Why business plans are a waste of time

Many of you might be surprised to learn that I have never written a business plan for my business. I have written a couple of mock business plans while working on my master's degree in International Business, but there has never been a point in my ever-evolving business where it made sense to have an official business plan. I could research and put my best estimates down on paper, but there are far too many variables for any business plan to be more than a wish list. My best advice to entrepreneurs has always been, "Just do it." Don't waste time trying to perfect it before going live, because while you're busy working on the perfect logo and brilliant marketing materials, all of your competition are getting their products into customers' hands. Once a consumer has tried a product that works well enough, you'll have a hard time getting them to switch to your product. If all you have to get started is $15, figure out what you can do with that and do it. Just get started and learn as you go. Snowball your earnings into more supplies and better equipment. You need to start working with actual customers if you want to find out whether or not your business idea is viable. And you need to be willing to accept that what you think is a good idea, may not be what sells. Ask for feedback and be willing to change until you find something that works.  

Here's a short and sweet article on the subject.

http://www.forbes.com/sites/actiontrumpseverything/2013/08/14/why-business-plans-are-a-waste-of-time/

Earning potential in the face and body painting industry

I posted this as a response to someone on a newbie face painter forum who was asking about earning potential in our industry.  I thought it might be helpful to some of you who follow my blog as well.

 I've met "headliner" award-winning, instructor/ sponsored artists who travel extensively for their work and only earn $20,000 - $30,000 per year. And I've met mediocre artists (whose names you never would have heard of) who run their own entertainment company, with multiple artists and services that earn six figures. I also know people who lose money every year because it's just a hobby (which is fine). Based on my experience, I would estimate that, most artists (for whom this is a 2nd income in their household) are earning in the $5,000 - $20,000 range. What you can earn depends 100% on your desire to make money, your willingness to work hard, and your business sense. You can be the greatest artist in the world and be broke if you don't know how to run a business or if you only make emotional decisions about your business.

I started my business with a $15 henna kit. I lost money for the first few years because anything I earned went back into the business, and because I had to fine-tune what I wanted to do vs. what made money. There were a lot of poor decisions (or "business seminars," as my husband likes to call them) that cost me money in the beginning. But you're always learning, so just figure out where you went wrong, forgive yourself, and move on. I went from being an artist, doing festivals and parties, to being an instructor, to running a supply business. You never know where it will take you. My husband retired early last year because I now earn enough to support our family. 

You have to decide how much you need/ want to earn, and then do everything you have to do to reach that goal. I write my financial goals down and tell others what my goals are so that I feel more accountable. I have a sticky note on my computer right now with $15,000 written on it, and tick marks for each $1000, because that's my next short term goal I need to reach to pay for a couple of big purchases. Trust me, it works.

The most important piece of advice I have is to never stop your marketing efforts. I thought I could get to a place where I'd have enough customers and the business would just kind of run itself, generating more business naturally. I nearly lost my business with this kind of thinking. You will never get to a place where you can stop expanding your skills and marketing your business because your customer base and competition is constantly evolving.

Conventions and Tradeshows...Worth it?

Here's an interesting article I came across on my Facebook feed.

http://comicbookwife.com/2014/09/20/the-hidden-truth-about-comic-book-convention-earnings-for-creators-have-comic-book-conventions-jumped-the-shark/

I see this at conventions for all industries, not just comic book conventions.  Instructors, featured artists, and vendors are usually sacrificing income they could be earning at home or even going well into debt to attend conventions these days.  I used to attend 8 - 12 conventions per year.  Now I attend 2-3 at the most.

I'm looking at this from the convention/ tradeshow standpoint, but it also applies to any festival or event where you pay a booth fee.  You have to measure the potential impact of your marketing dollars.  How many attendees are going to be there?  How many are potential customers?  How many vendor hours are available?  How much in sales do you have to earn per hour just to break even? How much does it cost you (per potential customer) to attend the event?  Remember to include cost of goods when you do your math.  If your booth fee is $2000, your hotel $1000, your travel expenses $1000, and staffing costs $2000....You might think that $6000 is break-even, but how much did it cost you to buy the $6000 worth of product that you sold?  Your break even might actually be closer to $10,000. If you're at an event with 10 vendor hours, you'd have to have $1000 in sales per hour just to break even.  Unless you have products with a very high price point, that level of sales may not even be possible.   And let's assume that many of those sales at the show were actually to current customers, who would have purchased from you online if you had not been at the show.  You could have stayed home and made money instead of going through the stresses of traveling and working a tradeshow, hoping to break even.

