How to Determine A Show's
~ Real Profitability ~
Courtesy of the National Craft Association
Information for Craftsmen & Artists
The intent here is to evaluate the success of a given show in light of your earnings.
When you are first starting, the income from your efforts will determine how long you can afford to stay involved in the craft industry. Most of us start out with a relatively inexpensive show for two reasons: First: we don't have much money and the fear of loss is greater than the entrepreneurial spirit. Secondly: we are testing the water. We need to see if our product will sell in its present condition or if it needs alterations. Once we have tested ourselves and our product proves to be a saleable item, we can evaluate a show's success based on income.
The first thing to do is establish the cost of production for the items you are selling. The cost of production would include all materials and what you feel your time is worth when manufacturing the products. This is done for several reasons. Sales income and manufacturing income are as different as night and day. To mix them would dilute any formula for profit margins. The IRS treats each very differently. If you ever have an audit, the IRS will want to know the value of your unsold merchandise for tax purposes. If you have a real hot seller and want help in the manufacturing process, knowing the cost of production will allow you to pay your help without hurting yourself.
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What you now have is a reduced equation for figuring the profitability of a show. You now have known quantities of product at a known cost, a specific booth fee and the related costs of transportation and storage, if any. Do not include any expenses you may have incurred for travel or lodging. Using the travel expenses will alter your results for the out-of-town shows and not give you a clear picture in comparison with the local shows.
Your product cost formula is:
Total Product Cost Of Items Taken - (minus) Total Product Cost Of Unsold Items = (equals) Total Product Cost.
Your total expense formula is: Booth Fees + (plus) Total Product Cost = (equals) Show Investment.
The Show Investment represents the amount of money you placed on the line to earn an income. Just like placing money in the bank to draw interest or purchasing stocks to earn dividends. If you did place the Show Investment in the bank or bought stocks with it we would measure our gains in terms of a percent, sometimes called earned interest.
When you put money down on a show you are making an investment. You invest time and skills in the marketplace and measure the results in money. By creating a product cost before you get to the show you have converted your skills and time into money and now you have a basis for evaluating the success of a show.
Show Investment Return formula is: Total Sales minus Show investment = Show Investment = % gain or loss.
For example: Total sales = $350.00, Booth Rent = $ 35.00, Product Cost = $ 84.00. Show Investment = (35.00 + 84.00) = $119.
Plugging this into the formula gives you 350.00 - 119.00 = $231 divided by 119 = 194%. On this show you would have nearly doubled your money. Can you find a bank or stock that in one weekend will give you that type of return? It appears that the show in question was a very successful investment.
Using the concept of investment returns will allow you more flexibility in selecting shows with higher booth fees.
If the return is the same on an investment and all other things are equal, a $300 booth fee for the show numbers listed above should return you an additional $282 for the show period after expenses. That means that a more expensive booth fee could actually be less expensive in the long run. Don't shy away from them, as long as you have enough inventory ready for the larger size show and have tested the salability of your work.
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