Are You Earning Enough To Survive or Thrive?

Now that the cat is out of the bag that prices are going up across the fabric industry, it is time for anyone who owns a fabric business to take a long hard look and re-cost their products out. This really applies to anyone who is in business where costs are rising, but truthfully this exercise should occur every year or every couple of years, to be safe, as things are changing so frequently.

This is exactly what I had to do when we started getting price increases and I knew I would have to raise prices. I needed to take a look at all of our business costs and reprice our fabrics based on the new reality. I needed to do this to ensure that the price increases that we passed on to customers accounted for as many of the increases as possible. It is important to confirm that your margins are where they need to be for you to survive because no one wants to work for free or lose money. Since every company is different, everyone has a different profit margin that needs to be earned to survive and thrive. For example, an online store might not need to make as much as a brick and mortar store with higher costs or the other way around.

I am not sure how often fabric resellers look at this or if they look at it at all. Either way, I am recommending that they all take a look now because so many of the input costs of running a business are going up a decent amount. In addition, there are new costs arising all the time as the world evolves i.e. new tech.

With that, I am going to make some suggestions of items for business owners to take a look at when costing. I am also going to ask some probing questions to get you all thinking about those hidden costs that we tend to forget about, but can’t afford to overlook as every bit counts.

• Covid Costs. Have you reviewed what you are spending to deal with Covid? Think about all the sanitizer, cleaning products, masks, gloves, extra cleaning, etc.? You never had to pay these before, but you cannot overlook them because they eat into your margins. Hopefully, these expenses will not be around a lot longer!
• Rent. Has it gone up? Is your landlord charging more for any services i.e. garbage, cleaning, etc? Is your rent going up next year? If so, you might want to start getting your prices up in anticipation of that.
• Salaries. Are you paying any employees more or less? Are you paying yourself more or less? Have you hired any new employees? Do you have any part-time employees? Are you paying any outside contractors? Do you have to pay severance to a former employee?
• Benefits. If you pay benefits to your employees (insurance, 401k match, etc), have the costs of that gone up? I know this is a huge expense for us every single year.
• Inventory. We know fabric prices are going up, but are other products you sell going up too? Make sure you are raising the selling price accordingly.
• Freight. Is your inbound freight more? Is your outbound freight more? Is the computer program for your freight service costing more?
• Commodities. Are your shipping boxes and other shipping products costing you more? Is the paper you print projects on costing more? Is bubble wrap more? Are your invoices more? Do you buy custom ribbon or other branded items i.e. pens, pins, hats, shirts? A lot of these things are going up and it’s easy to overlook.
• Equipment. Did you buy any new equipment? More scissors for classes? More sewing machines to rent? Have you purchased any new technology i.e. computers, scanners, printers, etc.? Did you add new lighting? Did you purchase any new signage this year? Did you purchase any new shelving?
• Repairs. Did you have to make any large capital expenditures this year? Did you replace your roof? Did you have to fix a leak? Did you have to buy a generator?
• Social Media. Are you running ads on Facebook or IG? Did you buy a video camera to make better quality videos? Did you hire someone to manage your social media? Are you active on new platforms? Do you have any new subscriptions?
• Websites. Do you pay someone to manage your website? Have the fees gone up to run your website? What’s the cost to register your website and url every year?
• Programs & Apps. Are you using new apps to help you be more efficient in business? What are those costing you? You probably never had those costs before so these are new things to be considered.
• Advertising & Marketing. Are you doing more advertising or less? Have you been preparing more marketing materials than normal? Do you pay someone to do your marketing or create your advertisements?
• Trade magazines and groups. Do you get trade magazines? Are you part of any trade associations or groups? Are you part of a guild?
• Travel. Are you traveling for business? Maybe you are doing home delivery, how are you factoring that in?
• Insurance. In order to protect your business, you need insurance, have your premiums gone up? Have you had to buy any new types of insurance? Have you had any claims this year that will cause your premiums to go up?
• Phone, internet, gas, heat, oil, electricity, cleaning, water, security. Lots of things here that we don’t often think about, but someone has to pay. Have these costs gone up? How about snow plowing? Window washing? Gardening? Did you add cameras or security to your store? What are the monthly fees?
• Bank & Credit Card Fees. Are you accepting more forms of payment? What are the fees? These costs are going up too and that is inflation.
• Taxes. Have your taxes gone up? Are they going to go up now that we have a new administration in place?
• Permits, licenses & dues. Do you have all your business permits? Have the prices of those gone up? Are there any new licenses or permits you need to run your business? Did you take any online classes this year? Did you have to pay for any certifications?
• Upgrades. Have you upgraded any of your services? Have you upgraded any apps? These all have a cost too.
• Shrinkage. Has there been more theft or less theft this year? That is a tough one because there isn’t much to do about this and it can definitely hit the bottom line hard.
• Who else wants your money? There are lots of people digging into margins, are there others that I missed and you want to remind shop owners of? Please put them in the comments.

I sure hope that all business owners take my suggestion to review the costs of running their business. There is nothing worse than thinking you are making X, only to find out you are making Y, which is pretty much always less than X….very rarely will you be making more money than you think. You might not be able to do this all in one sitting because as you think about it more, and as time goes on, you will realize that the costs are everywhere and there are many you overlooked. I would suggest reviewing all your bills and looking at your checking account to see where all your money is going. As they say, “Follow the money” and it will tell you a clear story. After you are done with the analysis, you will need to decide if you need to raise your prices or not and then have a plan on how to effectuate that so as not to disrupt the flow of your business.

For all your consumers out there, I hope this opened your eyes to what it costs to run a business and why fabric prices are where they are. It’s not as easy or profitable as you think.