Muddling your Models

This week I have been working with a designer on her business model.  You have a business model too – even if you don’t realise it – but it it the best model for you?

There is more than one way to structure how you do business, and reach your customers, and what suits you won’t suit the next person.  Your model will depend on how much you need to earn, how much time you can commit to your business, whether you want to employ people and so on.  And it will evolve over time.

I thought it might be useful to give you some examples of different business models, and some of the pros and cons of each model.  Hopefully you may recognise your own model, and be able to account for its strengths and weaknesses.  If you are using a combination of models, are these complimentary, or conflicting?

Let me know what you think!

Model How it works Pros & Cons
Wholesale I sell my necklaces to shops, for a wholesale price.  I sell my necklaces to the shops for $10 each, and the shop retails them at $25 each, so I make $10 per necklace. This model is based on getting high volumes of sales, for a lower price per item. 

I don’t have big marketing costs trying to attract lots of individual customers, and I don’t have the overheads of my own shop.

My own website I sell a range of necklaces online through my own website. 

I sell each necklace for $25, so make more per item.

I have to spend time marketing my website to attract customers, but I get to keep a larger chuck of the profit on each item. 

I keep the range I produce quite small, so that I can buy the materials in bigger volumes, and get bigger discounts on them.

Bespoke Orders I create one-off, unique pieces for customers that I meet face-to-face in my studio. 

I charge $100+ for a necklace.

I get to work closely with my customers which I love.  I spend a lot of time with each customer, liaising, sending designs and sample materials.  I have to charge much higher prices to cover these costs.
Paying Commission I sell through Etsy, Folksy, or galleries, who take a commission on my work. The retailer takes between 20-60% of my sale price, but they do the marketing to attract the customers, and I can reach a wider audience this way.
Fairs & Exhibitions I exhibit at a range of craft fairs and exhibitions that attract my target customers. These events are a valuable way to attract new customers, giving them an opportunity to see my work. I can use these events to bring my brand to life.  The overheads can be high, and I have to give up a weekend, but I benefit from impulse buyers, and I collect names and addresses for my database.
A combination of the above I sell wholesale, and through my own website. I also do the odd exhibition at key times like Christmas. I have to be really careful to keep my pricing consistent across all these channels, and make sure I have built enough margin in to make a profit at wholesale and retail prices.  I benefit from a wide customer base and increased sales opportunities.