A couple of years ago, retail expert Mary Portas was asked to give her thoughts on the crafts industry. In an open letter to the website UK Handmade, she delivered a stark critique, telling people in the industry that they needed to step up their game, act like sophisticated retailers, and price accordingly. This letter arrived just after I’d opened Homemade London, a craft business that combines luxury and creativity, so naturally, I thought her analysis was spot on.
While the crafts industry has changed a lot in these last two years, pricing is still sporadic – a quick look at handcrafted products on websites such as Etsy and Folksy make it clear that there are many designers out there who are clearly not charging for their time properly when calculating their sale prices. And it’s an issue that I see on an almost daily basis at Homemade London, where I work with some amazing teachers, many of whom have their own companies. Not surprisingly, the conversation often turns to money.
Yesterday, one of my team made a flippant remark about her business not being “about the money” and immediately regretted opening her mouth, as I launched into a tirade about respecting your work enough to charge properly for it. Of course it’s important to be passionate about your business but it’s equally important to be confident about money.
Another teacher, a brilliant upholsterer, admitted how she’d recently misquoted someone for a job and that it took all the joy out of the project knowing that there would be no profit for her at the end. It’s an easy trap to fall into for many reasons: consumers are naturally always looking for bargains and prices are often going to be higher than they’re hoping to pay. When you first start out in business, asking people to give you money can be a strange experience and sometimes it feels linked to your own self-worth. Whatever your sector, pricing too low kills margins and profitability. When money’s tight, it’s tempting to chase every penny of revenue, but you must never forget margin.
I don’t really have a problem when it comes to asking for money – I had good training from an unlikely source. At the age of 19, I first arrived in London with £35 in a post office savings account to my name. My CV at the time was limited to some time as an au pair in Paris and two years selling ice-creams at my local cinema, so my career options were fairly limited. Out of desperation, I opted for a job in telesales and soon found myself in a pokey office in High Street Kensington with a bunch of other trainees, each with a 40-a-day cigarette habit. In almost every possible way, it was a horrible, soulless job. The aim was to sell industrial cleaning chemicals to uninterested factory managers while our supervisors listened in. Partly, they wanted to ensure that we weren’t deviating from their pre-written script, but they also checked that we weren’t actually calling our mums.
Needless to say, we weren’t often selling to a receptive audience and even today my son is banned from eating a certain chocolate biscuit after a particularly vitriolic telephone encounter with a man from a certain biscuit manufacturer. But the adversity only served to make each success that much sweeter. The thrill of a sale is now in my blood.
Now I have the luxury of selling something I believe in, I find that customers and suppliers respond well to polite but direct conversations about money. Many clients will ask you to reduce your prices as a matter of course (many of our customers are lawyers and accountants, so they’re used to it), but this doesn’t mean that you have to say yes. The insinuation when people ask for a discount is that they will go elsewhere if there’s a cheaper deal to be found. In my experience, it’s far more beneficial to your business to focus your efforts on the level of service that you offer and the quality of your product than on slashing your prices. This, after all, means that you need to work even harder to find more customers.
This is borne out by the fact that at Homemade London we’ve always found it easier to sell a £250 product than a £25 one, and more than half our business comes from existing customers.
So, for 2013, I’m putting my money where my mouth is. Our prices are increasing for the first time in two years. I was slightly nervous because January is one of our busiest times of the year for bookings and I didn’t know for sure whether the higher rates would put people off, but it’s actually had the reverse effect. The extra revenue means that we can give more to our customers, which, of course, makes everyone happy.