Breaking Down Costs

[Iguanadon]

Just cuz I love playing with numbers... I sat down and created the spreadsheet below to look at my material costs and in theory how much I make "per hour" based on 2 scenarios. I have 2 types of "Typical 1 day event". My weekly market which is 5 hours every Saturday during the summer and I average $775. And other festivals and other type events that are generally 8-9 hours and I average around $1550. (Believe me, I've done some dud events, but over the past 6 years I know which events are worth doing and that's what I stick with). I do some multi-day events as well, and they average around $1500 per day, so this covers everything nicely. I tried to think of all my costs, but please let me know if you notice anything missing or bad calculations, etc.  I'm glad I did this as I didn't realize that booth fees were my second highest cost.  I'm just so used to writing the checks when I register for the events.   REMINDER TO THE NEWBIES!!! I've been doing this for 6 years and I have busted my ass perfecting my setup, my sales pitch, my products AND I live at the beach with an abundance of markets and events to choose from every year. I do 25-30 events a year. I still have my day job, this is a side hustle that I enjoy more than I can say.

[rjweb]

Looks good Iggy, the only thing I didn't see any mention of was the web site expense and income, keep up the great work, RJ

[Dave Monk]

All I can say is that you are a hell of a lot faster than I am. Good job!

[Iguanadon]

32 minutes ago, rjweb said:

Looks good Iggy, the only thing I didn't see any mention of was the web site expense and income, keep up the great work, RJ

Thanks RJ.  The only reason I keep my website is because of selling patterns for Harvey.  I keep a small portion of each pattern sold and that covers the website, so no out of pocket expenses for me.

[kmmcrafts]

You know me I can knit pick that list of expenses to pieces.. but I'll keep it out of the equation. though the knit pick list is very long it does add up to be a substantial total.  You have some bigger expenses not mentioned though.. Just to name a couple of them without writing the whole list I can think of off the top of my head is.. (Even if I knit pick this down you still do fairly well for just having fun..)

Business Insurance? Mine's about $400 a year.. but I don't have a business vehicle or maintenance and insurance fees for one either.. 

How about credit card processing fees? 

Any shows you do that you travel more than a couple miles? All day shows do you pack lunch, stay in a hotel etc.  

It was nice of the IRS to give us a whopping $0.04 more for mileage deduction when fuel prices doubled as well as everything else vehicle maintenance etc. related  to travel just about doubled too.. I guess they thought that $0.04 should help cover those mileage expenses, LOL

 

[Iguanadon]

3 minutes ago, kmmcrafts said:

You know me I can knit pick that list of expenses to pieces.. but I'll keep it out of the equation. though the knit pick list is very long it does add up to be a substantial total.  You have some bigger expenses not mentioned though.. Just to name a couple of them without writing the whole list I can think of off the top of my head is.. (Even if I knit pick this down you still do fairly well for just having fun..)

Business Insurance? Mine's about $400 a year.. but I don't have a business vehicle or maintenance and insurance fees for one either.. 

How about credit card processing fees? 

Any shows you do that you travel more than a couple miles? All day shows do you pack lunch, stay in a hotel etc.  

It was nice of the IRS to give us a whopping $0.04 more for mileage deduction when fuel prices doubled as well as everything else vehicle maintenance etc. related  to travel just about doubled too.. I guess they thought that $0.04 should help cover those mileage expenses, LOL

 

Hey Kev, yep, some other little costs there for sure, thanks.

1) No business insurance currently, but something I keep meaning to look at in case my inventory gets destroyed in my garage. If cost is $400 as you mention, that would add 50 cents per item sold.

2) I have a row for travel costs already in the spreadsheet.  23 of my 30 events are literally within 1 mile of my house.  So the travel costs shown cover the other 7.

3) Yes, I could add about 30 cents to each piece to cover credit card fees on the 60% of sales paid for by credit card.

And as I've said, Anything above my material costs is pure profit for me, I don't care about the hourly "wage" or pay, it's my leisure and fun time.

[kmmcrafts]

1 hour ago, Iguanadon said:

Hey Kev, yep, some other little costs there for sure, thanks.

1) No business insurance currently, but something I keep meaning to look at in case my inventory gets destroyed in my garage. If cost is $400 as you mention, that would add 50 cents per item sold.

2) I have a row for travel costs already in the spreadsheet.  23 of my 30 events are literally within 1 mile of my house.  So the travel costs shown cover the other 7.

3) Yes, I could add about 30 cents to each piece to cover credit card fees on the 60% of sales paid for by credit card.

And as I've said, Anything above my material costs is pure profit for me, I don't care about the hourly "wage" or pay, it's my leisure and fun time.

