Module 3 your creative business strategy

This programme has been funded with
support from the European Commission
Module 3
Your creative
business strategy

• Getting started in your creative business (from idea
to opportunity, the role of the business plan)
• The role of marketing research
• Working through the key sections of the business
plan
• Presenting your background & experience
• Operating plan
• Your target customer, how are you going to sell?
• Pricing, costs and making a profit
• Making the most of business mentoring
• Some rules for success
In this module we will explore:

Many ‘artist-entrepreneurs’ do not necessarily set out to start a
business. Their focus is on developing their own practice. They then
enter a commercial environment in order to make money to continue
their artistic work. They then need to develop business & management
skills to make it work.

Spotlight on the UK.
• In the UK in 2014, Creative Industries was the highest
growth sector, it accounted for 1.8 million jobs - an
increase of nearly 16% since 2011 (Creative Industries:
Focus on Employment June 2015).
• Self-employment is where the growth is - 43% of the
current creative industries workforce is self-employed.
• 78% of its businesses have fewer than five employees – so
not small or medium-sized, but micro.
Getting started in YOUR CREATIVE BUSINESS
From idea to opportunity
The role of the business plan

In Module 1 & 2 we
explored why you want
to set up your creative
business. We now look
at and dissect your idea.
Ideas are the creative lifeblood of
your business. People that generate
lots of ideas are good at coming up
with solutions to problems. However,
an idea is not an opportunity.

From Idea to Opportunity
Turning an idea into an opportunity is a process. It takes time, resources
and hard work. There are four elements to work through:-
1. Research the need. Does the market need your offer and most
importantly, will they pay for it
2. Business Plan. The process of writing a business plan actually helps
develop an idea into an opportunity. It forces you to ask and answer
hard questions and explore your options.
3. Team. An idea rarely becomes an opportunity without a team. No
individual has all the knowledge and skills necessary to make it
happen
4. Resources. What resources will be required to turn your idea into an
opportunity.

There are 3 facts that distinguish a business idea
from a creative idea:
• There must be a clear need for your product or service (or you must
create one). This is the OPPORTUNITY.
• That need must have sufficient potential to create a demand.
• There should be sufficient reward within your idea to be able to
support your business needs & build on it.
You can work on lots of ideas at once but should focus on only one or
two opportunities. When dealing with ideas it’s OK to dream. When
dealing with opportunities get ready to measure, to use data.

The idea comes to life in a business plan.
Operating a business where your intellectual capital is your key to
success requires an approach that differs from the standard business
model and business plan.

Reasons for a business plan
According to statistics from the Bank of
Ireland, 66% of all business start-ups will
fail in their first five years.
A staggering 80% of small
businesses without a business plan
will fail in their first 5 years
Paul Fagan, Action Coach
Why?
• Lack of planning on behalf of business
owners.
• Having a well structured business plan
gives you more success of survival.
“
”

Reasons for a business plan
• You wouldn't build a house without creating a plan. Why would you
build a business without having a similar plan?
• To help you think through the whole process - the value of a
business plan is not only the plan itself, but the process of writing it.
• To put down on paper how much money you need to get started and
how much you need to make each week
• To convince yourself that it is worth doing
• To show others that you have thought it through
• To use with a grant authority/banks to get support
• To give you targets to aim towards and measure yourself against

The role of market research
in validating your idea

Identify a clear need for your product or
service (or you must create one).
Ask yourself:
What does this industry need right now?
What is unique about my approach?
(Back to Module 1 workbook, exercise 8)
For example – there are thousands of
graphic designers in the marketplace, what
will be special about you? It might be the
potential to become an interactive media
designer – going beyond graphics to add
animation and digital effects.
The business starts
with developing
your business idea
(refer back to
Module 1 workbook
exercise 1) and that
idea needs to be
validated before
you move forward -
the role of market
research

Use market research findings to convert the reader to become a
supporter, a customer or an investor in your business.
Start with Quantitative Research
1.1 SIZE OF THE MARKET (and market segment)
Do you know the size of the market you are targeting ?
e.g. Ireland - Central Statistics Office www.cso.ie Population Census and
Household Budget Survey e.g. spending on clothes, technology, going out
How much of your product was sold in 2016?
Is the market growing and at what rate?
How many competitors are there out there?
Validate your idea You will be expected to be
knowledgeable (and honest) about your market

