Wednesday, June 4, 2014

Cost of Goods Sold

There were way more unknowns than knowns when this all began last year.

I didn't know how to turn my idea into a tangible product, how to price the product, who my potential customers were, and how to successfully market to find more customers. 

Since officially launching MagnifiCuffs on July 11, 2013 there has been a lot of product development, package revisions, social media updates, networking, collaborations, mentor appointments (seriously, thank God for Sonja!) and growth.

Slowly but surely it all came together! 

I am very happy to tell you that the product is now at the highest level possible. 

The magnets are the maximum size that will fit within the ribbons, giving them the strongest connection possible.  The adornment glue is specifically made for affixing metal to material.  My sewing skills are so honed that although each set is still hand sewn, they look like they were sewn by machine. 

With the cost of all of the material improvements deducted from the sales price there was a crystal clear realization that I would lose money with each sale.  Say what!?! 

When I initially calculated my COGS (Cost of Goods Sold) I made the rookie move of not including labor in the cost.  This is apparently a very common mistake of many first time business owners to use labor as profit. 

Since I'm at home anyways, making any sales and bringing any money in is a good thing.  Right?  Wrong. 

About a month ago Ryan (husband and Chief Officer or anything I don't want to do) asked how I intended for the business to ever become profitable, or even stay afloat, if labor wasn't included in the cost of the product.  If I need to hire someone in the future, how will we pay them an hourly rate if labor costs weren't factored into the price of the product?

D'oh! 

A funny thing happened once I increased my prices a few weeks ago.  I started to improve my online shop by uploading more uniform pictures.  I stopped feeling resentful whenever I made the product.  I wore my product with pride and took more care when sending sets out.  I reached out to some people and started to form some awesome relationships including a photographer who gets me great shots of the product in use. 

I started to treat my business as a business!  Not a hobby that would hopefully one day help us pay ourselves back our initial investment.  Truth be told, we never would have paid ourselves back because I kept putting money into it to grow the business. 

But putting money into a business that costs money to sell the products...well that's a shotty idea.

As we all know, I could easily outsource the work and get the prices down but that goes against my core values and the reason I started this business in the first place. 

So when you see our prices please know that you are paying for a one of a kind (or limited edition) set of trendsetting accessories that are handmade by a Mama within the US.    

Love,
Marcia

P.S.  Check out our online store and use the code: firstpurchase for 20% off