Don't think you can get insurance to cover your cost of damaged items at a retail price level.. only at a raw materials level.. 

[barb.j.enders]

10 hours ago, kmmcrafts said:

Don't think you can get insurance to cover your cost of damaged items at a retail price level.. only at a raw materials level.. 

You should be able to get coverage for the "stock" which would be retail price level.  However, that premium might come at a premium.  

[barb.j.enders]

12 hours ago, Iguanadon said:

No business insurance currently, but something I keep meaning to look at in case my inventory gets destroyed in my garage. If cost is $400 as you mention, that would add 50 cents per item sold.

You might want to check with your insurance broker.  Because you are earning an income from your hobby, ANY claim you may have on your house might not be covered because you didn't disclose the "business".  Just call me a paranoid, now retired, insurance broker.

[Iguanadon]

8 minutes ago, barb.j.enders said:

You might want to check with your insurance broker.  Because you are earning an income from your hobby, ANY claim you may have on your house might not be covered because you didn't disclose the "business".  Just call me a paranoid, now retired, insurance broker.

You're absolutely correct and my insurance broker is the one that brings it up. LOL  She'll nail me down on it one day.

[kmmcrafts]

My policy is just a very basic one that is more for liability but they include $10,000 for machines used to make my products, and also includes my inventory.. but only at a raw material cost, not retail value.. A lot of shows ( my understanding ) require you to have some sort of liability insurance. If a customer trips in your booth and breaks their arm the show ( organization ) is liable but it can fall back onto you as the seller too.. The injured person may not sue you but their health insurance can and probably will so they can get their claim payout money back.. It may not even be a thing that was your fault.. it just happened at your booth..  

[amazingkevin]

Amazing all you have to do to cover your butt!!!

[tomsteve]

 utilities for the shop and insurance. you might not have business insurance but you still have homeowners insurance.

also, does your travel expenses have % for auto insurance?

[kmmcrafts]

The more money you make the more money goes to the IRS.. He's doing it all wrong when you leave out most of the expenses that "could" be deducted.. The right way is to see how little you can "show" you make and still have the business survive.. .. While my statement is kind of funny, it is true..

[new2woodwrk]

@barb.j.enders is very correct!

Just an FYI and CYA for consideration - for anyone reading this thread...

If your insurance co. decides what you do makes your home a commercial entity, they can/will cancel you.

We are seeing that quite a bit here in our real estate market with Solar Panels - Jennifer and I are both real estate agents.

The "supposed" sell back of electricity to the power co. creates a commercial entity and residential insurance company's are dropping home owners left and right. Many home owners are now unable to obtain residential insurance because of this. It happens when the insurance co. renews a policy and requests a 4 point inspection of the property. That's how they find out and how they "get" the owners on record.

I have a separate insurance policy for the shop in the garage and write that off as an actual business expense. The policy is completely separate from my home owners policy so any claim can not be used against my residential policy. In fact my residential policy no longer covers the lower portion of my garage, only the upper portion which is a small "nursery" room.

 

Edited July 24, 2022 by new2woodwrk

[OCtoolguy]

2 hours ago, kmmcrafts said:

The more money you make the more money goes to the IRS.. He's doing it all wrong when you leave out most of the expenses that "could" be deducted.. The right way is to see how little you can "show" you make and still have the business survive.. .. While my statement is kind of funny, it is true..

I love "cash" businesses. 

 

[kmmcrafts]

The true cost of doing business is why my prices are the way they are.. I've went round and round with many folks on here about pricing and about legal business fees including as AmazingKevin says ( covering your behind LOL).. and those fees to do just that.. some folks might get lucky and never need the insurance for the business or the homeowners insurance won't drop you because of running a business etc..  Many business's cut corners to offer cheap prices.. good for them if they get away with it.. If you rely on the home owners insurance to cover you when your shop burns that you're running a business out of.. you'll go out of business very fast.. 

IF you sell with " intent to make a profit ".. whether you're hobby or not  the IRS, your insurance company and many others see you as a business.. 

[OCtoolguy]

1 hour ago, kmmcrafts said:

The true cost of doing business is why my prices are the way they are.. I've went round and round with many folks on here about pricing and about legal business fees including as AmazingKevin says ( covering your behind LOL).. and those fees to do just that.. some folks might get lucky and never need the insurance for the business or the homeowners insurance won't drop you because of running a business etc..  Many business's cut corners to offer cheap prices.. good for them if they get away with it.. If you rely on the home owners insurance to cover you when your shop burns that you're running a business out of.. you'll go out of business very fast.. 