The best way to reach customers yesterday may not be the best strategy for today.  The marketplace is evolving and customers are more savvy than ever.  Instead of buying the first thing they see, customers wait to go home and read reviews and compare prices.  I'm not saying that conventions and tradeshows aren't worth doing, especially if you have a new product or the show attendees are mostly unfamiliar with your product.  But be sure that you do your homework on the event and make sure that you are getting as much marketing impact as you can from the event.  I see far too many new products debuted at shows before they are ready to launch.  By the time the creator gets their act together, either the moment has passed, or competitors have already gotten their version of the product out there.  Have your product in stock and ready to sell.  Polish up your website.  Make sure you have plenty of advertising material to hand out.  When given the choice between getting your company name and logo in front of customers or spending that same amount of money to get your actual product into actual customers' hands, which do you think will have more impact?

My cousin works for a large international professional hair product company.  I know they can spend upwards of $30,000 to attend a tradeshow where they are pretty much just meeting with current customers, supporting vendors, and maybe gaining a handful of new customers.  I can't help but think that they could have sent out $100 worth of free product to 300 good customers or potential new customers and have gotten much more value for their investment.  An online competition with $30,000 going to help somebody start a new salon would have gotten them incredible amounts of publicity.  But some old dogs take a while to learn new tricks.

It may be tough love, but sometimes you have to remove emotion from the equation and do what makes business sense.  As my favorite money guru, Dave Ramsey likes to say, "It's math, not magic."

Henna and Liquid Bling Clearance Sale - New Stencil Loyalty Program

Check out the Amerikan Body Art home page for our Liquid Bling clearance sale.  Also, the 2014 crop of Jamila Henna Powder has arrived, so we are clearing out what's left of the 2013 crop.  It's some great staining stuff, so stock up while you can.
www.AmerikanBodyArt.com

Also, I introduced a new stencil loyalty program.  For every 75 self-adhesive stencils purchased in a single order, you get a free 10ml vial of Body Glue.  Yeah Freebies!!!

Raise your hand if you like free stuff! I created a brand new page on our website for free downloads, samples, and marketing materials. I can't wait to have more material to add to it! There's a tab at the top of our website, 100% Free Stuff. Check it out.

Also, the progressive sale is still going on with our Professional Henna Kits. The current price is down to $114.99 (regularly $149.99) with 3 Free Gifts.

www.AmerikanBodyArt.com

Freehand Glitter Tattoo Kit

Check out our new Freehand Glitter Tattoo Kit at the low introductory price of $19.99

If what you're doing isn't working, do something different.

 As of April 1^st, Amerikan Body Art will start making some changes to our discounting programs. We will now differentiate between reseller accounts and professional artist accounts.  The idea is to make it more attractive for people who want to sell our products with some degree of exclusivity and to still allow professionals to get discounts when buying in volume. In addition to changing the discount program, we are also adding an affiliate program, an instructor program, and drop-shipping services.

Wholesale program for Resellers of Amerikan Body Art products

Resellers will receive 50% off retail prices for ABA branded items, 30% off bulk items and packaging (we will also be lowering prices on some of these items), and 20% off non-ABA brand items (such as face painting books and facepaint make-up).  For the most part, your prices will remain the same as they have been, and we will be able to offer you more products. We are working on a separate website for resellers to use in the near future, but for the time being, resellers will have to email their orders.  In order to be considered a reseller, you must show proof that you are marketing Amerikan Body Art products in your business…i.e. a link to your web page where you feature Amerikan Body Art products or a photo of Amerikan Body Art products displayed in your brick and mortar store.  The minimum purchase requirement for wholesale orders will remain at $200 except for drop-ship orders.

