The top 5 business mistakes and how to surpass them
2013/01/04 6:00 AM
When I first started out with my handbag company I was in the dark about everything. I had never taken a business course of any kind, and was really relying on my own savvy to get through it all…….not knowing (or even being aware) of what big mistakes I was making every day. All this cost me so much money…meaning that I didn’t understand costing, margins, or budgets (even though I managed million dollar movie budgets, but somehow when it was my own money I just put on blinders). It was so painful.
Understanding how your company cash flow works, what your margins are, having a sales strategy and marketing plan are obviously the linchpins to your success yet somehow most of us just forget about all that when we are wrapped up in the design process, or worrying about production…..the things that we “think” are the only things that matters. So I want to share with you the following 5 mistakes that I made, in the hopes you’ll take a serious look at right now at your business so you can be more successful this year. I can’t really say which is more important and don’t have them in any specific order since they are all equally important to your success.
1. Proper costing: I never knew the importance of this when I started out. I just priced things “around” what I thought they cost and what I thought the market could bear. This was clearly a terrible idea! Calculating your COGS, including all shipping costs to get the goods to you (either in raw materials or as finished products) is essential to the profitability to your business. Be sure you multiply your final COGS x 2.5 to get your wholesale price. Once I fixed my bad margins, my profit increased 250%.
2. Maintaining your Trademark: When I had my handbag company, I trademarked my company name (which was my own name “ Sarah Shaw”) under the name of the corporation. Therefore, the corporation owned the TM. When things went south with my investors and we closed the company, I lost the right to use my OWN NAME when the Trademark “died” with the corporation. Note: Always file your TM under your personal name and license it to your company to use. Bummer right?
3. Clear sales pitch: Let’s just remember (again) that I had zero experience calling buyers, let alone selling anything. I started out by cold calling buyers around the country that I found in magazines (the internet was not really a hip thing back then) which was great and all…..but I didn’t know what to say to them to get them to understand what I was selling. I was very hesitant and didn’t have a clear short pitch prepared. As I recall, I just thought my stuff was cute and they should buy it……not very professional. Be sure you have tested your pitch with a friend before you pick up the phone!
4. Marketing? This word scared me to be honest, and I didn’t have a clue what it meant. After trying to get the word out about my new line, I finally (and I am serious) went to the California Mart in L.A during market week and took samples of all the post cards and advertising materials that the other designers had put out for buyers. I figured they were all making money and I should just copy what they were doing. That was a good start, but I still didn’t really know my target market very well and I wasn’t sure how to translate their ideas into something that worked for me. These days with the ease of email campaigns (using constant contact or some other company) you can easily and quickly stay in touch with potential customers both online and wholesale.
5. Sticking with your esthetics: I never had a “vision” when I started my line, I just sort of fell into it, but I was very clear about what I wanted to design and manufacture. Once I was selling the handbags, and people wanted more, I knew in my gut that if I did what felt right to me that I’d be successful – and I was. But as time went by, sales reps and various business partners wanted to stick their 2 cents in and suggest (or force) me to design things that were either trending or that they wanted me to include. Since I was still “sort of new at this”, I caved, and when I did, the line was not successful. This was a hard lesson, emotionally and financially, but what I learned was to always trust myself, and never make anything that didn’t feel right to me or that varied from my esthetic. Customers buy from you because of your design esthetic!
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There are 6 comments
Jeanette says: Very good advice on areas that are often overlooked by small business owners. Thank you! – Jeanette, Claribelskincare.com
Very informative Sarah. Especially the TM information. I have to go back and look at how my was submitted. I think mine is also under the company name. But since I am the only investor currently I’m good, but I will have to amend that if it changes. Great tip! I also walked my first couple trade shows as a “buyer” instead of an exhibitor and collect as much marketing material, PO forms, anything and everything. And talked to people about the shows–was is successful or not, did they like their location, and what other shows they did…etc. You can never get enough information. I also used my local college for help, and for networking, great source of free guidance.
Hey Donna,
I’d go and revise it now. Better to have it done in case you do ever take on any kind of investors as it will already be done and in play…..just my 2 cents!
Shelly Lang says: Hi Sarah, As always, thanks for sharing your hard earned know how. This is very helpful!
Shelly Lang
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Do you know how to set the right price for your product line? Lordy knows I sure didn’t when I first started my handbag line. But once I learned the correct way to do it, I never mispriced anything again! Now I want to share this method with you so you can be profitable and not wonder why you can’t pay yourself.
It took me years to figure out how to set the right price for my product line when I first started out, so I can imagine you might be in the same situation. If you are not sure if you are making any money, then there is a good chance you’re not pricing your products correctly.
Proper costing is the lifeline to your business and profitability. Taking into consideration and finding all the hidden costs, is the key. So many people forget little things that they add up and then BOOM, you are not making any money. Once you have the actual cost (cost of goods sold) then it is easy to figure out the wholesale and retail prices so you are always making money.
I’d love to share this formula with you. It totally saved my rear when I was in year 3….. Just thinking of all that lost money in the first 2 years…. I want to cry!
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