In the early months or even years of running a new business, it can be difficult to tell how well you’re really doing.
Even when you feel like you’re getting the hang of things.
You’ve got a solid website, you’re making some sales here and there – but it might seem like there’s no concrete way to know for sure if your handmade business is where it’s supposed to be.
We’re all learning here!
That means that we might not know exactly what to look out for when it comes to knowing if our business is doing well, or if it’s lagging behind.
I’m going to let you in on a 5 Point Checklist that will help you understand exactly how your business is doing!
These 5 points should help you get a concrete answer on how your business is doing, and what steps you might need to take to bring it to the next level.
This will be helpful for any handmade business owner who wants to know if their business is where it needs to be.
Hi, my name is Mei Pak and I help makers, artists, and designers make a living by selling their handmade products online.
I currently make a full-time income running three creative businesses online.
I want to help you get your business up and running, and be successful, so that you can make a full-time income doing what you love.
1. Conversion Rates
The first on the five-point checklist is conversion rates.
Checking out your conversion rates is a really great way to see how your business is actually doing.
Numbers don’t lie.
You just can’t argue with them.
A conversion rate is the number of visitors to your site that make a purchase when they visit.
Generally, your business is doing well if your conversion rate is at least 1% or higher.
That means for every 100 visitors to the site, you should get one sale.
If that’s the case, you can rest assured that your business is in pretty good shape.
If your conversion rate is lower than 1%, there are a few things you can check.
Start by making sure your site is functioning properly.
Check out the website on multiple devices, from your phone to your best friend’s laptop, and make sure that there aren’t any bugs or areas that need improvement.
Too often, customers aren’t biting simply because the website is confusing or malfunctioning, so that should be the first thing you check.
You’ll also want to improve the shopping flow of the site.
This is called conversion rate optimization – or CRO – and it’s fundamental to increasing your conversion rate and reeling in those sales.
CRO is when you optimize your website or landing page based on visitor behavior.
This will help you increase the chances of a visitor making a purchase when they’re on your site.
It is not a one and done – you should be checking your website regularly to make sure that it’s as optimized as possible for the customer experience.
If you still aren’t reaching that 1% conversion rate, then you can start looking at the rest of your shop experience.
- Are your product photos professional and easy to view?
- Is the pricing justified and competitive for your brand?
- Are the products well made?
- Do they look well made?
Little details like this can make a huge difference.
Think about it – when you visit an online shop, you’re more likely to spend money on well-made products with amazing product photos!
Making sure you’re hitting that 1% conversion rate is probably the best way to see if your business is doing well or not.
Remember, you need 100 people visiting your site each day to make one sale.
So if you’re worried that you’re not making any sales, it’s probably because you’re not getting any traffic.
If you only get 10 people visiting your shop a day, you’ll make one sale every 10 days, or 3 sales a month.
A lot of people are frustrated that they’re not making a lot of sales and then we wonder if maybe it’s because no one likes our products.
The actual problem is you’re usually not getting enough traffic.
That’s why focusing on marketing is super important for handmade shops.
Not enough people focus on marketing – and it can really hurt their business.
There are plenty of ways to drive more traffic to your website.
Focus on getting more people to link back to your website.
You can use SEO, media and influencer outreach, where other people are sharing your site with their own followers.
Media outreach is my favorite way to promote products – and one of the things that helped my business take off the most.
I highly recommend it.
You can also use paid ads on Facebook, Instagram, and Google to drive traffic to your site.
Make sure that you’re using sources that you know convert traffic well.
Pinterest, for example, is notorious for being really easy to get a ton of traffic, but it doesn’t convert well into sales, so you may want to avoid it.
2. Email Marketing
Number two is email sign up conversion rate.
Email lists are a huge part of building a long term business and making regular, consistent sales.
Unlike social media where how many followers you have has nothing to do with how much sales you’re making, your email list is actually a strong indicator for how well you’re doing.
The more email subscribers you have, the more money you’ll make.
Email marketing has one of the highest conversion rates in terms of turning prospects into actual buying customers.
It is crucial for making sales.
Let’s dig a little deeper into how understanding your email list sign up conversion can help you know whether your business is doing well.
The email sign up conversion rate is determined by the people who visit your website and then join your email list.
It indicates that people are interested in your products.
Your business is doing well if you can convert 10-50% of your website visitors into email subscribers.
Of course, this depends on how you get customers to sign up in the first place.
If you use popup ads, they should convert between 10-20% of traffic into email subscribers.