We will begin offering drop-shipping services for resellers as soon as we can get a few little issues worked out.  I’d appreciate any input on drop-shipping programs from those of you who already have a drop-shipping agreement with another company.

Volume Discounts for Professional Artists and Entertainment Companies

The most common complaints that we receive from professionals are about only needing to replenish a few stencil designs or some other item that professionals use up quickly, but not enough to place a discounted order.  So we will start adding volume discounts on stencils and other items that you professionals and entertainment companies go through quickly.  In order to allow for volume discounting on individual items, we are reducing our overall shopping cart discounting, but also lowering the threshold for receiving our highest professional discount.  The new overall cart discounts will be 10% off orders of $100 - $249 and 25% off orders of $250 or more. 

Instructor and Affiliate Programs – Earn money for your referrals and a rebate on your own orders.

A lot of you have supported us over the years by promoting our products simply because you believe in the integrity of our company and the quality of our products.  I feel like we’ve grown from absolutely nothing to this wonderful company that we are today because we have the support and love from so many generous people.  We can’t be everywhere to meet potential new artists, so it really helps our business grow when people like you help spread the word about what we have to offer.  We are creating these new programs not only to market our own products, but also as a thank you to those of you who use our products in your business and in your classes and to help you find more success as an artist and/or instructor.  We want these programs to be fair and mutually beneficial to you, your students, and Amerikan Body Art. 

Affiliate Program

Our new affiliate program consists of a banner or ad placed on your website, which links to the Amerikan Body Art website.  Our website software tracks purchases made through the link on your website and we will pay you a referral fee of 10% of the total purchase (after applicable discounts and before shipping costs).  Additionally, you can use the link when placing your own orders and receive a 10% rebate on your own orders.  Payments will be made monthly. 

The affiliate program is going to be launched on a trial basis and we make no guarantees that it will last forever or that we won’t make changes to it as we go along.  Until we launch the program and see it in action, we can’t know what unforeseen issues could cause problems.  There will be some pre-requisites to becoming an affiliate, and some requirements to maintaining affiliate status such as minimum sales generated through the link, other than your own purchases.  If the link doesn’t generate any sales for us over a certain period of time and only serves as a rebate generator for the affiliate’s own purchases, we will likely withdraw their affiliate status.  We want this to be a win-win situation for us and the affiliate…increased sales and visibility for us, and income/ rebates for the affiliate.  

Instructor Program

Basically, we will offer you and your students a Coupon code (for free shipping or a free product), product samples and literature for your students, a gift product that you can offer as a prize or use for demonstration purposes, and we will advertise your class on our Facebook page.  In exchange, we simply ask that you offer a great class to your students, make a genuine effort to market your class, pass on these samples to your students and promote our products in your class.

Just to be clear, I’ve outlined our expectations below.  We believe that the majority of people are honorable and honest, but we also need to be sure that we aren’t being taken advantage of if we want to continue to offer this program.  At this early stage of the program, we would be happy to consider any suggestions you may have and we hope that you understand that the program may go through some fine tuning changes, based on feedback and experience.  We may find the need to limit the frequency that we are willing to allow each instructor to participate in this program, based on the perceived success of their classes and marketing efforts, but we are willing to give everyone a chance to try it out at least once.

1.  You must contact us at least 2 weeks before your class.

We feel that you need to be marketing your class for at least a couple of weeks (probably a month) ahead of time in order to allow potential students time to make arrangements to attend.  We will give you a coupon code for the Amerikan Body Art website for both you and your students to use between 2 weeks before the scheduled class up to 2 weeks after the class.  You can also earn 10% of your students’ orders by becoming an affiliate and having your students shop through our banner on your website.

2.  You must have both a business website and a business Facebook page.

We want to know that you are indeed in business as a face and body artist (or in a compatible industry) and are qualified to teach.  You don’t have to be an award-winning artist, but professionalism is important. 