All findings are factual, often numerical.
Third party independently verifiable data
Numbers Statistics Data Charts
Is the market big enough and growing ?
• Market Trends
• Market Size
• Market Value
• Market Growth
• Competitors
Categories of Market Research Design
Quantitative Use for
Based on your own market research, not
statistically valid
Hearts Minds Opinions Attitudes
Does anyone want it? Will they buy it ?
• Attitudes
• Perceptions
• Opinions
• Feedback
• Testimonials
Quantitative Use for

Where can you find this information?
On-line, doing research yourself (secondary research)
• Create a strong market overview - read about your niche in trade
magazines / national press / consumer media but always trace back
to original source.
• Industry associations (e.g. Ireland - Digital Marketing Institute, Irish
Exporters Association, IBEC;
• Sector bodies e.g. Arts Council, Design and Crafts Council of Ireland,
Enterprise Ireland
• Our friend Google which can lead you to market research reports
such as Mintel, Foresster
EXAMPLE - Music business research yielded from desk search

1.2 Check out the competition.
Using the keywords of your business description, Google them,
interrogate their websites, what is different about your approach. E.g.
artisan soap makers UK

For each competitor, consider :
• Year established
• Size (employees, locations)
• Target Customers / Sectors (typically listed on website)
• Marketing & Sales approach (website news & events)
• Strengths & Weaknesses
• USPs
Competitor Comparison
Suggest visual e.g. table with columns comparing offerings
on a feature by feature basis
EXERCISE
Why you have competitive advantage -
write a strong summary paragraph

Primary Market Research - Main Techniques
• Depth Interview
• Focus Group
• Market Research Online Communities (MROC)
- LinkedIn Groups
-“Listening Platforms” i.e blogs, forums etc
• Questionnaires / Surveys
- Online, face to face, telephone or post
• Mystery Shopping
• Observation

Focus Groups
Planning
1. Recruit relevant participants
2. Pick convenient venue, day and time
- Can be in some-one’s living room,
evenings etc.
3. Facilitator is key role (someone you
trust)
4. Plan topics to probe
During
1. Welcome, timing, permission to record
2. Faciliator set atmosphere and tone of
evening
3. Thank-you, reward
Depth Interview
You conduct a one to one
interview asking your
interviewee a set of semi-
structured, probing questions
usually face-to-face.
You need good interpersonal
and listening skills
Advantages: flexibility, can
collect lots of in-depth info
from one person.
Watch for your own
interviewer bias.

Examples Of Market
Research Questions
How will you conduct
the research?
• Employ market
research experts
• Employ students
• Do it yourself
Analysis
How will you
analyse findings?
How long will it take ?
The power of questionnaires
What are the key pieces of information
you need? Consider the logical flow of
these questions
Are they yes/no answers, multiple
choice or do you need more
information? Use variety of styles to
keep interest levels up. Start with
general easy questions and move on to
more sensitive ones
Aesthetics
Encourage Response Rates - Appeal to
ego, forewarning, respond by dates,
incentives, prizes, confidentiality

Free Online Research Tools
Survey Monkey Basic
www.surveymonkey.com
Cost: Free. Enhanced plans with
additional services circa €200 per
annum.
What It Is: An online survey and
opinion poll service.
How to Use It: You can creative
surveys free of charge for your own
audience. For a fee, you also can get
feedback from your target audience
via SurveyMonkey's own samples.
Get the Most Out of It: Beyond the
answers to survey questions,
respondents may provide additional
insight in their open-ended
comments.

Free Online Research Tools
Google Forms
https://www.google.com/forms/about/
Easy-to-create surveys and
forms for everyone
Create custom forms for
surveys and questionnaires at
no cost.
Gather everything in a
spreadsheet and analyse data
directly in Google Sheets

Mystery Shopping &
Observation
One of the most valuable ways to
understand your market is to spend time
in retailer outlets, portfolio websites and
trade fairs (see Module 2) to see at first
hand who your competitors are and
what they are doing.
• Are there many new lines being
launched?
• What is the brand leader doing?
• Are there many promotions?
• Which lines are being given most
space/coverage? (These are usually
the best sellers!)

