Top Complementary Business Models For Handmade Entrepreneurs

As you lead your business forward, you will eventually have to do one of three things to grow your handmade business: (1) train others (either employees or contractors) to help you make the products you sell; (2) offer “how to” information products along with handmade products; or (3) add complementary business models within your existing retail business model to boost sales.

A baker kneading dough for breadThis post shares other types of business models (excluding wholesale, another great business model) you can choose from.

1. Customized products

If your customers like your core line of products, you can offer them in customized versions at a premium price. You already have most, if not all, of the ingredients and supplies to do this. Set up a basic ordering structure, a time frame, minimum payment requirements, etc. Use your newsletter and blog to let customers know you can customize products for them and share the pricing differences and the extra special attention they get when you create products in scents designed just for them.

GCD Spa does a good job of this, offering a core line of products and making custom options available and easy to choose from.

A variation on this theme is to offer a very high end product that costs you a bit more to make, but which allows you to increase your profit margin exponentially because you can charge much more for the product. For example, Cirque offers a $40 bottle of nail polish made with 24 karat gold left flake. Sure, it costs a bit more to produce, but the increase in perceived customer value allows you to maximize your profit margin by charging more for the product.

2. Memberships

Launch a “product of the month” club, or a “limited edition club,” where you offer a bulk discount for retail customers who buy quantities in advance and pay a little more for guaranteed delivery of your handmade goodies throughout the year, without them having to place an order. Sometimes called “subscription services,” another spin on this idea is to create a loyalty or membership program where you offer year-long discounts to people who become “members of your brand.”

Your most loyal followers pay an annual membership fee to enjoy a discount on orders all year, along with special perks as you make them available — to members only.

Some examples are Carol's Daughter's “Friends of the Family” membership program, and the Level Naturals monthly “Good Box.”

3. Community

Use the Internet to create your own social network or forum where people who love your products gather to talk about their shared likes, dislikes, hopes, dreams, and concerns. You can use everything from public or private Facebook groups or pages to services like vbulletin and Ning to do this. The possibilities are endless. Carol's Daughter's “Transitioning Movement” site is a good example of this type of community. You can sell ads at these sites and use them to increase brand awareness and create opportunities to create collaborative new products with members of the community and industry colleagues. (Note: Martha recently migrated the community to a Facebook page … though there's not much going on there at the moment …) While I see this as a super idea for any handmade product, I see special opportunities for businesses selling mineral makeup and ethnic hair care products.

4. Share “How We Make”

Unlike the examples above, this model does not have to be a direct sale. It can be more of a marketing model than a completely new business model. It involves publishing a complimentary monthly e-book or e-report about the ingredients used in your products, and how you incorporate them into the products your customers love. Each month, create a new short booklet and make it available to your customers and prospects in PDF format. Use this to grow your list.

Joan Morais does this very well, offering lots of different types of short “how to” e-books at reasonable prices, and rotating the ones that are available for free each month. This strategy allows you to bring more people into your sphere of influence, while also building your credibility as an expert in your field (which always creates new business opportunities for you). People like buying products (especially handmade ones) from people they know they can trust. Demonstrate that you've done your research and people will be more inclined to come to you for their product needs and wants.

5. Sell supplies

The examples above help you sell existing products to retail customers. The “sell supplies” model discussed here is a step removed from that. Unlike the above examples, you will need to expand your list from retail consumers to friends and colleagues in your industry. This is not a huge stretch since you are probably connected to tons of them on Facebook.

The idea here is not to become a big time supplier, but to systematize the sale of a few of the higher end and more exotic ingredients you must buy in bulk in order to maintain a profit margin, and sell those ingredients to your colleagues at prices that beat the huge suppliers you buy from. I'm not suggesting you go into business competing with your supplier (though many a successful small business has started this way …), but really just that you create a temporary measure to boost your profit margin until the sales of your products using particular ingredients reach a point where they can support themselves. Choose 5 or 6 of your top high priced ingredients — ones that are easy to ship and which weigh little but cost a lot. The best examples include things like high priced fruit extracts and mica used in mineral makeup and nail polish.

6. Affiliate programs

You know these when you see them — Amazon is the biggest and most well known example. Invite people to sell your products as affiliates, earning a commission on each product they sell. This is admittedly not my favorite business model, but several people I know make a decent amount of money as affiliates selling other people's products, and they don't have to change how they do business or make products to add this. You'll need a reliable affiliate tracking platform to track your affiliates's sales, and the amount you owe them for those sales. I have heard good things about iDevAffiliate.

7. Events

This is hot and getting hotter by the minute, as the interest in all things local continues to grow. You can host events, either on your own or with other Indies, where your products are featured. For example, this past holiday season, IBN member Dawn Fitch of Pooka Pure and Simple hosted a Holiday Ladies Night Out with a few other IBN members in her area. They charged $25 for people to come into the Pooka Boutique and shop. (Yes, people paid to enter the store to spend more money …) Tickets had to be purchased in advance and included fun socializing and music, handsome young men to greet guests at the door and take their coats, and a coupon for a complimentary holiday beverage. Check out the flyer for the event.

Another example is a supplier member who opened up her warehouse parking lot a few times a quarter so people could bring their own containers and load up on suppliers at bulk prices. Ingredients were weighed “salad bar style,” and people in the local community met each other and had a great time.

Of course, you could offer classes to teach people how to make the products you sell. (Indie Business Network offers teacher's insurance for this!) One of our members who does this well is Candance Sweeney and her Nakee Naturals Green Goddess Spa Parties and Workshops.

As you can probably tell, these suggestions are not just for handmade business owners. Anyone who has a business in any industry, and who has a desire to grow and add additional income in a natural way, will be excited by at least one of these ideas.

You Have To Be Ready, and Plan, Plan, PLAN

Of course, not every business is at a time in its evolution where adding new business models make sense. You have to grow into this. Don't do it too early or you'll be terribly sidetracked and end up losing not only money, but probably some sanity too.

I want you to get into the habit of zooming out and planning for five years down the road instead of just five months down the road. Putting these ideas into your “knapsack of possibilities” now will help train you to recognize an opportunity to capitalize on them in the future.

Remember, skate to where the puck is going, not to where it is.

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About Donna Maria Coles Johnson

Donna Maria is an author, podcaster, attorney, and the founder and CEO of the Indie Business Network, providing affordable product liability insurance and mentoring. Donna Maria teaches Makers and Creative Entrepreneurs how to use technology and community to build a profitable, sustainable business.