How To Lower Production Costs to Increase Profits
So you’ve added up all your production costs and used our calculations to determine your wholesale and retail price.
But what happens if that price is much higher than you’re comfortable with and perhaps pricing you out of the market?
Or maybe you want to increase your profit margins by keeping the price the same but lowering your costs.
It’s time to take a look at your materials and techniques to see if you can cut some corners to reduce the production costs without sacrificing your good name and quality. As I’ve mentioned in other articles; I don’t believe in lowering the prices of your handmade goods to make a sale, you need to be sure you’re paying yourself properly.
But there are some ways to lower your costs so you can subsequently lower your prices; here are a few areas to look into:
You may need to rethink where you shop if you’re trying to lower your prices as the place you once frequented out of convenience may not cut it anymore. Once you have a business license, you can find places that sell at wholesale prices to business owners for some sweet discounts.
#2 HOW YOU SHOP
Keep an eye out for sales and try to make big purchases during those times. See if you can barter a bit and get a discount for taking last year’s stock off their hands or for buying in bulk. Companies will often reward loyal customers and you’d be surprised at what can happen if you just ask.
You can look for materials that aren’t as high end. You don’t want to compromise your quality too much but you can always add a lower end line to fit certain budgets. If buyers are interested in the higher quality ingredients/fabrics/materials, you can point them towards your top-line products and explain what makes them different.
A little alteration in the design of your products can make a big difference. Replacing zippers with snaps, reducing the amount of pockets or altering the size could cut down on the time it takes to make each item, its cost and ultimately, the price.
Making items in bulk can reduce your production time by quite a bit. The more you focus on one task at a time without having to switch locations, tools or equipment, the less time it will take you to complete. Assembly lines are used in mass production for a reason! It streamlines the process, gets you in a groove and keeps the pace going.
Is there an area that slows you down when it comes to measuring? Create a reusable template for cutting and marking. Cut your pattern pieces out of a heavier paper so you don’t have to pin them down each time or fuss with them. Create a guide you can line your pieces up to so you know exactly where to cut each time or place a detail without having to measure.
Look into the cost of upgrading your equipment or using different tools. There were times where my sewing machine just couldn’t move fast enough. An industrial sewing machine would come in handy for those who are experienced and have a lot of pieces to sew. If there’s an area you feel is slowing you down, do some research to see if there are any tools out there to remedy the problem.
#8 SET TIME FRAMES
You still want your craft to be fun and you don’t always want to be racing against the clock but when I had deadlines or days I wanted to get a lot done, I would set mini goals for myself. Give yourself an hour to complete all your cutting/prepping then take a little break, the next 2 hours can be dedicated to assembly then lunch, etc. It helped me keep my head down, be aware of the clock and have a little break or reward to look forward to once I was done a big task.
Here’s an example of how I improved my production time and lowered costs during the Christmas season when I was making flannel pajamas. Perhaps it will spark some ideas for cutting down on time and costs in your own production:
- discounts – watched for 50% off and “buy 2 meters get one free” sales and stocked up on fabric, regardless of the time of year.
- eliminated the drawstring – it didn’t cost anything extra in fabric as I would cut it from the scraps but it was another piece to cut out, sew, turn right side out, sew button holes on the pj’s and then thread the drawstring through. This step alone probably cut off 10 minutes per pair! Customers didn’t miss it as there was still an elastic waistband and I added cute little buttons to the front which were much quicker to sew on.
- ironed my hems first – once my pajama legs were together, I was finding it difficult to get my hems even, pin them and then sew them. I found if I ironed the hems up before I put them together, they were always even and I could just fold and hold them in place while I sewed.
- created a template for the hems – I took that one step further and cut a hem guide out of heavy paper so I could just fold the bottom of the fabric over the guide and iron to create a crease. This saved me a lot of time as I didn’t have to stop every few inches to measure and make sure everything was consistent.
- created new pattern pieces – I cut them out of heavy paper so there was less fiddling around to get them to sit flat, they didn’t shift around when I was cutting and they lasted a lot longer than thin tissue paper.
- bought new tools – rotary knives were so much quicker for cutting than scissors. I also purchased some sewing weights so I didn’t have to pin my pattern in place, I placed a weight at each corner and cut.
- broke down each and every step – I would make anywhere from 20 – 50 pajamas at a time so I divided everything into separate tasks.
- Cutting – I would carefully layer my fabric so I could cut as many pieces as my rotary knife would allow.
- Sewing – I would line each pair up, sew the leg seam then the crotch seam. Once I cut the threads in the next step I would go back and do all the hems and waistbands.
- Snipping – I would cut all my threads at once. This seems small but stopping each time to grab the scissors, find the thread, cut it then go back to my sewing machine, added up in masses.
- Details – I would then go back and thread elastics through each of the waistbands then sew all of the buttons on the front.
I went from it taking me a good hour start to finish to make one set (when I was only making one at a time) to around 15 minutes per pair when I was making them in bulk and using my assembly line method. Of course I would rope my family into helping me if they were willing. They didn’t mind snipping a few threads while watching TV 😉
This is really great information. I arrived at this blog post from your other post about how to price handmade items. I’m a bookbinder trying to price my handmade journals and sketchbooks and I’m finding the time it takes me to make a book is making my costs very high. In reading this blog about how to lower production costs by prepping and doing things in bulk rather than from start to finish, I don’t really understand how that’s actually saving time and money. In the end, it seems to me you’re still spending the same amount of time on each task that goes into making the product you’re just breaking it up differently. For example in my case, I could spend a whole day prepping all my paper, covers, etc for several books to be bound throughout the week. Of course, all that prep work would help me bind more books in a day than I could if I did every step of the book-making process from start to finish in one day, but is that actually saving me time/money? It seems it’s only saving me time/money if I don’t count the hours I spent prepping all the books and just count the actual time it took to bind the books. Do I not pay myself for all those prep work hours I put in? In your other blog post I mentioned earlier you say to calculate all your costs and all time spent working on your business. Are you saying in this blog you don’t count the time spent on an assembly line approach? It doesn’t make sense to me how this lowers production costs at the end of the day. And if it does save time/money, how do I actually calculate that per item made?
Thanks for reading! I’m definitely NOT suggesting you don’t pay yourself for prep hours. You must account for and pay yourself for any time you spend on your business. The purpose of breaking up the steps and completing them in bulk is just as explained in the article; you complete a task faster when you’re working with the same tools, in the same area, and following the same motion over and over. I’m not familiar with the steps that go into bookbinding, so perhaps this method isn’t as useful for your business. If your products only require one or two steps to make, breaking them up and completing them in bulk may not make a big time difference. But when I’m sewing, having to pull my pattern piece out, set it on one layer of material, cut the fabric, take that fabric to my sewing machine, sew a seam, iron that seam, back to the sewing machine, sew another seam, etc. to make just one product, really slows me down. If I pull my pattern piece out and cut 10 pieces of fabric and then sew the same seam 10 times in a row, then iron those 10 seams, etc. it’s much more time efficient.
I hope that helps clarify!