Market Research Online
Communities (MROC)
Use social media, blogging, online
forums, and any other community
spaces you can find (online or off)
to conduct your research. E.g.
• LinkedIn Groups are great way to
build credibility and make new
connections that can ultimately
help grow your business
• Facebook groups
• “Listening Platforms” i.e blogs,
forums etc
EXERCISE
What online
communities apply to
your creative sector?

Research in action
Many creative business owners start
where they are. They make a
product and actually start to sell
them. This is often called proof of
concept. Keep in mind that
everything doesn’t have to be
PERFECT before you can get going
on your creative business (just
almost perfect!). You’ll learn, grow
and evolve and your creative
business may look very different in a
year or two. The key is to just start.

Constantly research to
recognise opportunity?
• Are you staying ahead with new
modules of practice in your field?
• Regularly research market trends ,
zeitgeist -what’s happening
globally in creative and cultural /
social movements which may have
an impact on your work?
What opportunities are out there for
you to apply for: residencies, short
skills development, online courses in
your area of interest. Collaborative
opportunities?

Working through the key
sections of the business plan
Your background and experience
- writing a winning bio

Key sections in a Business
Plan for a Creative Business
We have looked at how you validate your
idea through research and establishing
why/how it will work.
NEXT
Your background and experience
(people buy people)
reflect the characteristics in Module 1 slides 10 and 11
Your operating plan (production)
Your business structure
Who is your target customer?
How you are going to market and sell?
How you are going finance the business
and make a profit?
• Review of all the
sections
• Highlight those
areas where you
have already got
information
• Highlight key
areas where you
need to start
getting
information
• Set yourself a
target of having
the plan complete
by end of course

Presenting your background and experience
Write an Attention-Grabbing Professional Bio
A professional bio is simply a story-based version of the information you
would typically include in a CV. The format is less formal, and it gives you
an opportunity to highlight some interesting facts about yourself while
injecting a sense your personality. PEOPLE BUY PEOPLE. The main goals
of a bio are to give the reader an accurate sense of who you are and
what you do, to establish expertise and credibility, and to qualify your
experience and background. All of these elements combine to develop
trust in you and your brand.
You will need a bio in the following ways
• Post it on your website and blog
• Include in your marketing
materials
• Provide with proposals to clients
• Submit for speaking, presenting
or teaching applications
• Include in any professional
documents you develop

Presenting your background & experience
What to Include in Your Bio
• Current job, business or professional
experience
• Publications or presentations you
have completed
• Professional memberships you
currently hold
• Awards, honours and certifications
you have received
• Your contact information
• A photo of yourself, your educational
background, what inspires you (your
values – see next slide), quotes or
testimonials from clients, and links
to examples of your work.
Create both written and
video bios for impact
- TOP TIPS
• Make your opening
attention-grabbing to draw
the reader in and make
them want to learn more
about you.
• Write it in the third person,
using “he/she” instead of “I
• Use a conversational voice –
much easier to read
• Include some personal or
unique quirks and the softer
side of your personality!

Word Bank to Help you Write your Bio
• Achievement, Advancement, Aesthetics
• Belonging ,Community ,Creativity,
Curiosity
• Determination, Discipline
• Effective, Exciting, Financial security
• Freedom, Fun, Growth, Helping others
,Honesty
• Independence, Influencer, Innovation
• Joy, Knowledge ,Leadership, Meaningful
work, Originality
• Public service , Reputation, Respect
• Self-respect, Stability, Sustainability
• Teamwork ,Time freedom ,Trust, Vision
,Work/Life balance

Example: IKEA Values
Humbleness and willpower
We respect each other, our customers and our suppliers.
Using our willpower means we get things done.
Daring to be different
We question old solutions and, if we have a better idea,
we are willing to change
Constant desire for renewal
Change is good. We know that adapting to customer
demands with innovative solutions saves money and
contributes to a better everyday life at home

Let’s look at some great bio examples
http://lisacongdon.com/blog/about/
Fine artist and illustrator Lisa Congdon is best
known for her colorful abstract paintings, intricate
line drawings, pattern design & hand lettering.
She works for clients around the world
“
”

Other great examples
http://www.katebingamanburt.com/about
(love her use of a gif)

http://austinkleon.com/about/

http://ekwetzel.com/about/
(written in the first person, very simple and powerful

http://www.lauramurphy.ie/biography.html

Additional reading
9 important points to consider when
writing your entrepreneur bio
http://www.biotemplates.com/biograp
hy-examples/how-to-write-an-
entrepreneur-bio-with-sample-
wording/
EXERCISE
Create a new or rewrite an
existing bio profile

