale, call on prospective clients and give them full information pricing, quality and your return
policy (yes, you should have one).
A shorter method is to offer your products on consignment to local stores. They usually won't buy very
much until they know there is a market (why should they replace something that DOES sell with
something that MIGHT?).
remember, however, that your intent is to get as many of your products on display as possible, so
consignment is good for both you and the store in the early stages.
If you plan to retail, you need an advertising plan for ads, displays, notices, announcements, news
coverage and perhaps prizes in local contests. Ads in the local paper (also, radio and cable TV) might
start out with a larger (e.g. 3" x 5") announcement of your product and possibly an introductory special,
followed by smaller display and a less expensive, permanent classified ad.
Displays are any means of showing your product to the public, such as renting space in a vacant store
window or giving a merchant a special deal to allow you to set up a display.
Notices can be put up on store and church bulletin boards or listed on cable TV. Announcements can
be ads, radio spots, posters, signs that simply inform the public that your product exists.
News coverage is usually very effective and should be a major consideration. When you place your
initial ads in the local paper. ASK THEM to send out a reporter!
Most local and small town papers are happy to do this because the articles are local interest. Make the
best use of their exposure: focus on your products, not your ego!
When you are satisfied your market potential and ready to produce in volume at a good wholesale
price,, start contacting progressively and larger markets.
Check on mail order companies, distributors and catalog of publishers. If you retail, place ads in
vehicles with larger circulation. Send out professionally done brochures and price lists among with a
short but cordial cover letter describing your product and offering additional information. Be sure to
include information on how to order. For retail customers, include a "handy" order blank and possibly an
addresses return envelope.
Depending on the product of your hobby and its acceptance, your small business venture might keep
growing. Many of today's large businesses started out as small hobbies. Some craft products can
profitably be marketed through large catalog houses. Others are best for local retail sales and a few
lend themselves to customizing, where customers come directly to you for personal service.
Your success in marketing your hobby depends on the demand for the product (which you try to
stimulate), the price quality, plus your ingenuity, determination and enthusiasm.
Something as uncomplicated as renting a flea market stall once a week may be just the ticket. It may
be as far as you really want to go. But, if things go well, you may want to expand your production and
sales efforts.
When you expand, think about buying and selling COMPATIBLE but non-competing items made by
other hobbyists (or supplied by hobby manufacturers). After all, your marketing system is in place and
is working, so why not make extra profit for relatively little extra work or cost?
One mistake many hobbyists make in the business world is to put so much time, effort and TLC into
their products that can't possibly sell for their actual worth.
If you are going into business, find a happy medium so you can turn out quality products at an
affordable price and still make a fair profit. A second tip is to be able to separate your product from
your ego. Never take rejection for it to flop that have nothing to do with you! Keep your mind and ego
clear so you can concentrate on improving the product's acceptability! |
