Wednesday, May 26, 2010

The Hidden Costs of Being Independent


So, you've decided that you're going to take the plunge and dive in at the deep end and launch an independent online t-shirt shop. You've factored in the costs of getting the t-shirts themselves and the screen printing of them but there is a proverbial slap in the face waiting for you if you aren't prepared for all the hidden costs of being independent. In this blog I'll outline some of the costs I've encountered from my work with LadyUmbrella.

Packaging
Whether it is a plain white mailer, custom packaging or even some extravagent and brand orientated packaging it's going to cost some moolah. Make sure you factor the packaging costs into your budget. I would also recommend starting your research months in advance of planned launch date - it can take time to find what you want and get it delivered, especially if it is going to be custom.

Postage
Of course, it is a no brainer, you are going to have to post your goods to your cherished customer so make sure you have enough in the kitty to ensure that the 'mailman always delivers'. Like the packaging, do some research to find out postal rates for different areas that you will be shipping to. There are different factors that determine the price of postage, namely size, weight and chosen delivery type (registered, express, standard etc). Large boxes are obviously more pricey to ship, not due to their weight but the area they take up, so make sure to factor in postage costs when you are working out you're packaging. Another important thing to consider is how you are going to handle returns/exchanges - try to factor them in.

Duty, Tax, Legals
This is another vital thing to make sure you have in order. I won't even attempt to give rates of tax or duty as it is totally different depending on where you are in the world but read up on it. If the accountants hat is something that never quite fitted you ask someone who is up to speed with the ins and outs of your tax system. The one rule that holds world wide is that you don't want to fall foul of the tax man. Also, depending on where you are you may need to register yourself as a company, again like the number crunching side of things, if you're not sure what your legal obligations are ask someone who is and get it sorted. Your business is your baby and all babies need to be looked after. Make sure to budget for costs that may be incurred compliments of legal sytems and the tax man.

Online
If you're going to be an independent and sell online you have to have an online presence. You're going to need a robust shopping cart system, website and domain/hosting. There are a whole myriad of choices when it comes to the type of website you can create, shopping cart you can use and hosting/domain plans you can choose and accordingly there are a whole myriad of prices. It is possible to get "one size fits all" type websites which will help keeps costs down and some stealthy googling will help you find a hosting/domain plan to suit your budget. Generally the big bucks are spent when you get a custom made website and shopping cart - it is up to you to decide which route you want to go.

Payment Processing and Banks
Once you have all of the above established you have to decide how are you going to get money from Point A to Point B (A being their pocket with B being yours) without the big C creeping in taking a piece of the pie (C being banks and payment processors charges). It is possible to use PayPal and only incur a low % per transaction cost (I think) but the downside is that they will hold the money for a much longer period than alternatives. If you set up a merchant account at a bank which will allow you to receive credit card payments directly there will be a lenghty form filling process to go through and possibly monthly payments. Like most things in this post thus far there are a lot of options available to you so do some research. What is ideal and works for someone may not be for you so do scope it out and find out what is your sweet spot regarding payment and banks, the balance between charges incurred, features of service and payment holding period.

Finishing the T-Shirt
One of the real advantages I think of being independent is that you have complete control of your product down to the very last detail. Perhaps you want to get some woven neck labels and some hang tags or have some other ornate notion of how you want to present your t-shirt. All of these little add ons undoubtedly cost money but can also take a lot of time to source. Don't leave it until the last minute to finalise your plans for finishing the t-shirt - if you fail to prepare, prepare to fail..

The Frills
Badges, stickers, business cards, custom pens, custom paper, custom anything! All these frills can really add to how you present your t-shirt but also cause those euros (dollars) to pile up. The frills can also take a bit of time to get produced so if you want to get yourself some frills of any nature make sure to research it in a timely fashion. One company who adds a lot of value to their product is Hipstery who add 3D glasses and a variety of other interesting frills to their packagaing. Unfortunately I can't add anymore about their packaging - it's shrouded in mystery, you should just check them out and prepare to be amazed.

What Rob Says
At this stage I must sound like a broken down record player ranting on about research but it is essential if you want to be able to manage the hidden costs of being independent. Find out what your budget can handle and research the above areas. It will take time and it will be frustrating. Some items that you might want to get may not be possible due to budget constraints - think outside the box when trying to come up with unique, cost saving ways of packaging your t-shirt.

The real value of the frills and packaging is the initial "wow" factor that it gives your customers. This wow factor comes at a price but you have to try see if you can afford the extra outlay. And that is what it will be - extra outlay. Don't let the frills and packaging increase the price of the product for the customer as this will defeat the purpose.

There is a lot to think about and a lot to mull over but form a strategy for how you are going to manage the hidden costs of being independent and.....
Research!!


This post was written by Rob from LadyUmbrella ladies t-shirts.

4 comments:

  1. very helpful. thanks for the info

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  2. Thanks for the awesome comment! I'll be sure to pass it on to Rob :) - Amanda R.

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  3. There are also "soft" costs many don't consider: higher utilities, upkeep/replacement of equipment (t-shirt presses, computers, office equipment), office supplies and accounting fees to name just a few.

    If you're completely self-employed there are additional expenses involved like self-employment tax and health insurance, not to mention unpaid sick days and time spent on the business management.

    All these and more factor into the final cost of your product.

    If you don't estimate hidden and "soft" costs you can hit the end of the year at a lower profit than you expected or even a loss!

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  4. I totally agree Pop Art Diva and probably should have included that fact in the post. When you go it alone you go it alone in every aspect of the business - sick days are no longer as straight forward as an "I'm sick" phonecall and still getting paid...the buck stops with you..Rob

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