Operating Plan

Operating Plan
When writing the business plan, the operating plan section describes the
physical necessities of your business's operation, such as your physical
location, facilities, and equipment. It should also include information
about materials and stock requirements and suppliers, and a description
of the manufacturing or creative process.
Two important factors
You need to address two factors in this section:-
1. Show what you've done so far to get your business off the ground
(and that you know what else needs to be done)
2. Demonstrate that you understand the manufacturing or creation
process of producing your product or service e.g. a step by step
example of designing and creating your product or service from start
to finish

Operating Plan - Key Sections
Your base/location: What type of premises are you working from, its
size and location? If it's applicable, include drawings of the building,
copies of lease agreements
Equipment and Assets: Describe the equipment necessary its worth and
cost. How will this be financed? More in Module 5. Also make a list of
your assets, such as land, buildings, inventory, furniture, equipment and
vehicles. Include descriptions and the worth of each asset. How will you
use technology, processes, products and services to reach your goals?
Production: Explain how long it takes to produce a unit and a breakdown
of costs - More in Module 5. Be realistic about time - How much time
will you have to work on your creative business?
Feasibility: Describe any product/service testing, price testing,
or prototype testing that you've done on your product or service.

Operating Plan - Other Aspects
• Supply Chains - an explanation who your suppliers are and their
prices, terms, and conditions.
• Quality Control - an explanation of the quality control measures that
you've set up or are going to establish.
• What level of service do you provide ?
Don't be vague; define what makes your service so extraordinary.
• What roles do you and employees, collaborators or subcontractors (if
any) play?
• Are there are ‘risks’ involved in any part of the creation or production
process ? This could be handling hazardous materials. Describe how
you are/ will be properly trained in dealing with safety issues.

Operating Plan
- Protect Your Intellectual Property (IP)
Especially important to artists, authors, broadcasters, composers,
designers, film makers, musicians, photographers, publishers, recording
studios, theatre companies and other creative businesses. IP is
fundamental to the way that creative businesses generate value.
Intellectual property is something unique that you physically create. An
idea alone is not intellectual property.

Operating Plan
- Protect Your Intellectual Property (IP)
Having the right type of intellectual property protection helps you to
stop people stealing or copying:
• the names of your products or brands
• your inventions
• the design or look of your products
• things you write, make or produce
Copyright, patents, designs and trade marks are all types of intellectual
property protection. You get some types of protection automatically,
others you have to apply for.

Operating Plan - Owning intellectual property (IP)
You own intellectual property if you:
• created it (and it meets the
requirements for copyright, a
patent or a design)
• bought intellectual property rights
from the creator or a previous
owner
• have a brand that could be a trade
mark, eg a well-known product
name
Intellectual property can:
• have more than one owner
• belong to people or businesses
• be sold or transferred

Operating Plan - Owning intellectual property (IP)
Intellectual property if you’re self-employed
If you’re self-employed, you usually own the intellectual property even if
your work was commissioned by someone else - unless your contract
with them gives them the rights.
Credit, links and
more information
https://www.gov.uk/int
ellectual-property-an-
overview/what-ip-is

Typically, there are three legal forms

The most common set up for creative businesses is the sole
trader - it is the easiest to start, and the least complicated to
dissolve. A sole trader is a business owned and controlled by
one person who takes all the decisions, responsibility and
profits from the business they run.
Advantages
• Many of the advantages are summed up under the
heading "control".
• Full control over daily and strategic decision making.
• Far less red tape and regulations than a Limited Company.
• No staff to manage or pay.
• No annual accounts to prepare as sole traders add income
and expenses to their annual self-assessment tax return
where you declare your annual profits and tax liability.