If you use landing pages, they should convert between 30-50% or more.
Remember that customers will be more likely to join your email list if there’s an incentive.
Give them a reason to sign up!
- a free gift on their next order
- free shipping
- a coupon code
- or a giveaway
The email list is powerful because about 25-40% of your entire business sales should actually come from emails.
Make sure you’re proactive about getting visitors to sign up.
3. Customer Reviews
The third point on our list is reviews.
A healthy handmade business should expect about 20% of customers to leave reviews after they make a purchase.
If this isn’t happening, you’ll want to examine how you can increase that percentage.
Send an email to customers reminding them to leave a review.
I usually write something like this:
“Hey, just checking in that your order arrived safely, and everything is okay. And if you love your purchase, please leave a review! I’m a small business and every piece of feedback is a huge help.”
For many customers, all it takes is a simple and friendly reminder.
In general, customers like to support small businesses in whatever way they can – especially if they loved their purchase.
So don’t hesitate to ask when you need to.
You also want to be getting feedback from your customers because if there are any product or shipping issues, you’ll want to know about it.
That way you can fix the problem and it won’t happen again with future customers.
Asking for feedback is something I always struggle with.
I’m afraid people will only have bad things to say about my products.
I think we all feel this way to a certain extent.
But also keep in mind that getting that feedback is exactly how you’ll continue to move your business in the right direction.
4. Return Rate
The fourth tip is to look at your return rate.
Unfortunately for online businesses, the product return rate is significantly higher than brick-and-mortar stores for obvious reasons.
You can’t truly experience the product before buying it, like you can touch, feel, smell, try on a product before buying it at a physical store.
Returns are an issue every online business will face at some point.
According to Shopify, the average return rate for online businesses is 20-30%.
It’s only 8-10% for brick-and-mortar shops.
So if your return rate is higher than 20-30%, then you might want to take a closer look at why and how you can fix that.
Research also shows that customers are more likely to make a purchase if the business has a great return policy.
When it comes to online shopping, customers are hesitant to fully commit to buying a product that they haven’t seen in person.
If you have a good return policy in place, you could actually get more customers.
It's also a good idea to keep track of your returns.
If you notice that one product in particular is returned again and again, find out why, and fix the problem.
At my handmade jewelry business Tiny Hands, I created a spreadsheet of all my problem orders.
The spreadsheet laid out the return item, the reason for the return, and any photographs a customer might have sent.
That helped me to understand the reason for the returns, so I could fix it, and prevent as many returns in the future as possible.
I personally ran into a problem with the eyepins coming out of my charms.
It was a big problem and made for quite a bit of returns for a while, so it was something we worked on to create a solution for.
Using a different kind of glue and eyepin we saw our return rate go down for this reason.
The fifth point on our checklist is sustainability!
To me, sustainability means your ability to keep your business in the game over the long run.
Let’s ask some questions here.
When you think of owning a successful business, what does that look like to you?
If you met your monthly goals for orders, could you actually handle the production and fulfillment?
If you can’t, then it’s likely you’re not priced correctly and until that gets fixed, your business won’t go far.
How much money does it cost to run your business – what are your fixed expenses?
That number plays a part in how profitable you are.
In the beginning, you might not have a clear profit plan, and that’s okay!
Opening a business means investing money in that business.
You may not necessarily be making any money at the start.
But say you’re six months into your new business.
The shop is launched, the products are made, you’re working every day to make it happen.
But you’re still not making a profit.
In that case, your business isn’t sustainable, and something needs to change.
A healthy profit margin is around 50% for businesses making between $0-$100k/a year.
The more money you make, the less profits you get, simply because it costs more to run a bigger business.
If you have over $100k in sales, it’s healthy to have around a 20-30% profit.
If you look at the numbers and realize that your business isn’t sustainable, take a look at what isn’t working.
- your landing pages
- your calls to action
- and your product line
How can you generate more traffic?
How can you get that conversion rate up?
You are capable of getting your business to that next level – but it’s not going to happen without looking at your numbers.
I know it can be tough to tell if your business is where it’s supposed to be – especially when you’re just starting out.
Regardless of where you are right now, you can get even more successful with the right strategies and marketing techniques.
So, keep going and don’t give up.
No one said that starting a handmade business would be easy – but believe me, it’s so worth it when you reach your goals.
What’s one way you generate traffic to your site?
Let me know in the comments below!
Then be sure and check out my channel for all you need to know about starting your profitable handmade business.