It is nearing the end of the year, time to do a business review. To compare how your business did to how you wanted it to do.
Why would you do this? Because knowing how you did will give you the knowledge and power to direct how next year will go. Here are the areas you should do a business review on:
How many items did you sell.? Are there certain items that sold better than others? Why? Is it the price point? The type of art? Do you need to do something to get the other items to sell better? Marketing? Or is it time to eliminate creating them?
How much money did your business earn? This is the total amount you brought in before you reduce it by merchant fees or inventory costs?
Costs and Expenses
Put them into categories, much like you might for your tax return. How much did it cost to create your items (cost of goods sold)? How much were your online costs (website, hosting, Etsy fees, merchant fees, etc.), rent, event fees (entry fee, travel, food)?
How much time did you spend on your business?
Did you track how much time you work on your business? Do you average 40 hours? 10 hours? 5 hours? It is essential to know how much time you are spending, so you know what your hourly rate is. If this isn’t where you would like it to be, it may be time to adjust your prices.
How many are unique each year? How many are repeat customers? Do you track this? Depending on how you sell, through Etsy, Amazon Handmade, Shopify, or directly through fairs, it is vital to know and resell to your existing customer base.
Knowing all of the above
How did it compare with what you thought? Did you do the quick math and figure out how much you made by taking line 3 from line 2? Did you like what you saw?
If you really want to have some fun, take what you have about and divide it by the number of hours you are working? Yikes. Nothing like seeing what you are earning on an hourly basis. It is not just the hours selling at an art fair, but the hours it takes to create, set up your website, and ship items to customers. If something in this number doesn’t sound acceptable to you, is there a way to change it?
Or did you take a look at this and decide you are making a reasonable hourly wage?
If so, congratulations!
If not, then dig a little into why things were different from your expectations? Did something unexpected happen at a show? Bad weather? Did the cost of creating your art increase?
This isn’t a time for excuses; this is a time to honestly look at the numbers. All businesses do some type of review at the end of the year. It lets you know you are heading in the correct direction or if you need to course correct.
Maybe you saw you were spending too much of your time on administrative tasks you could pay someone else to do for you? Perhaps you see your online store isn’t making money? Is there a way to make it more profitable? Or does your online presence send people to your physical presence at art shows?
Doing a yearly business review gives you the power to know how you are really doing.
Dig a little into the numbers you see, and then spend some time at the end of this year and into the new year to see what you can do. Knowing a business does not take off overnight, do you see momentum building in your sales, or do you see one area in your business you should focus on?
Did you find your creative business is making enough money you can stop your full-time job? Or maybe you see you might want to take on a part-time or full-time job so you can take some of the stress off from your creative business.
There will be no one right or wrong answer to what you see. Just use this as one tool in moving your business in the direction you want it to go.
Having done your annual business review, you may have learned something new about your business. You may have decided this is something you would like to look at twice a year or quarterly even.
And now that you have done a year-end review, you have your accounts ready for your taxes!
If you aren’t sure where to start your business review or would like more guidance, here are two different examples of how to complete an annual review. Chris Guillebeau and Marie Forleo both have different approaches.
Find which way works best for you and complete your review, so you can have the best start to your new year.