It's easy to set yourself up as you only need to declare to
yourself you are going to be a business. Sole traders still
need to properly account for all sales, expenses and profits
for any income tax and liabilities on a yearly basis. The VAT
rules still apply if the turnover of the business exceeds the
limit set (i.e. Sales of goods €75,000 and sales of services
€37,500)
Ireland: You should advise Revenue when you start a
business as a self-employed person/sole trader.
All you need to know on
http://www.revenue.ie/en/business/running/regi
stering-tax.html#section2

Registering a Business Name
You may decide to use your own name as the business name,
but if you wish to use a separate business name you must
register the name with the Companies Registration office. To
register a business name, the form required is a RBN1 form
(Registration of Business Name). To register online,
individuals would need to set up an account online through
www.cro.ie and complete and submit the form online. Fee
€20 if you register the business name online.
You may be part time employed in the early stages of
business and paying PAYE. You may be applicable for the
Artists Exemption in Ireland.
http://www.revenue.ie/en/tax/it/reliefs/artists exemption.html

Disadvantages
• Perception that you are "small" - it may be difficult to
bid and accept larger contracts.
• Full personal liability for failure. In Ireland, if your
business fails, it may be more difficult to obtain social
welfare. If you have been self-employed then you will be
means tested before being eligible to receive Jobseekers
Allowance, while if you have been an employee for a
certain period, it will entitle individuals to Jobseekers
Benefit for a defined term regardless of their means.

A legal entity separate from its share-holders.
Directors or shareholders personal assets are
not at risk in the event of a winding up or
receivership. It is generally the most tax efficient
business structure to use.
However, the disadvantages are
increased administration required of directors
the cost of preparing annual accounts
How to Set up
A Form A1 is completed and submitted together
with a constitution (Only a one document
constitution if the company is a LTD company, a
memorandum and articles of association for all
other company types).

Company incorporation can be
completed online at www.core.ie

When two or more people start a business, the result
can often be a strong union that blends complementary
skills, financial resources, customers and connections to
help the venture succeed. But, sometimes, such
relationships can sour and the business can fail.
You need to decide in advance who is doing what, who
is responsible for what, and how to resolve
disagreements. Before entering a partnership, think
carefully.

• do you completely trust your partner(s)-to-be
• have all the partners sign an agreement setting out
how the business is to be financed, how profits and
losses are to be shared, and what will happen if one
of the partners decides to leave. Failure to agree on
such issues at an early stage can lead to difficulty
later.
Partnership Business Name must be registered. The
partners in the structure operate without the benefit of
limited liability thereby assuming full and total personal
liability and responsibility for outstanding debts.

Other formats
Social Enterprise
A business that trades for a social purpose. The profit
or surplus generated is usually reinvested in the
company or community rather than being distributed
to shareholders and owners. Their social purpose is
absolutely central to what they do. Examples: Food
cloud, The Nerve Centre, Derry.
A Collective
Where a number of organisations come together for
a specific purpose. The members of the collective
usually have a common interest or objective. The
form of the collective can be formally defined or be a
looser, informal agreement.

Download
As a first step, download the
Revenue’s Starting in Business
guide (reference IT 48) and VAT
for Small Businesses (IT 49) from
its website (www.revenue.ie).

Your target customer and how are
you going to sell and market

Who is your target customer?
This section will elaborate further on who and where your customers
are and how you will reach them.
• Who are your customers/users? What do they need or expect?
• What can you do for them that will enrich their lives and contribute
to their success now and in the future?
• Why should be come to you? What are the unique benefits you
offer that will make their lives better?

All customers are not the same!
You may have many different types of customers/users for the same
product/ service. This is called Market Segmentation
• One size does not fit all
• Split target market into specific sub targets
• As a general principle, it’s better to aim for the premium end of your
market (competing on originality and quality as opposed to price)

Defining your target market
All great businesses begin with knowing who your customer/user is
(called buyer persona’s) by identifying specifically more about their
pain points, background, demographics, wants, needs and what
channels are best to reach them.

Creative customer profiling
• Develop target profile of a typical customer segment/service user
• Picture a particular ‘individual’ and segment based on what
motivates them
• Develop a deeper level of understanding of them
• What do they like to do? What are their pain points ? What are they
complaining about? What is their biggest challenge? What
motivates them?
• What are the key communication channels to reach them on &
offline
• Where do they go to get information?
• What messages do they want to hear?
• What will motivate them to pick you over others ?
Then you can create appropriate messages
that are specific to each target group’s profile.