IF you sell with " intent to make a profit ".. whether you're hobby or not  the IRS, your insurance company and many others see you as a business.. 

Who ever said it was a " free" country should be run out of town. 

[John B]

Iggy, you left out the biggest expense. The War Office   "That'd make a nice present for ......"  "I'm going to a baby shower on Wednesday, What do have that'd make a nice Present" etc etc etc   

[meflick]

13 hours ago, John B said:

Iggy, you left out the biggest expense. The War Office   "That'd make a nice present for ......"  "I'm going to a baby shower on Wednesday, What do have that'd make a nice Present" etc etc etc   

Those are “samples” given away by your chief sales staff to help make further sales. Thus a deductible business expense.  Besides, probably still cheaper then her having to go to the store and buy a much more expensive gift. Plus, happy wife or (“war office”)happy life.

Edited July 25, 2022 by meflick
Typo

[kmmcrafts]

52 minutes ago, meflick said:

Besides, probably still cheaper then her having to go to the store and buy a much more expensive gift. Plus, happy wife or (“war office”)happy life.

Definitely cheaper as she won't buy a whole shopping cart full of things we didn't know we needed until she found them on sale..  

[OCtoolguy]

1 hour ago, kmmcrafts said:

Definitely cheaper as she won't buy a whole shopping cart full of things we didn't know we needed until she found them on sale..  

I saw yesterday that the MOST expensive vehicle driven today is the shopping cart at Costco.

 

[Sycamore67]

This thread made me glad that I only scroll saw for my own enjoyment.  Spent most of my life working to put food on the table and now just do things I enjoy.  Worrying about liability insurance or making a spreadsheet of costs are not fun for me.  However, if people enjoy that...OK.

[OCtoolguy]

6 hours ago, Sycamore67 said:

This thread made me glad that I only scroll saw for my own enjoyment.  Spent most of my life working to put food on the table and now just do things I enjoy.  Worrying about liability insurance or making a spreadsheet of costs are not fun for me.  However, if people enjoy that...OK.

Totally agree.

[kmmcrafts]

13 hours ago, Sycamore67 said:

This thread made me glad that I only scroll saw for my own enjoyment.  Spent most of my life working to put food on the table and now just do things I enjoy.  Worrying about liability insurance or making a spreadsheet of costs are not fun for me.  However, if people enjoy that...OK.

 

7 hours ago, OCtoolguy said:

Totally agree.

Many folks that are retired now worked for a company that valued them, gave out some sort of pension gave out some health insurance that you didn't have to pay a big chunk of your earnings to have that insurance.. Back when people wanted to work and be proud of what job they had and did.. The employer didn't consider you as a number and did their best to keep you with them and gave you a sense of stability that you'll be working next week, month, year etc.. 

IF you have to fend for yourself no matter what, you might as well do all of it on your own.. Times have changed a great deal.. maybe even before your times but I can say it was way better to work for someone 30-40 years ago than it is now.. 

People talk about how the young folks don't want to work and shortage of workers everywhere.. ALL the young folks I know don't want to work for greedy corporations, especially when these young kids have all the opportunities with just doing stupid YouTube videos and can make more money.. a young man about 6-8 years old building things out of legos on YouTube makes about $10,000 a month.. you suppose he's going to happily take a pay cut and go work for a sweatshop making $15 -20 an hour? People are fooling themselves about how this next generation is lazy and don't want to work.. it's more that they know what they can do and many are doing it online.. These kids are taking over Hollywood stars just being themselves on YouTube ,TikTok and other sights.. and they don't have managers and all the middle men taking the majority of their income either.. they get famous and "companies" want to sponsor them so these kids get cool clothing and whatever else free just to show it on their videos.. which brings me to this.. My son likes to ride BMX bicycles and do stunts etc.. he shows his riding etc. on instagram.. just short 30sec. - 1 min. clips of him doing jumps and stunts.. He has had companies offer hats, shoes, and you name it.. for free if he'll wear this stuff doing his stunts.. He's not trying to get popular or to start a entertainment gig at all.. he was doing these videos etc. just showing friends and followers his BMX tricks.. this stuff here is how "easy" it is right now for many of these young kids to just do what they like to do and make money.. yet you get grilled in a interview for a job that you really don't want anyway.. WHY go work when these opportunities are there to just play? especially when a real jobs pay sucks and very little if any recognition for the job from your boss when you can be recognized by a lot of folks for just playing and doing what you like / want..  Employers are going to have to step up their game, kids don't want their crappy $5000 - 10,000 sign on bonuses.. etc.. and then be treated as just another worker..