Tuesday, July 3, 2012
The dirty M word
The dirty M word.....
....Do I have your attention now? :)
Well, for all intense purposes, the dirty M word today is MATH. If you were thinking that it was MONEY, well they are bedfellows but today let's talk a little about MATH and a simple equation to help keep you on track preparing for shows.
As I prepare inventory for BeadFest in Philadelphia in August, a question that's often raised to me in conversation is, "How do you know how many beads to make?" The short answer, since it is my first time there, is that, "I don't." Now, there's all kinds of equations I could use to try and figure it out but the one that I'm finding most helpful to keep me on track with production and keep my momentum going is this:
SALES = QUANTITY(AVERAGE ITEM PRICE)
Let's break it down:
Sales: Since I don't know what my sales will be, this number is the most enigmatic. I have nothing to base this number on in reality. I do have an approximate idea of what my budget and expenses will be and I do know how many other vendors as well as a round figure of attendees. So, this number is the variable. It could be low and it could be high....I won't know until after the show.
Quantity: This is the number I can most control. The number of beads I make has a direct impact, in terms of production anyway, that will determine my sales.
Average Item Price: This might be the most confusing part. Do you know your average item price? Your average item price is the median price point of what you are selling. If you add up the retail cost of all of your items (beads, in my case) and divide it by the number of items, you will have your average item price.
For simplicity sake, if you sell earrings, some may be as high as $50 and some may be as low as $15. If you add up the retail value of all of your earrings, we'll say $1000 and divide it by the number of earrings you have, let's say 100 items, you average item price is $10.
Let's plug that number in to our formula:
SALES = 100(10). So in this case, if you sold all 100 pairs, your sales would be $1000.
So, I'm giving you homework~
For next Thursday's post, I want you to find out the Average Item Price of what you make....and we'll discuss how we can impact our sales but increasing/decreasing our Average Item Price...and how you can use this number to help you plan your inventory for shows!