Profile Factors
Personal Factors
Age & Occupation, Economic
Circumstances, Lifestyle, Personality
Psychological Factors
Motivation, Beliefs & Attitudes
Social Factors
Family Roles & Status- consider the
various roles they play and how
they influence purchase decisions
Cultural Factors
Culture - values, beliefs, attitudes,
opinions, Subculture- nationalities,
religions, racial groups, geographic
regions

What products or services are you offering?
Did you know people don't just "buy" a product? They "buy" the
concept of what that product/ service will do for them, or help them do
for themselves.
When I book my child on a coding course,
I am buying them the experience of learning a new skill for life.
People who are overweight don't join a slimming club to go to
meetings. They "buy" the concept of a new, thin,
happy and successful self.
How can you present your offering in terms
of what it can do for your user ?
The phrase to remember …. WITFM (what’s in it for me)!

What products or services are you offering?
Ask yourself! Am I focused on satisfying what my customers need or
want? Or Am I more interested in ‘selling’ them what I do?
A clever way to articulate this is through features and benefits
Features - Features are descriptive, they describe what a product or
service does,its dimensions and specifications
Benefit - What problem does it solve for the user/ customer? What's in
it for me? Translates the feature into something of value to the
customer
Features Tell, but Benefits Sell

Benefits translate a feature into a solution that solves a customer
problem. Solving consumer problems is one of the best ways of
marketing. Think in terms of results.
How do we translate Features into Benefits?
• By using specific language and phrases
- “Which means that”
- “Which allows you to”
- “Therefore you can”
- “Therefore you will be able to”
• Doing a feature/benefit matrix
- Documenting all the features and benefits of your product or service
• PROOF is the final part of this exercise. Offer evidence to document
fact or feature

Example
People have little interest in purchasing a bed. What they want is a
good night's sleep. When Apple marketed the iPod? They did not focus
in its technical specification, they communicated the clear benefit to
the customer

Example
EXERCISE
Using our template,
complete a Features into
Benefits exercise for your
product or service

How you are going to market and sell?
Depending on who your customers/ clients are you may sell your work
in some of the following ways:
• Showcase events, pop up shops, trade shows and exhibitions
• Become an independent retailer / selling through independent retail
stores, e-commerce sites, catalogues
• Set up an independent or collaborative art studio open to the public

In Module 2, we looked at selling platforms for your work

Selling ART
• Commercial galleries, art dealers, agents, auction house,
commissions
• Be awarded to create a collection, through an art foundation
bursary, grant, residency, commission
• Make and sell prints
• Take commercial commissions
• Tutor, researcher, curator, lecturer, visiting speaker
Our Slash Career approach is very evident

Where will you sell
your work/ earn
from your work?
Apply to open submission
exhibition's like EV+ A,
Tulca enter to expose your
work to professional curators.

Music
Beyond performance, earn from your work being used in advertising,
TV, Film, Media, Publications. Music licensing for film and TV.
Textiles
Collaborations with interior designers, interior architects, public
commissions.

Writer
Passive income channels - app
development , creating your own selling
platform, write an ebook.
Photography
Put your photography to work on the
web. Photography websites such as
Shutterstock and iStockphoto can provide
you with platforms to sell your photos.
They may offer either a percentage or a
flat fee of each photo that is sold to a site
client.

Sell your own products on the internet
The possibilities here are endless – you can sell just about any product or
service that you like. It could be a product you have created and can
manufacture on your own or it could be digital in nature (such as
instructional videos).

Write an ebook.
This can be a lot of work upfront, but once the ebook is created and
marketed it can provide you with a passive revenue stream for years. You
can either sell the ebook on your own website or offer it as an affiliate
arrangement with other websites that provide content related to your
ebook.
App design and development
Apps can be an incredibly lucrative income source. Apps make people’s
lives easier. Fresh, creative ideas can win. If you can come up with
something unique, you could earn well off it.
Create an online guide.
By providing specific information in a guide-like format, you can earn
through advertising and affiliated links.

Passive income from your creative businesses
Make YouTube videos
This is a venture that is growing rapidly. You can create videos in just
about any area that you like – music, tutorials, opinions, comedy, movie
reviews – anything you want . . . then put them on YouTube.
Establish your own or buy a blog
Thousands of blogs are created every year, and thousands are either
completely abandoned by their owners sometime afterward. If you can
buy blogs with a reasonable amount of web traffic – as well as a
demonstrated cash flow - it could be a perfect passive income source.

