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Ask Dave

An Ideal Home Business

Jenny started a home-based business sewing, and it's grown quickly. She and her husband feel like they need to set a limit on their orders or hire someone to help. What does that mean for her business?

QUESTION: Jenny in Nashville is a stay-at-home mom to two kids. She started a home-based business sewing, and it’s grown quickly. She isn’t getting much sleep as a result because she’s selling. She and her husband feel like they need to set a limit on their orders or hire someone to help Jenny. What does that mean for her business if she hires someone?

ANSWER: The first thing I would do is I think you ought to raise your prices. I think you’re selling too cheap. There is a limit to what people will pay, but obviously, you’ve got no trouble getting more volume than you want to get at your current prices. They’re getting a customized shirt for $22.

What you’ve got is an ideal stay-at-home deal for a mom of little babies, and you’re excellent at it. You’ve built a good customer base that’s loyal. You don’t have to grow it. You just like making money. The only problem is it’s just taking over your life. So let’s just raise our prices to $32. I’ll bet you that’ll cut your volume down. I’ll bet you won’t have a 20% drop off in sales. It’s not like you’re charging $500 a shirt here. Kick it up a little bit and be a little bit more proud of your craft. I’d be fine if you cut your volume down by 20% and increased your income by 30%. That’s our first step.

Let’s bump it to $32, and then keep bumping it until we get some real damage to the volume. You might be shocked how high you can take this. But it might be that when you bump it to $32, it drops it off a little, but when you bump it to $37, the volume drops off a lot. You go back down to $32.

Once you’ve done that and you’ve got the volume back up and it’s still starting to bother you but you really just can’t charge $272 for these things, then you can outsource to some other moms who are just like you and pay them per unit for their work. It’s called piece goods. That can be done as an independent subcontractor. They don’t have to be employees. They can start a sewing business in their home, and you can be one of their customers instead of technically having employees. It’s much easier. It’s called a 1099. They’re an independent subcontractor, and they are a legitimate independent subcontractor then. They’re not an employee. You don’t care what their hours are. It’s their problem and their sewing machine and their thread—only to your specs, of course.

The first thing you need to do is get your volume down. You may decide that you’ve got enough income without fooling with expanding the business just by raising the prices. But if you want to go to a piece goods thing, then you can. That’s not being greedy at all, by the way. I think your prices are too low to start with.