3.  Your class must be advertised in at least two places (website, Facebook, newsletter, email group, forum)

We want to know that you are making an effort to bring in students with good marketing practices.  Send us the class information and we will put it up on the Amerikan Body Art Facebook page as well.

4. Your class must prominently feature the use of Amerikan Body Art products.

We consider ourselves to be sponsors of your class, and the purpose of this is to spread the word about our supply company.  It’s fine if you have other sponsors for your class as long as you can be fair about it.

5.  Samples and literature sent by Amerikan Body Art must be distributed to your students.

Let us know how many students you expect or hope to have.  We understand that you may have fewer students than you anticipate, but an estimate will help us know how many samples to send.  We expect these samples and the accompanying literature to be handed out to students, not kept for yourself or your employees.  Use your own discretion as far as what to do with leftover samples, but they are not to be sold unless the funds are to be donated to a charity.

Although we have not set an exact limit on how many samples we are willing to send, we would expect that class size would be commensurate to the instructor’s experience, marketing efforts, and venue….Meaning that we probably aren’t going to agree with an expectation of having 50 students at your house, but if you were teaching at a convention center, a larger class size would be normal and we would be happy to accommodate requests for a larger amount of samples. 

So that's what we've been up to lately....Feel free to email us any questions or suggestions.

The P Word....and the C Word: Profit and Change

This is a long one folks….

This article, while largely aimed at those of you who sell merchandise, can also help those of you who sell intangibles (such as face and body art services).

Anyone who knows me well, knows that I hate change…probably more than most people.  But I consider myself a sane business person, and any sane business person who finds themselves getting poor results while doing things a certain way, must change the way they do things.  (This applies to life in general, not just business.)

Before delving into profit margins, I need to be sure that you understand what profit really is.  As a corporation, you receive a salary (as do any of your employees) and any money left over after salaries is your company’s profit.  That’s fairly straightforward for those of you who have incorporated your businesses. 

However, as a sole proprietor, all of the money left after expenses becomes your income.  This income represents your salary plus company profit.  A lot of people throw around big numbers that sound great, but aren't a true reflection of the profitability of your business.  If you are a sole proprietor, with gross sales of $100,000 you DID NOT “make” $100,000. And if your gross sales were $100,000 and your expenses were $50,000, your company profit IS NOT $50,000…unless you work for free.  With gross sales of $100,000 and expenses of $50,000, your profit is $50,000 minus whatever you would have paid someone else to do this job.  So if you determine that $48,000 is a fair salary, then you made $48,000 and the business profited $2,000. 

Why is this important?  Because a record of business profit is necessary if you wish to sell your business, if you plan to use it as leverage for a loan, or if you want it to continue to have value after you retire.  As a self-employed business person, you have two ways of providing for yourself once you retire.  You must either have funded a retirement account while you were working or your business must be able to continue to provide profit for you when you no longer wish to do the daily work and must pay someone to do what you have been doing.  You spent years building up your business, and it doesn't make sense for it to simply cease to exist when you are no longer willing or able to work.

Too many businesses don’t take the time to do the math to determine whether or not their business is actually profitable.  They look at gross sales as an indicator of business health and when their profit isn’t as high as they’d like, they think the solution is higher sales.  Well if your profit margin is too low (sales vs. expenses), higher sales might not translate into higher profit…In fact, it could even be driving you further in the hole.  I ran the numbers on a few of my Amazon products and determined that I was actually losing money every time I sold one of those items.  How could that be?

Item X – Retail price $10

Raw material cost - $2.50

Labor cost to package item and to package/ship item - $1.75

Amazon fees - $1.90 (this includes a portion of the monthly amazon store fee as well as “Referral” fees)

Shipping materials – (labels, ink, boxes, bubble wrap…this stuff isn’t free) - $1.30

Shipping losses (undercharging) and product loss (spills/ expiration) - $1

Overhead costs – (Boy, can this be an eye-opener) - $1.60

With this math, I’m losing $0.05 on each sale.  I can spend more money on advertising to increase my sales, but no matter how many nickels I lose, you can see that it will never be a profitable product if I continue to use the same formula to sell it.

So how do I change the formula? 

