We all make mistakes – especially when we’re first starting out.
Even the most successful businesses have gone through their share of challenges.
The hope is that the mistakes that happen are small and inconsequential.
But it doesn’t always work out that way.
You know how the saying goes, that you’ll spend more in the first year than you actually make?
For many of us, that’s the reality.
But it doesn’t have to be!
Today, I’ll let you in on the three most expensive mistakes I made when I started my business – so you don’t have to make the same ones.
My name is Mei Pak and I help makers, artists, and designers make a living by selling handmade products online.
Today, my handmade jewelry shop makes $200,000 a year in sales, and my husband’s shop that we started in 2019 made $900,000 in 2020.
It wasn’t easy to learn how to run a business and I made my fair share of mistakes that ended up costing me a lot of money.
Thankfully, each mistake was a huge learning experience, and it’ll help make everything you do later on have a greater chance of success.
1. Trade Shows
One of the most expensive mistakes I made was doing trade shows.
It’s easy to confuse trade shows with craft shows, so let me be clear that I am not talking about craft shows or craft fairs.
I am just talking about trade shows.
The biggest difference between a craft show and a trade show is that with trade shows makers sell their products wholesale.
Craft shows are where you sell individual items directly to the end customer.
At trade shows you sell your products in bulk to shop owners then they resell your products for a profit.
Trade shows are super expensive to do.
You have to pay for:
- the booth rental
- show services like WiFi and electricity
- the design and construction of your booth
- the shipping of your booth to the location
- travel and lodging for each show
When I’ve done trade shows, I’ve spent between five to ten thousand dollars each time.
If you’re new to doing these shows, you’re not likely to make money or break even at first.
A lot of shop owners want to buy proven products that they trust, and are less likely to take a chance on a new product or brand they’ve never seen before.
While trade shows might sound like an easy way to sell and reach a profitable market, they’re really not anymore.
To do trade shows well, you’ll need to have a big cash cushion – and a lot of patience.
You just can’t expect to be profitable after only one show.
You have to be financially prepared to do at least 3 shows over the next 1 to 2 years before you see a profit.
You could spend thousands of dollars here and not make any money!
You have to ask yourself if that’s something you are comfortable with.
When I was starting out, I really wanted to make trade shows work for me.
I did New York Now, the Atlanta Gift Show, and the National Stationery Show.
Altogether, I spent almost 20K, before I realized that they were hurting me more than they were helping.
I wasn’t in a financially comfortable place to be able to swing doing each of those shows a couple more times in order to see results.
I had to stop doing trade shows all together.
Instead of exhibiting at trade shows, I recommend partnering with sales reps who work with dozens of other brands.
Sales reps will take about a 15% commission of sales, but they’ll usually pay for their booth themselves and only charge you a small fee to have a small shared space.
They’ll ask you to send them promotional print material to display on their booth, along with product samples, postcards, catalogs, and anything else that will help to market your product.
You’ll still spend some money, and you’ll have to share a booth with other brands, but you will be spending a lot less than if you did a show totally on your own.
Sales reps also help sell your products during times when there aren’t trade shows happening.
They travel a lot and pitch your products to different stores.
This can be a great way for you to get into selling wholesale and establishing a new income stream for your business if you aren’t already doing this.
2. Ad Agencies
The second most expensive mistake I made when starting out was hiring an ad agency to help me with my marketing.
In the beginning, I was convinced that experts in advertising knew more than I did and that they could bring me better results.
I spent tens of thousands of dollars working with a ton of paid ad agencies.
And guess what?
I really wish I didn’t.
But if I didn’t, I wouldn’t be able to share this with you.
Here’s the thing.
Most ad agencies will require you to commit to a minimum of three months with them.
Others ask for six months, because “results take time.”
Of course, results do take time, so, again, I trusted that they knew better than I did.
Who was I to question the experts?
Agencies will never guarantee results and anyone who does it is lying through their teeth because no one can guarantee results.
What they will do is a whole lot of over-promising to get you to sign on as a client.
I was sucked in by the success stories I heard.
Each of these agencies had a few booming businesses they could boast about.
I didn’t face the truth that each of these agencies also had failed case studies too.
But it’s not like they were showcasing those to the public.
What I didn’t realize then, was that it’s VERY easy to fudge success stories and take screenshots of people making a ton of money for their clients.
Agencies can use inspect elements on their browser or take stats out of context.
For example, they might show that a campaign got 20x the return on ad spend on Facebook ads manager.
This basically means that you’re making $20 for every $1 you spend on ads.
These agencies won’t mention that was just for one sale, or that it was just a retargeting campaign – which cannot scale in the first place.
I know we’re getting technical here, but the bottom line is, take agency success stories with a grain of salt.
In 2019 I had a terrible year for business.
I was giving other people more money than I paid myself, and even though I made six figures in sales, I barely had any money to my name that year.
It was then that I decided it was time to take back the reigns and do ad management myself.
I cut out the middleman and didn’t have to pay those extravagant monthly service fees for little results.
Unfortunately, we made this same mistake just a few months ago with my husband’s business.
We took a chance on an agency that was very highly rated and seemed like a perfect fit for us.
Because we know my husband’s shop has a great foundation to make almost a million dollars in a short amount of time, we thought it would be a piece of cake for any agency to produce results for us.
Unfortunately, after two months and over ten thousand dollars in agency fees, they just cannot beat the results we were getting ourselves before we hired them.
So we’ve decided to fire them and instead bring on an assistant that we train to do marketing for us.
We’re keeping everything in-house to minimize expenses, and because we’re providing the training, we can have more control over how the job is done.
3. Custom Web Design
The third most expensive mistake I made was paying for a custom web design.
I paid thousands of dollars for a web design agency to develop a custom website for my business.
This was back when I was on Prestashop which is a self-hosted platform like WordPress or Woocommerce.
Now, I’m on Shopify.
The custom site became an expensive problem pretty quickly.
That’s because, with custom themes, you don’t get free support.
Whenever anything breaks or a plugin or app becomes incompatible with your theme, you have to pay extra just to get it fixed.
Not only that, but there is no directly associated ROI with custom designed websites.
Yes, it was nice to know that no one else had a site that looked like mine.
But while that thought might boost my ego, it came at a heavy cost to my bank account.
There are so many amazing paid and free themes out there.
And most come with the ability to customize everything from color to font to the logo.
Once you add your product photos, reviews, and other specific features to your business, it’ll end up looking pretty unique.
You don’t need a custom-made website to communicate that you and your products are unique to your customers.
Building a business is hard and it takes a lot of money to do.
You will undoubtedly make a ton of mistakes along the way, I am to this day.
The important thing is we learn from them, and hopefully sharing my experiences with you helps you to avoid making the same mistakes I did.
What’s one unexpected mistake you made when you started out?
Let me know in the comments below!
Don’t forget to also check out my YouTube Channel, so you can stay up to date on the latest advice for your handmade business.