A Rocky Start, Blog #3: Running the Business…before it runs you

So I sat, surrounded by a sea of beads, beaming with artistic rapture, ready to begin my creative journey.  It was a heady rush.

But no worries–I came back to earth with a thud when I sat down at my computer to tally the expenses of my venture.

“Entreprenuerial rapture” carried me through the early months of the business side of things, but I admit:  The biz has gotten boring, and I’m behind on my accounting.  So it occurs to me perhaps I’m the wrong person to give tips on starting a jewelry business, but here are some of my early headaches and how I dealt with them.  Hopefully some can benefit–and even better, add to the list of “things not to do” and/or “things to do.”

First off, some people seem to have the attitude of “Why even bother keeping records?  I hardly make any money.”  And technically, that’s true–my understanding is that we don’t absolutely have to report income on our business until it clears $400 profit in a single year.  So here’s my logic:  If I keep track of every single expense I put into the business, be it in a spreadsheet or in Quickbooks or what have you, I can absolutely prove (to theoretical future IRS agents) that have made no profit and will make no profit for a long time to come.  Otherwise, I’m potentially guilty of cheating the tax system, and…I’d rather not.

So the first thing I did was make a Spreadsheet and list every single thing I’d bought for the business, down to post-it notes and packing tape.  I call it “Bead Inventory,” even though that’s not precisely accurate anymore.  In this spread sheet, I enter the item, the cost, the source (where I bought it from), and–if it’s a consumable and dividable item like 16 inches of beads or 30 yards of wire, I calculate a per-item/per-inch cost in the final column.

And yes, I have a “grand total” cell at the bottom of the sheet, but I haven’t looked at it in months.  Far too depressing.

If you don’t know how to use spreadsheets, there are tutorials online, and if you can’t afford Microsoft Office, try NeoOffice or OpenOffice, which can be downloaded for free and do exactly the same things and create exactly the same file types.  Or you can keep track of things in a notebook, or in a simple table on graph paper, or what have you–my point being, keep track.  If you really want to make a business of it, now or later, you really have to.  I haven’t yet tried Quickbooks but I hear good things about it.  That’s on my to-do list.

Next, I made a few more spreadsheets to keep track of the cost of each item I make.  That way, I have a quick “supplies cost” reference when pricing items or attempting to calculate profit,  which of course, doesn’t account for my time and effort…but how much does the IRS care about those, anyway?  I read a good basic book about running a jewelry-making business (Jewelry Making for Fun & Profit by Lynda Musante), and in the book she says that since we are self-employed, part of our monthly expenses have to be paying our own wages.  And if I did that, I’d probably never turn a profit!  😛  So for now, I’m not even bothering with that.  Another to-do list item when business picks up in earnest.

But yes–keep track of every little tube of pencil lead that you’re going to use for your business.  And don’t forget the shipping costs!  I charge for the envelopes & bubble wrap, zippie bags, tape, and about 15 cents for my time to pack it.  (Clearly, I’m running a sweatshop, here.)

So if I’m sittin’ pretty on all these spreadsheets, you might wonder, what were my “mistakes” I spoke of earlier?  Well, here’s the nutshell versions:

1)  Organize!  and other useful -izes

I have my inventory list, all well and good.  But in the beginning, I just threw everything on there without any sort of organization.  Big mistake, when it came time to calculate costs of making items.  “Now, where were those 5mm copper daisy spacers, again??”  So describe your items using a consistent system.  I start out with the actual thing: “spacer bead,” “earring hook” or the specific name of the stone, then add on materials, sizes, styles, etc., after that.  It makes it easy to categorize them and alphabetize them if you’re consistent with the way you describe the items you buy.

Which leads to:  Categorize your items and alphabetize them within categories.  This is easy to do in spreadsheets simply by adding blank rows in between your category sections and putting a new heading at the top of each section.  In my spreadsheet, to use an example, I have sections broken down thusly:  gemstone beads (includes any beads that aren’t metal), spacer beads & caps, findings, supplies (consumable and non-consumable), and tools/misc.  Then everything inside each section is alphabetical.  It’s the only way I can find items I’m looking for, now that my inventory has gone (way) beyond that initial $400 purchase.