These are just ideas, you need to work out what is right for your business
model. Complete this section of the business plan after completing

Pricing, costs and making a profit

Pricing, costs and making a profit
How to set your price?
Pricing is a process in which the first step is vital- establish your cost
price. Without truly knowing your costs, you cannot know if you are
making a profit or not. Many creative entrepreneurs mistake turnover for
profit. Let’s recap
Turnover is the amount of money you take into the business
Profit is what is left when you have covered all your costs

Working out costs for a physical product is straightforward. A cost is the
amount of expenditure which a business incurs in manufacturing a
product. The three elements of cost:
Materials including packaging
Labour
Overheads
The purpose of costing
Is to control cost
to identify more
profitable products
to fix
price

• Pricing your product or service is one of the most
important business decisions you'll make.
• You must offer your products for a price your target
market is willing to pay–and one that produces a profit
for your company–or you won't be in business for long!
• Your pricing must takes into account your costs, the
effects of competition and the customer's perception of
value.
• Cost is the total of the fixed and variable expenses
(costs to you) to manufacture or offer your product or
service.
• Price is the selling price per unit customers pay for your
product or service.
• So, when customers ask, "How much does it cost," your
answer is your price.

Pricing - what you need to be clear about
1. What is your hourly rate? Your hourly rate is very important to use for
estimating purposes. You can calculate this by dividing the hours you
have available to work on the particular project/ product
design/artwork by your expenses plus profit. This puts a value on the
time you spend doing work which can be invoiced out for.
2. How long is the project taking? Track your time over weeks/months to
find out the average amount of time it actually takes to create/provide
your main services that you offer. In time you will get quicker and
better at what you do – you do need to know how much time you
spend at a particular task to ensure that all of your work time is
accounted for.

3. What are your competitors charging? You need to know who your
competitors are as well as what they are charging. It is useful to join a
network of creative services providers liaise with colleagues who will
share information.
4. The market - learn by doing If you are unsuccessful securing a
commission/contract/ order, ask for feedback for future learning , this
constructive feedback is important for your next pricing exercise. Ask
who was offered the commission/contract/ and why they were
selected and if possible what their fee was.

5. What is your clients/customers budget range? Just ask! This is crucial
to know before you process with the relationship as if you don’t have a
general idea you can waste a lot of your time here with unsuccessful
proposals.
6. What is the value for the client/customer? When a customer buys
your creative service they expect a return – the value of your work/
service is really important to try to gauge this at the very start.

Pricing creative services
“You need to take into consideration your years of skills
development, your experience & talent honing your
creative expertise. Your portfolio & client testimonials
on previous work will support you. Your creativity has
value - the way you use your imagination to solve the
clients problem is another step forward. Then it is your
job as part of the selling process that you will provide
the best service and make the customer feel
comfortable in the knowledge that you will provide
something unique, creative and innovative and choose
you even if your cost if higher that others”.
From the designers guide to marketing
and pricing by Llise Benun & Peleg Top.

The Fundamentals: Price Floors & Ceilings
Think of cost as the floor–you must set prices above the floor to cover
costs or you will quickly go out of business. (If you decide to set prices at
or below cost it should be for a temporary purpose such as to gain
market entrance.)
Think of customer "perceived value" as the ceiling–this is the maximum
price customers will pay based upon what the product is worth to them.
Perceived value is created by an established reputation, marketing
messages, packaging, sales environments, etc. An obvious and important
component of perceived value is the comparison between you and your
competition.

Somewhere between the floor and the ceiling is probably the right price
for your product or service; a price that enables you to make a fair profit
and seems fair to your customers. When you understand your cost floor
and your value price ceiling, you can make an informed decision about
how to price your product or service.
In summary, while you must be mindful of costs in setting your prices,
don't limit your thinking only to cost-based pricing. Value-based pricing
makes you think about your business from the customer's perspective. If
the customer doesn't perceive value worth paying for at a price that
offers you a fair profit, you need to re-think your game-plan!

Pricing for Profit: Cost-Based Pricing
Setting a low price on one or more products to make quick sales to
support another product in development. (Some companies also employ
this strategy when they need to increase cash flow.)
Establishing a high price to make high profits initially. This strategy is used
to recover high research and development costs or to maximize profits
before competitors enter the market.

