Developing a Line Sheet

You're ready to enter the wholesale market. You've categorized your products and developed an inventory system. Now it's time to develop your line sheet.

What's that? A line sheet is a one or two page document which conveys information about your company, your products, as well as your payment, delivery and return policies.

Following are the key items you'll need to include:

1. Your contact information - As with your stationery and all your marketing materials, include your contact information, especially email address and telephone number.  This is not the place for your Facebook or Twitter addresses! They goal is to make it simple for the buyer to contact you, not for them to be impressed with each and every one of your social media efforts. If you are working with a sales representative, consider replacing your contact information with theirs.  Your rep will thank you for this simple gesture!
2. Basic information on your products - Wholesale pricing, colors, and sizes available are key elements here. If you have developed your inventory and have a unique identifier for each item, include it here.
3. Minimum quantities - What is your minimum order? Make it realistic yet encourage your buyer. Remember, the goal in wholesale selling is to sell a larger quantity of items - in doing so, you can lower your supply costs and increase economies of scale and time! For example, I have a minimum order of $100, which is fairly easy to achieve.  Using easy numbers, selling a case (12) of candles for $10 each is $120.  the quantity makes sense and it achieves the minimum order I require.
4. General information about your product - What are your materials? Do you have a unique assembly method? Are your supplies eco-friendly? This is the spot to turn your features into benefits.
5. Payment terms - Here's an area you may need to beef up your accounting terminology. Are your terms net 30 (payment due 30 days after receipt of product), upon delivery, or up front? I offer a combination - I just don't have time to do a credit analysis, so first time orders require a credit card payment, and following orders are net 30. 
6. Turn around time - How long can the buyer expect between date of order and date of receipt of product? If your turn around time is four weeks or more, you really need to be thinking in advance regarding the seasonality of your product. If you're able to have product inventory on hand, consider a two week or less turn around time.
7. Shipment - Answer questions such as who pays? Which carrier do you use? Think creatively as to whether you can offer a discount on shipping for larger orders.
8. Damages and returns - This was the hardest part for me. If you're going to play with the big guys, you need to be prepared to offer refunds and returns like the big guys. Know what your competition is doing, even if you're reaching for the stars. But make sure your return or refund is something you're willing or able to lose. You may be able to write in a restocking fee here, but always be prepared to accommodate a 100% refund!

As I've mentioned before, I use Stitchlabs for my inventory management system. One of the reasons I chose it was because it could take the information I developed on each product family, the inventory and stock photos and create a .pdf file for me. While I'm not endorsing nor encouraging use of this product, I do recommend you research whether the inventory system you're considering can do this for you as well.

So those are your key elements. If you foresee selling wholesale in your future, I highly recommend you begin working on these elements now! In future posts, we'll discuss how to take this technical information and turn it into a marketing piece.

As always, I welcome your feedback and questions.  Until then, happy sales!

Dorene

Inventory Management, Part 2

As your business continues to grow, you'll need to develop a system for inventory management. In a previous post, we discussed the why an inventory management system is necessary; today we'll discuss how to develop your system.

Consider the variety of your products. What do they have in common? If you develop a variety of products, try to align them similar to how you would shop a department store: bedding, kitchen, clothing, decor. If your products are in a similar line, such as jewelry, align them around similar functions: necklaces, earrings, bracelets. And don't be afraid to be specific.

When I first started my inventory management system, I grouped my products similar to the sections in my Etsy shop: container candles, tea lights, votives, etc. For the most part this worked.....but then I needed a way to differentiate between three container candles I carry.  While "container candles" creates a category of similar enough products, I have a different pricing structure for my 7 oz and 12 oz candles. So in addition to the tea lights and votives, I now have separate product categories for my 7 oz. container candles, as well as my 12 oz. status jar and 12 oz interlude jar candles.

You'll also want to be able to differentiate between sub-categories. At D'Lites by Dorene, I use a sub-category of fragrance. If your product is jewelry, you may choose a sub-category of metal or stone; if your product is paper products, you may choose a category of notecards and a sub-category of stamped or stenciled.

Why are sub-categories important? Because at some point, you'll probably want to cross reference your products to understand your best sellers. For example, I can easily identify by my Etsy sales that tea lights are my best selling product. But what if I want a better understanding of my best selling fragrance? This is where having a sub-category and the ability to sort comes in handy. Think of how you could get a better understanding of which stone sells best or whether your stenciled or stamped products are most preferred.

As I've mentioned before, I utilize the online system Stitchlabs to manage my inventory. What's nice about this system is it has already developed dashboard functionality to show my sales trends.

This can also be easily accomplished using Excel or another spreadsheet software. Here's a snapshot of the same information:

And, using a little Excel Pivot Table Magic, here are my top ten fragrances for the same time period:

But what if most items are similar but a few are unique? I have a category for my clearance items, many of which are five or less. The pricing structure is different, but it's still a way for me to collect "similar" products yet use the same formula to be able to analyze my results.

As you grow, you'll find yourself creating a unique identifier for each item - a shorthand method for you and your customers to place and to analyze sales.

What questions do you have? My intent is to "build" this information in segments.  Our next chapter will be on how to use our inventory system to develop sales sheets to distribute to retail and wholesale vendors.

Until then, Happy sales!

Dorene

Inventory Management

As your business continues to grow, you are going to need to consider an Inventory Management system at some point in time. I can hear your groans now (and trust me, I've groaned a bit myself), but if you're serious about quitting your day job, developing a better understanding of your inventory is going to help you manage the business side of your art.

I can hear you now, "My business is small and I do custom orders only." Well, please consider the following reasons to begin a finished goods inventory system:

• Craft shows - It can be difficult to track every item sold if you get busy. Knowing your beginning and ending inventory can help you reconcile your sales at the end of the event.
• Planning for your heavy sales season - Do you prepare a larger amount of product prior to the holiday shopping season? Enough said.
• Consignment sales - Some consignment stores have formal contracts for items you have delivered, others are extremely informal. You need to be able to identify the amount of product you have placed in a store to be able to reconcile your sales at the end of your month or other time period, as well as an understanding of your cash outlay in product.
• Wholesale sales - As your business grows and you get additional wholesale orders, you will need a method to track on an ongoing basis how much product to make in consideration of how much finished product you have on hand. You may also need to produce additional items to prepare for imperfect or damaged goods.
• Costs of goods sold - Dig out your accounting books! If you remember the difference between FIFO and LIFO inventory accounting, you know the costs of goods can vary over time. 
• Cash flow - Your inventory represents liquid assets - an item to be converted to cash. Granted, this conversion doesn't take place until the product is sold. Conversely, your supply inventory is a sunk cost you cannot do anything with until you make a product (unless you sell supplies, which is a bit different discussion).
• Taxes - As mentioned, your finished goods represent liquid assets for end of year accounting purposes. Which is why a good accountant will tell you not to replenish your inventory at your fiscal year end if you can help it. 

These are just a few practical applications of inventory management. Our next few weeks will involve a discussion on this topic, specific to your finished goods. While I use Stitchlabs online system to manage my inventory, the principles we discuss will be useful for all systems, even a simple Excel file if necessary. 

So please let me know your questions, thoughts and concerns, as well as your experiences and challenges with managing your inventory! 

Until then, happy sales!

Dorene