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How Much Should I Pay Retailers for Selling My Product?

I want to start selling my handmade jewelry in boutiques, but I do not know much of the profits should go to the owner of the shop. Any advice?
Brad Sugars answered August 11, 2011
URL: http://www.entrepreneur.com/answer/222356
This is typically done on consignment, by which the store receives some kind of split on what they sell.

Revenue is usually split 60 percent to the store and 40 percent to you, although everything is negotiable. If your product is a "hot" item or helps drive extra traffic to that retailer, you can start at 60/40 then maybe move to a 50/50 or even 40/60 split.

It all depends, ultimately, on the type of demand for your product and the cost basis for your work.

Do you know what your costs truly are?

You need to know, because if you are getting 40 percent from every sale, but you need 50 percent to cover your costs, your profit margin and ultimately your profit, then you're already losing the game.

Typically, if you can get a three times the retail markup -- or 300 percent over your costs -- then you're in a good position to cover your costs. Of course, that's if you know exactly what your total costs of goods really are.

For example, if it costs you $1 to make a piece, and you sell it for $3, are you really covering yourself in terms of expenses and leaving room for a healthy profit margin? Generally, that's at least 35 percent to 50 percent for custom made items. It's better to make and sell something for 50 cents "all in" and sell it for $10 than worry about making slim or no margins work for you.

Your other option is to set up shop at one of your local arts or crafts markets and see if there is a demand for your jewelry. Then, you can price and keep all of your revenues and profits, while developing a customer base that you can use to leverage yourself into retail outlets.

No matter what path you take, know your numbers inside and out and price your work accordingly. If your work is truly something people want to buy, you'll be able to create a unique niche for yourself, and ultimately command and charge whatever price your customers are willing to pay.

Related: Does Your Business Really Need a Retail Store?
Related: How Do I Get Boutique Owners to Sell My Retail Product?

Brad Sugars is the founder and chairman of ActionCOACH. As an entrepreneur, author and business coach, he has owned and operated more than two dozen companies including his main company, ActionCOACH, which has more than 1,000 offices in 34 countries.