Being Busy Doesn’t Always Mean Being Profitable

This is something that crops up a lot and is a topic I covered in a Zoom session for my Soap Suite members this month.

Being busy doesn’t always mean being profitable. I know that might sound obvious when you see it written down, but I also know how easy it is to forget when you are in the middle of running your business. You can be making products every spare minute, selling at markets, packing orders, getting lovely feedback from customers and still not have a business that is properly working for you. And by working, I mean supporting the life, income and business you are trying to build.

When a handmade business looks successful but still feels hard

This is where some handmade businesses can become really tricky, because from the outside yours might look successful. You have regular orders, repeat customers, stockists, a nice social media following and a busy market calendar. But behind the scenes, you might still be exhausted and paying yourself very little.

I don't want to be unrealistic - in the early days you will be working a lot and probably not paying yourself, that is just how it is, but I do think some handmade businesses are mathematically impossible, from a profitability perspective. Not because the products are bad, and not because the maker is not talented or working hard enough, but because the numbers, the time, the product range and the pricing simply do not add up. There are a number of reasons for this and I have seen them all, but the good news is it is your business and you can make changes,

Why more handmade products can create less profit

One of the biggest traps for handmade soap and skincare businesses is the temptation to keep adding more products. A new scent, a new size, a new seasonal range, a new balm, a new scrub, a new gift set. Of course, creating new things can be lovely. It is often one of the reasons we started making products in the first place, breaks up the monotony of making the same thing and allows you to exercise your creative streak.

But more products often create less profit unless carefully managed.

More products usually mean more ingredients, more packaging, more labels, more admin, more stock holding, more compliance work and more mental load. That does not mean you should only ever sell three things and never have any fun with your product range, but it does mean your product range needs to earn its keep.

A smaller, simpler product range is often more profitable. It can also be much easier to manage, especially if you are running the business on your own or around another job, family life or other responsibilities.

Your best selling product may not be your most profitable

Another thing worth thinking about is whether your most popular product is actually your most profitable product. This can be a really uncomfortable one, because we naturally become attached to the products people love. A product can sell really well, get lots of compliments, create plenty of engagement and still not actually be worth carrying.

It might take too long to make. It might need too many ingredients. It might need awkward or expensive packaging. It might have a weaker margin than your other products. It might be one of those products that everybody loves, but nobody wants to pay enough for.

This is where you have to look past the nice comments and look at what the product is actually doing for your business. It is not just about whether something sells. It is about whether it is worth selling. Sometimes a few tweaks can change everything - investing in a piece of equipment that speeds the process up is a perfect example. Other times there is no quick fix and you may have to accept that carrying on with it is impacting your business in a negative way.

Wholesale pricing can reveal problems quickly

Wholesale ( ie selling to other businesses, shops for resale) is another area that exposes weak pricing very quickly. Even if you do not currently sell to other businesses, I think it can be useful to consider what wholesale pricing would look like for your products. If wholesale pricing feels impossible, it may be a sign that your retail pricing is already too low, your margins are not strong enough, or the product is not commercially viable in its current form.

That does not mean every business has to wholesale. Some businesses are much better suited to retail, events, online sales or a mixture of different routes. But if you would like stockists in the future, ( and I genuinely feel that this is the best route to growing your business fast) or you are already selling to shops, then your pricing needs to be strong enough to cope with that.

You may well be surprised at how high your profit margin needs to be and the formula you have probably read about wholesale prices being double your cost price and retail being 4x that, is not true. It absolutely does not work for a handmade business. I am a much greater fan of reverse engineering what you need to earn, against the time you have available and using that as a tool to see how viable your business (and your pricing) is. This is a tool I use a lot in my 1 to 1 calls and it can be an eye opener. 

Not every product deserves to scale

Before growing a product, it is also worth asking yourself whether you actually want to make a lot more of it. Not just one more batch or a few extra for a market, but hundreds or possibly thousands over time. Can you make it efficiently? Can you label it, pack it, store it and sell it without it taking over your life? Is the return worth the effort?

Some products are lovely as small batch products, but they do not necessarily deserve to become a core part of your business.  Not every product needs to scale. It is for this reason that specific gift sets that I used to sell on my website were not available to stockists. They took too long to make up and were not viable for me to sell at wholesale prices. 

Pricing handmade soap and skincare is about more than ingredients

Pricing is another area where makers often start too small. They look at ingredients and packaging, which of course matter, but they are only part of the picture. Your pricing also needs to support the cost of running the business. That includes electricity, insurance, website fees, equipment, subscriptions, postage materials, labels, your workspace, your time, taxes, National Insurance and all the other costs that are part of small business life.

And then there is profit. Profit is not a dirty word. Profit is what allows your business to survive. It supports reinvestment, growth, a cash flow buffer, future plans and business stability. It doesn't just pay you a wage. Without profit, you do not really have a sustainable business. You have a very demanding hobby that probably pays you less than the minimum wage. 

Your product range and pricing need to work together

This is why product range and pricing need to work together. Profitability is not just about the numbers on a spreadsheet. Your product range affects your workload, your stress levels and your ability to grow. Some products are too time consuming to justify the return. Some products create unnecessary complexity. Some products stay in the range because you love making them, even though they may not be helping the business.

And I do think there is room for joy in a handmade business. Not everything has to be cold and clinical. But if you want your business to support you financially, you need to know which products are doing the heavy lifting and which ones are holding you back.

Questions to ask about your product range

So perhaps it is worth asking yourself a few honest questions. Which products make the best profit? Which products take the most time? Which products drain your energy? Which products create the most admin? Which products are only still there because you like making them? And which products would you actually want to make in much larger quantities? Do you have a route map of how you could achieve your income goals? Is it even possible with the way your business is currently operating?

You do not have to change everything overnight

If this has made you feel a bit uncomfortable, please do not panic. You don't have to change everything overnight. Sometimes gradual changes are much easier for both you and your customers. You might introduce new products at stronger prices first. You might slowly move existing products towards more sustainable pricing. You might simplify your range over time, remove one product that is not pulling its weight, or review your wholesale pricing before taking on any more stockists.

Small changes can still make a big difference. The most important thing is to stop assuming that being busy means everything is fine.

Building a handmade business that works for you

We are all different, and there is no single perfect formula. A business selling mainly at markets will need to think differently from a business selling mainly wholesale. A soap business will have different challenges from a balm business. A maker working around children, another job or health issues will have different limits from someone working full time in their business.

The important thing is building a business that works for you, your life and your goals. Because revenue is vanity, profit is sanity and cash flow is reality - as they say.

If you run a UK soap or skincare business and you are starting to wonder whether your pricing, product range or business model is really working, this is exactly the sort of thing I can help with in a Pick My Brains One to One Zoom call.  It is not about telling you to charge silly prices or turn your business into something you do not want. It is about taking a birds eye view of what you are doing vs where you want to be and helping you build something more sustainable, more profitable and much easier to live with.

Calls can be anything from 30 minutes to 3 hours and we can talk about anything that will help you right now. You can find out more about how it all works here.