2)  If you leave receipts around idle, they begin to multiply…

Yeah.  I know.  For now, I just jam them into a manilla envelope and hope for the best.  I know that someday when I’m really a “Business” per se (as in, making a profit of any kind), I will need to file them according to product type or date or something more helpful.  So I’m creating yet another future headache for myself.  Perhaps you’d like to start ahead of the game and organize them logically from the start.  Also:  Some people don’t send receipts or invoices with their products, so in that case, I’d suggest printing out your shopping cart or confirmation e-mail from that seller to serve in place of a receipt.

3)  Is an EIN something German?

Call the IRS and get a tax i.d. number (or Employer Identification Number) when you can.  I do NOT recommend going through an online service, as they all charge you for the privilege of inducing your headache, when you could simply call the nice IRS people and get one for free.  You’ll need one if you have to file sales tax for in-state sales (I haven’t had to deal with that yet, thankfully) and you can also use them at bead shows and for certain online vendors to get the wholesale rate.

My experience was a headache-inducer, as I didn’t realize I didn’t have to use an online service and pay money for the thing, nor did I realize that, because we hired a nanny for part of the year last year and had to pay income taxes for her, we already had one.  Don’t be confused by their confusing questions:  You are considered a “business entity” when you apply for a tax i.d. number.  Silly me, I’d thought I was a person and my business was the entity, but no.  If you have ever gotten a tax i.d. using your social security number before, that one is the one you’ll use for your business as well.

4)  Have a process

Once I finish a piece, the first step is, of course, photography.  Etsy is a harsh mistress when it comes to photographing your work!  But after that, the bookkeeping begins:   I take the item to my computer and count the parts until I’ve calculated the cost of the item and input everything into the spreadsheet, where it is assigned an item number.  If I’m really smart and my son is asleep, I’ll also write my Etsy description at that time (see below for more on this) so I can measure everything and have it good to go when my photos are resized and I’m ready to list.  Then it goes into a zippie bag with the item number from the spreadsheet written on the outside.

One horrible idea:  Taking everything out of bags to photograph them at once.  That just sent me back to the spreadsheet to make sure everything went back into its proper baggie.  Ugh.  It might be better to hang little price tags on things with their item numbers instead, although that might mess up the photos, too.  So yeah…photos first in any case.

That’s my process, at least, and I’m sure it will be tweaked and improved as I go along and I build up a larger inventory to keep track of.  I do intend to get Quickbooks sooner or later and give that a try–I still haven’t figured out a good way to keep track of each item’s statistics as I sell them (I need to learn to make a database where I can write each item’s description, its cost to make, its sale price and date of sale, cost of shipping, etc., but who has time for the learning curve?  But that’s another blog entirely…).

5)  Keep your item details in a text file for easy reference.

Let’s say Etsy or Artfire has a major crash and all your items are de-listed and the listing details lost.  You now have to re-write all your item descriptions, right?  Well, I know that I’m a moron when it comes to remembering all the things I need to remember, so i started out typing all my item descriptions (and the other schpiel that goes into my listings) into a text file, where I can easily copy and paste them when doing my listings.  This also can be a time-saver, since I might have extra time to write the descriptions on a day when I don’t want to list everything I’m describing.

And one more thing everyone who uses a computer should do:

6)  Backup Backup Backup!!!

You’ve created all these wonderful pictures, descriptions, and spreadsheets now, right?  Can a catastrophic hard-drive failure be far behind??  It doesn’t cost a whole lot to get an external USB hard-drive and back up your important files every couple of days.  I’d also suggest getting a flash drive to keep things on when you might need to transport them, and getting a free web mail account like gmail or yahoo, where you can e-mail yourself files as attachments and leave them there as yet another form of backup.  Don’t have just one way to back up your files; have several.  Send your pics to Flickr and Photobucket (you can set them to private if you don’t want folks to peep at them).  There are lots of ways to store your important files off-site as well as having an on-site backup.  Save save save!

I think that’s all my tips for now.  I’m sure I’ll think of more–there’s always room for more bloggins, right?  Send me your comments, critiques, tips, links, horror stories, success stories, and dirty jokes!  particlesofstone@yahoo.com

Next time:  Tumblin’ Down the Rabbit-Hole:  Entering the Etsy Arena


3 comments so far

  1. Audrey on

    Great post!! Some really good ideas that I will have to try.

  2. shelley on

    This is a great read!

  3. Cindy on

    Thanks for the suggestions.

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