Category: Starting Your Business

If you plan on selling your handmade items, you’ll need to be able to accept payments. When selling through an online marketplace (like Etsy or Artfire), the marketplace collects the payment from the customer on your behalf. The marketplace then takes a portion of the sale (their processing fees) and deposits the rest into your account. But, if you are selling in person, you’ll need a method of collecting payments.

How to Collect Payments in Person

1) Cash or checks. Cash or checks are the easiest way to collect funds from local customers. Remember to allow checks to clear before giving the customer their item.

2) Credit card readers. There are a number of small business credit card readers available. The credit card readers use your smartphone or tablet and process the customer payment on your behalf. The company then takes a portion of the sale for processing the payment and deposits the remaining funds into your account. The needs of each small business vary, so compare your options to figure out which reader suits your small business best. For example, if you primarily take orders over the phone, make sure you choose a credit card reader with lower fees for keyed in transactions. To help you decide which will work best for your needs, I’ve summarized some main points about each in the chart below. Links to each credit card reader can be found at the end of the article.

Information below updated 4/11/16.

Reader	Cost	Fees	Deposit Availability	Other Notes
Square	Free. Order online. $10 in office or electronic stores that is credited back to your account after use.	Swiped: 2.75%, Keyed in: 3.5% + $0.15	1 business day, includes all business processed before 8pm ET the preceding day.	Additional features likes a register app, Square store, and more available. Email only customer service.
PayAnywhere	Free. Order online. $15 in office or electronic stores that can be credited back to your account after use.	Swiped: 2.69%, Keyed: 3.49% + $0.19	1 business day, includes all business processed before 5pm ET the preceding day.	Storefronts available for larger vendors. Rates for storefronts from 1.69% (and up) per swipe.
Quickbooks GoPayment by Intuit	Free. Order online.	Two plans available. 1) $0 monthly, Swiped: 2.40% + $0.25, Keyed in: 3.40% + $0.25 2) $19.95 monthly, Swiped:  1.75% + $0.25, Keyed in: 3.15% + $0.25	2-3 business days	Automatically imports information into Quickbooks for easy accounting.
Etsy Card Reader	Free. Order online.	Swiped: 2.75%, Keyed in: 3% + $0.25	Money goes to your Etsy shop account and is deposited each Monday. Earlier deposits are available.	No Etsy transaction fees from items listed in your shop and paid via the card reader. No listing fees for items sold via the Quick Listing (not listed in your Etsy shop).
Paypal Here by Paypal	Free. Order online.	Swiped: 2.7%, Keyed in: 3.5% + $0.15	Money goes to your Paypal account for you to transfer to your bank when ready. Money is instantly available with the Paypal debit card.	Can also accept payment from your customer’s Paypal account.
Amazon Local Register No longer accepting customers.	$10, but receive a credit for transaction fees once you use reader. Order online.	Swiped: 2.5%, Keyed in: 2.75%	Capable of next business day deposits, just need to set it up.	Amazon states that they have stabilized the card reader to make swiping easier. Card reader is larger than other brands.
Flint	No reader needed. App is free from Google Play or App Store.	Processes through Stripe. 2.9% + $0.30.	Within 2 business days.	Simply take a photo of the card and it is securely processed. Image is not stored on your device. Optional integration with Quickbooks. Mixed reviews online.

Update 10/26/15: The USA has recently switched to EMV credit card readers. Learn more about them in this post.

Always Collect Payment First

A quick (but important) note for newer sellers: Always collect payment before you begin working on any item for any customer. No seller ever wants to put the supplies and time into an item, especially a custom item that you might not be able to resell, and then have the customer not follow through with the sale.

Having customers pay in person is great for fairs and local sales, but what if you need to collect payment for items that you aren’t selling through an online marketplace, and the customer is not local? Online invoicing is a great way to easily do so. Read on to part two of this article, which covers online invoicing.

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Links to credit card reader websites

Square
PayAnywhere
Quickbooks GoPayment by Intuit
Etsy Card Reader
Paypal Here
Flint

Do you want to start a craft business? Great! Today, let’s talk about how to set goals for your craft business – the SMART way.

Before you start writing down goals, you have to understand how to set them.

Wondering how to price crafts for sale? Before you start a craft business, you must know how to price your handmade items. There is nothing worse than designing an item, creating it, packaging it, selling it, and then realizing you made no profit – or worse – you lost money selling an item!

Craft Pricing Formula

There are a number of pricing formulas out there, but this is the one I like the most. It takes into account supplies, labor, and overhead costs.

Generally, a handmade item is priced using a formula similar to this:

Cost of Supplies + Labor + Portion of Overhead = Total Costs
Total Costs x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price

Let’s break down the parts of the formula.

How to Figure Out the Cost of Supplies

The cost of your supplies is how much you paid for the supplies. This is straightforward. However, it can get tricky if you use a portion of a supply in a project for sale.

For example, if you make a tshirt using a half a sheet of vinyl, you’d only use half of the cost of the sheet of vinyl in your formula. Similarly, if you use a third of a container of glitter in your product – you’d only use 1/3rd the total cost of the glitter in your formula.