I look for less expensive raw product, either by switching suppliers or by negotiating a lower cost by purchasing in higher volume. 

I look for less expensive packaging.  Sometimes we choose packaging based on appearance, rather than functionality.

I decrease labor costs by producing/ assembling more product at a time, instead of producing one or two items at a time.

I look for less expensive shipping and packing materials.  I recycle/ reuse as much as possible and look for free packing materials from friends or on craigslist.

I try to more accurately estimate shipping charges, and offer more shipping options. 

I revise my production schedule and product rotation process to avoid expiration issues.

I look for more effective and less expensive advertising opportunities, such as affiliate programs, YouTube videos, and workshops.

I decrease overhead costs when possible.  I realized that I spend $35 per month to maintain my newsletter subscriber list through Constant Contact, when I can do it for free through Blogger. 

As a last resort, and only when the market can handle it, I raise the product price.

And if none of this results in an acceptable profit margin, I stop selling the product and look for a different, more profitable product to sell.

I’d like to take a moment to discuss overhead costs, because I find that this is the cost that so many small businesses fail to calculate in their product costs, even me.  When first starting out, this is going to be a difficult number to calculate.  But if you've been in business for at least a few months, you can get a decent approximation of your overhead costs per dollar of sales.

Your overhead costs include: Rent (buildings, storage, vehicles), advertising, office supplies, website, advertising, taxes, licenses, inspections, professional dues, education, transportation, costumes/ uniforms, utilities, repairs, equipment purchases, insurance, etc….

Add up your overhead costs for the month.  Sometimes your costs might have to be an average.  Take advertising costs as an example: Over the course of a year, you spend $4000 on tradeshow fees, $100 on Facebook advertising fees, $300 on business cards, $600 on banners, and $1000 on a website.  Your annual advertising cost is $6000, so your monthly advertising cost would be $50. 

Divide your overhead costs by your sales.  So if your overhead costs are $10,000 for the year (or whatever period you are calculating) and your sales are $100,000, your overhead costs (not including production or labor costs) are 10% or $0.10 per $1 of sales.

There are other costs which you may be overlooking or underestimating, such as bank or Paypal fees, wear and tear on your vehicle, printer ink, repairs, tax preparation, credit card interest, etc….I was shocked to see that I spend $15 each week (around $800 annually) just on packing tape.  One set of cartridges for my laser printer costs $400 and I have to replace them two or three times per year.  When you start wondering if you’re charging too much and you consider lowering your fees in order to undercut the competition, you need to be very certain of what your real business costs are.

Since 2004, I’ve seen my annual gross sales either increase or stay the same, but never decrease.  However, my salary and business profit has decreased dramatically over the past two years.  Initially, I thought it was just a matter of increased competition, but I've had to concede that there are other factors that have contributed to the effect. 

Without consideration of product/ service trends, I've continued to heavily invest in products which don’t sell very quickly.  I've neglected to introduce new products or to adapt my current products to changing trends.  I allowed my website and advertising efforts to become stagnant.  While all of my overhead expenses have increased, I've failed to increase product prices or to lower costs to compensate.  Basically, I distanced myself from my business’ needs and my customers’ needs and desires.  I've been sitting here singing with my fingers in my ears and my eyes closed, hoping that things would just change with time.

Since that hasn't really been working out for me, I’m going to have to put on my big girl panties and make some necessary changes to the business.  For every change that I make, I will do everything within my power to be sure that I don’t take anything away from my customers without offering some benefit in return.  That won’t always be possible, but I promise to do my best to offer greater value without increasing prices on my products. 

Over the next several months, you can anticipate seeing changes to products, such as different kits with better price points and different packaging that will allow me to either lower or maintain pricing.  For example, we are changing our standard Liquid Bling packaging.  Liquid Bling is currently packaged in a bottle with a wide nib/plug onto which you must attach a metal tip in order to achieve a fine line.  Our new nib/plug is much finer and that means you no longer need to add a metal tip to the product.  The new retail price for Liquid Bling with the smaller plug and no metal tip will be $4.99 ($1 lower than current pricing).  And for those of you who prefer it with the old packaging system, this will still be available at the old price.  This new price will become effective as soon as we can get stocked up on product…approximately mid-February.

