Diversification: Everybody's Doing It.

Once upon a time I thought it was funny to walk into a Music/Vacuum Cleaner Repair shop, and look at CDs while surrounded by broken vacuum cleaners.  I guess the owner had a talent, and a love for music, and couldn't decide which to follow.  Today, you walk into a bookstore, and there are toys, coffee, CDs and DVDs, etc.  Walk into a coffee shop and there's assorted snacks, CDs, mugs and other stuff.  In today's economy, it makes sense to have a variety of items to sell, since once you get the customer in the shop, you want him or her to buy something, anything.  Every store is a variety store these days.

The same applies to online stores.  Amazon and Target have thousands of items to buy, from food to clothing to books, so you can do a lot of shopping with them.  This blog is all about running a small business, though, and we especially need to think about diversifying.  But how much, and when are just two of many questions.  I've talked about Cost of Goods Sold before, and inventory, and these require a lot of thought before you go buying stuff with intent to sell.  And don't forget shipping.  The big stores can afford to offer free or discounted shipping, where such an offer from a small business can kill any thought of a profit.

Every cartoonist out there wants to sell not only their books, but t-shirts, mugs etc.  Merchandising is where the bucks are, even for the big name cartoonists. This is where Bill Watterson of Calvin & Hobbes fame had his biggest disagreement with the Syndicates, who wanted to merchandise his strip, but he felt it would compromise the strip's integrity and charm.  Which leads us to our Hot Topics for today:
Should we diversify?
If so, when?
And how much?

So should you?  Probably. Eventually.  If you've just started putting cartoons on the web, it's a bit too soon to try selling t-shirts.  Wait until you build a loyal audience, and you have some genuine interest in your stuff.  If you're running your business as a real business, and not a hobby, then those t-shirts will sit around a while, and you cannot deduct the price of them until you actually sell them.  Please read my earlier posts about Cost of Goods Sold, Pricing, and Inventory.

Print on Demand online shops allow you to put your image on just about anything these days, but I would choose a few items wisely, and focus on them.  Quality over quantity, without exhausting your audience with too much to see.

Which brings us to a point that I've discussed before about publishing, that applies to merchandise. Print on Demand is expensive.  If you price your merchandise too high, you won't likely sell it.  Price competitively, and you make no profit.   This brings us back to that earlier point about quality over quantity.  Choose an item, like a t-shirt, and look around for quality shirts at a good price.  More than likely you can even save by buying in bulk, but again, watch out how much you buy, because you may have them awhile.  You can do this with anything, of course, although to get truly competitive prices, you really need to order a lot.  Be sure you have that supportive audience.

Finally, don't forget the bottom line.  You cannot deduct the cost of items you buy to sell until you actually sell them.  The more you offer, the more inventory you have, which takes up space, and costs money that you do not get back until the merchandise is sold.  And to sell it takes time to set up a shop, to get the word out, and requires advertising.

So make sure you're really ready to take that next step into diversifying your online shop.  If you want to become a retail type store, that could work for some people, but make that your business plan.  If you're an artist, cartoonist, writer, or other creative, then it may be easier to sell your books or art through a place like Lulu, or set yourself up with a printer, get a few thousand copies of your book, and really focus on selling it.  It's simple to have a link or two on a blog or website.  It's a whole other enchilada to actually have an online shop with changing and growing merchandise.

For the right person or group, though, that online shop can keep customer interest, spread sales out throughout the year, and create focus for your advertising.

With that in mind, please consider visiting my online shop where we now offer many fine things, from books to t-shirts, and artwork and more. :0)

And did I mention that we're currently offering FREE SHIPPING for the next week or so?

Happy Holidays!    JOHN :0)

Self Publishing 101: Cost of Goods Sold

A lot of you are interested in the price of Self Publishing, mainly because you know deep inside that it ain't gonna be cheap, but you still want to weigh the pros and cons of the issue before deciding.

Printing costs are still going up, and it is getting harder and harder to self publish, AND there may be a cost to self publishing that you haven't realised. Worse, if you don't know about this, you could be heading for BIG trouble.

I will break this into two parts, and tell you which part you need.

First, why self publishing? If you want a copy of a book for yourself, or to give to friends, then part one is for you. If you are in business for yourself, or want to be, you had better read both parts, especially part two.

PART ONE: Cost of Self Publishing

I've covered the cost of publishing before here, so read that post as well. That really goes indepth into the why's and how much of printing, and choosing a printer.

The thing is, printing is expensive. Looking at comics, the big comic book companies are considering moving the price of a color comic book up to $4.00. A Print on demand color comic might have a base price of $8.00! Add a little for yourself, and honestly, who's gonna pay more than $8 for a comic book? Now, a graphic novel will be a little cheaper in comparison, but there is a lot more work involved in creating a graphic novel. You can save money with black and white books, or using cheaper paper, but you get what you pay for, and sometimes black and white is not an option.

To really save money, you need to print lots of copies of a book. If you go by a traditional printer, you have no choice but to buy at least 100 copies of a book... usually more. Print on demand is nice because you print how many copies that you need, but that can be very expensive on a per book basis. The base price of a book is fixed, so to make a profit, the base price plus your profit and costs must be competively priced to similar books out there. You just cannot do that with print on demand or vanity press publishing.

Actually, some print on demand places offer discounts for bulk orders, so you can save a little bit of money by purchasing a lot of books and then selling them yourself. This leads to the problem I bring up in Part Two.


PART TWO:

Something you in business will have to consider is Cost of Goods Sold, or COGS. What does this mean to a Self Publisher? Pay attention.

You dish out a lot of money to have 100 copies of your book published, and you put it up for sale, and wait for the customers to roll in. Honestly, even if you have a lot of fans clamoring for your work, only a small percentage of real fans are going to buy one of your books. So you sell 10 or 20 books if you're lucky, and have 80 books left over.

Guess what? You cannot deduct the price of those books as a tax deduction. (Speaking for USA residents only, that is.) Please do not make the mistake of thinking that buying books is a business expense, because you cannot deduct the price of printing a book until you actually sell it. This goes for most if not all goods sold, which is why you see so many big sales at the end of the year.

Because I self publish, I cannot offer deep discounts on my books, because I already sell them as low as I can. I want the books out there right now, rather than going for profit. Every time I create a new book I purchase the book in bulk for sale through my site. Because of this, I have close to a thousand dollars worth of inventory in the studio after 6 years of self-publishing. And each year I can only deduct the cost of the books that I have sold that year, not when I bought them.

Figuring out COGS is available on Schedule C of your annual 1040 tax form, and can be quite confusing at first. Simply speaking, a business MUST keep a physical inventory of their items for sale, as well as the cost of producing those items.

To figure your COGS for the year, you need the value of your inventory at the beginning of the year added to the cost of new items for sale, and subtract from that the final value of inventory at the end of the year.

Simply put: Costs of Goods Sold = Goods Available for Sale - Inventory at end of Year.


Conclusion:

The cost of self publishing can be higher than you think. You need to buy lots of books to sell competitively, but if you don't sell those books, that expense can weigh on you for some time.

Keep in mind that I am not a paid tax advisor, but COGS is something that you need to understand if you want to be in business for yourself.

Cheers, JOHN :0)