How to Figure Out Labor Costs

The labor costs are how much you want to pay yourself. There are too many times where I have seen crafters selling products, and not paying themselves. Sadly, you are not going to be in business long if you aren’t making any money.

So how much should you pay yourself? I talk in length about how much to pay yourself in another post.

How to Figure Out Overhead Costs

Don’t forget: When figuring out your overhead costs, you’ll need to take into account everything you used to create your item. From the software costs, machine costs, actual supplies used, packaging (box or envelope, packing supplies, tape, the label paper you used), the cost of the scale you used, the amount of electricity used, the space in your home or studio, even a portion of your advertising costs or store fees.

How to Price Crafts for Sale Example

Example: I’m selling a personalized glitter tumbler sealed with epoxy. After creating the tumbler, the customer will pick up.

Supplies and costs:

• Stainless steel tumbler. $1.39.
• Glitter. I use one quarter of a container that cost $5.99. One quarter of $5.99 is roughly $1.50.
• Epoxy. I purchase epoxy by the gallon for $50.00 and can make 35 tumblers with one gallon. 1/35th of a gallon costs $1.42.
• Vinyl. I use one quarter of a sheet of adhesive vinyl to add personalization to the tumbler. One sheet of adhesive vinyl costs $1.42. One quarter of a sheet is $0.36.

• Total supply costs: $5.56.

Labor:

• I pay myself $10 an hour to make tumblers, based on my experience and expertise. It takes me one hour to make the tumbler.

Overhead: Things like electricity, space in my home studio, online store fees, legal fees, and more all go into the overhead of your business. You can think of your business overhead as the amount it costs you each month to keep your business running – or your break even point.

Here’s how to figure out your monthly overhead:

1. List out all expenses in your business for the previous month.
2. Add these expenses together. This was your total overhead for the month.
3. Divide by 744 (the total number of hours per month in a month with 31 days).

Let’s do it: $450 (total expenses)/744 = .60

What does .60 mean? This figure is your monthly overhead cost by hour. Simply add it to your labor rate in the formula and the overhead costs are accounted for.

My adjusted labor rate is $10.60 an hour.

Put the numbers into the formula:

Cost of Supplies + Labor + Portion of Overhead = Total Costs
Total Costs x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price

$5.56 + $10.00 + (which includes my overhead) = $16.16

$16.16 x 2 = $32.32

$32.32 x 2 = $64.64.

This gives us a selling price of $33 wholesale and $65 retail.

Online Craft Calculators

There are a number of online craft calculators available, as well as a handful of apps. Honestly, they will all use a different variation of one of the popular pricing formulas. If you find one you love, use it. If not, just grab your calculator and the formula above to price crafts for sale.

One more thing: Have you ever heard of dynamic pricing? You may not have, but you see it every day. Your prices should be dynamic, not static. Read more about dynamic and static pricing.

Yesterday, I compared credit card readers to help you decide which credit card reader worked best of your small business. But, how can you accept payments from customers that are not ordering through an online marketplace and they are not local? Besides having the customer mail you a check, you can also use online invoicing. Online invoicing means that a customer is emailed an invoice with links for them to pay with their credit card. After paying the invoice, they will be emailed a receipt and you will be notified. Depending on which invoicing system you use, the money is either deposited to your bank account or into your account.

If you are using an accounting program like Quickbooks, Xero, or Wave, an online invoicing tool is usually built into the program. Similarly, if you are using a credit card reader, many of those services also have online invoicing available.

If you already use Paypal to accept payments, you can also use it to send customer invoices. Your customer does not have to have a Paypal account to pay the invoice.

How to Send a Paypal Invoice

1) Log into your Paypal account.

2) Click “Send & Request” from the choices across the top.

3) Choose “Create and manage invoices” from the next screen.

4) Click “Create an Invoice”.

5) Enter your business information and your customer information. You can give your invoice any number you want, and set the due date for whenever. I chose to leave mine, “Due on Receipt”.

6) Pay close attention to the description of the item, and be as specific as possible when writing the description. In this example my customer is buying a pink shirt with a white monogram on the chest area. My description states “Size Medium Adult Dark Pink Shirt with Circle Monogram CSA, Monogram color: White, Monogram placement: left chest area”. In the event there is a problem with the transaction, a thorough description may prevent you from having to refund a customer.

Near the bottom of the Paypal invoice, you can also attach a file. This is a great place to attach a mockup of the item or a sample photo of the item if you have one available. I attached a simple mockup of the shirt design.

7) Once you are satisfied with the invoice, click “Preview” to see it. If you will be selling a similar item, you can also choose to save the invoice as a template. Here is what my completed invoice looks like when it is sent to my customer:

8) After previewing the invoice, click “Send” to email it to your customer. Once the customer pays, you will receive a notification that payment has been made, and you’ll be ready to start creating!

Again, it is a wise business move to always get your customer to pay for your item before you begin making it. No seller ever wants to put the supplies and time into an item, especially a custom item that you might not be able to resell, and then have the customer not follow through with the sale.

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