Regrettably, there is one negative change that I must make.  As of March 1^st, I can no longer offer a 60% distributor discount.  My business model and profit margin simply cannot support this level of discount.  Any of you who have been taking advantage of this wonderful discount over the past 8 months can still receive a 60% discount off orders of $2500 or more during the month of February. 

On the bright side, I will be adding new products such as more glitter/ mica colors and improving the website.  I am starting loyalty programs, such as our Stencil Loyalty Program.  Once you have purchased 500 stencils, the website (if you are a registered user) will inform you that you qualify for a free gift.  Sorry, this is not retroactive, it starts now.  And I have added shipping options that will allow you to save money on shipping costs when time is not as important as money. 

I am also investigating special programs that will allow instructors and advertising affiliates to earn money for helping to promote Amerikan Body Art products.

During the month of January, we moved the business to a new location. So February is the start of a whole new existence for us.  And since February is also the month in which my birthday falls, I am making it a month of free gifts.

For all orders of at least $25 during the month of February, receive a free bottle of Liquid Bling in our new packaging.  I’m going to make a special Limited Edition Valentine’s color. ($4.99 retail value)

For all orders of at least $60, also receive a free Basic Henna Kit. ($9.99 retail value)

For all orders of at least $100, also receive a free Mica-Tats Kit ($24.99 retail value)

That’s $40 worth of free gifts with your $100 order.  Limit of 1 of each free gift per customer. 

Thank you so much to all of you beautiful people who have shared and grown with me through the years.  I’m looking forward to a wonderfully prosperous 2014 for all of us.

Love,

Erika  

Visit our Shop at www.AmerikanBodyArt.com

Tips for Blogger Reviewers

I would love to offer bloggers the opportunity to review some of our products, but I'm looking for a certain level of journalistic professionalism and targeted marketing. We often get requests for free products to review. Some are so compelling that I happily send stuff off right away. Others...don't quite hit the mark. I typically look at your email to me, then your facebook, blogs and Youtube channels to determine several things before sending product to review.

1. Did you just send me a form letter that doesn't even mention my company or what sort of products you want to try out? C'mon, put in a little effort. I want to know that you didn't just CC me a mass email that you sent out to hundreds of companies, hoping that a few will bite. And while we love to hear, "I just love your company and would like to share my love with my followers..." I would prefer to hear, "I am putting together an article on XYZ products or techniques and your (specific product) is relevant to this article because...."

2. Are you in the face and body art industry (or salon/spa/ gift retail, etc...)? I am honored that you want to try out our products, but our products are mostly geared towards a very specific market segment. If your blogs/videos are about hunting and fishing, or just everything in the world that you love, there is a very slim chance that any of your followers are the type of customer that we try to target. Tell me about the focus of your blog and what kind of people follow you.

3. How many followers do you have? I'm not saying that I wouldn't send a newbie blogger something to try out and review, but you do need to have a certain amount of good content and peer interaction on your blog or facebook for me to believe that you're not just fishing for free product.

4. How will it benefit me? I get a lot of, "My followers would really love it if..." I know they would love it. We have great products, lol. When you're trying to pitch your services, you have to remember that although I want this to benefit you and add valuable content for your readers, winning me over is not about how it will benefit you (or your followers). It's about making me understand how it will be good for me to invest in you. This is important to understand when marketing any product or service to any potential customer. Hint: good photos, good editorial, and several links to my website or specific product pages are what I'm hoping to see when I've sent you free products to review.

5. I don't always have time to follow up on the websites who have reviews of my products. It would be really great to hear some feedback on what your followers had to say about your review. I don't expect all reviews to be 100% positive, and we need to know if any problems exist that can be fixed. We like to hear the praises too. Sending us a follow-up is a good way to ensure that I remember you and would consider sending you other products to review.

Here's an article that gives some great advice for writing product reviews.

Better Product Reviews

http://basicblogtips.com/better-product-reviews.html