Value-Based Pricing - Establish a ‘high’
• If your product has a mystique and uniqueness that
is valuable to customers, you can have the ability to
charge a very high price relative to your cost.
• If your target market is affluent and you are
positioning your product as a "prestige" product, an
especially high price could be in order. (For
example, do Rolex watches cost that much more to
make than other brands? The high cost, however,
brings a "status" benefit to Rolex's affluent market.)
• This strategy of charging "what customers are
willing to pay"–even though it's high–requires
alertness and a willingness to change on your part
because customers & competitors might decide that
you're making too much of a profit!

Pricing Strategies - Price the same as competitors
This strategy is used when offering a comparable product, when prices
are relatively well established or when you have no other means to set
prices. Your challenge then becomes to determine how to lower your
costs so you can produce a higher profit than your competitors.

Price Discrimination
• The term price discrimination refers to
the situation in which the exact same
product or service is sold to different
people at different prices. Very
prevalent when costing your time as an
advisor etc
• What conditions are required in order
for a firm to engage in PD?
• There must be consumers (or market
segments) with different price elasticity
of demand
• The firm must be able to identify these
consumers (or market segments),
either directly or indirectly through
their revealed preference

Types of Costs
Fixed: A cost not immediately affected by changes in the activity
level e.g. rent of Studio/workspace, loans on equipment
Variable: Correlates directly with changes in activity e.g. Stock,
Packaging, utilities,
Estimate how long it takes you to make the product which includes
preparation time, research, selling, marketing, packaging etc.. If this this
is the same in all cases, then it is a fixed cost. If it is different for each
piece you produce, then account for it as a variable cost.

There are two main methods of costing:
Total Cost Approach (Total Absorption)
• Calculate all costs for a product
• Determine no of units – how many can you make and
importantly how many can you sell (there is a difference!)
• Divide total costs by no of units
• Add profit figure – the magic number generating the price
to customer
1

Contribution Approach
• Determine Selling Price – influenced by the marketplace
e.g. what the customer will pay and competition
• Split Costs into Variable and Fixed
• Calculate “Contribution” - selling price less variable costs.
Example – a candle sells for €5, variable costs to produce
the candle is €2.50, therefore contribution is €2.50.
Contribution is assigned to pay off the fixed costs and once
the fixed costs have been paid in full, the contribution
stream goes straight into profit.
2

Contribution Approach
• Calculate “Break Even Point”
Establish Total of Fixed Overheads
Establish Contribution per unit
Divide Fixed Overheads by Unit Contribution
e.g. if Total Fixed Overheads for the candle business is
€10,000 and contribution is €5,000 then the break even
point is €5,000. The candle company must sell 2,000
candles to break even, all sales above 2,000 are profit.
2

Managing your money
Cash flow is likely to be irregular so
how will you ensure you remain
afloat during tough times? Many
creative businesses can ask for a
deposit and phased payments to
allow you to survive!
To thrive and survive you must
become responsible for your
income. Do you need to embrace a
slash career or keep a part time job
to provide you with the financial
security you need at this time?
EXERCISE
Using our template,
complete a Features into
Benefits exercise for your
product or service

Managing your money
Keep clear records of all your incomings and outgoings on a daily basis
relating to your business . You need these to be in control of your
business to complete your tax returns correctly and check that you’re
covering all your bills.
Module 5 deals with “Accessing Resources”
funding/loans /awards available to you & how to apply.
EXERCISE
Review our accounting templates as
examples of a ‘book keeping’ system

TOP TIPS for writing your Business Plan
1. Visuals can help explain a business plan’s trickier aspects
2. A challenge for anyone who is passionate about their business is to
explain it in terms others can understand. Perhaps write the plan in
PowerPoint - If you can’t articulate your plan over 10 to 15 well-
designed presentation slides, you will lose your audience
3. A business plan isn’t just about ticking a box. It needs to ooze
passion, drive, inspiration and competence.
Resources – UK based but applicable everywhere
Arts Council England: Starting a business (pdf)
Business is GREAT: Writing a business plans
Nesta Creative Enterprise Toolkit
Peter Thiel: sample pitch deck
The Prince’s Trust business plan pack (pdf)

Making the Most of
Business Mentoring

Making the most of a business mentor
The right business mentor can have a profound and fundamental impact
on your enterprise, particularly for those at the early stages of an
enterprise and aiming to have high rates of growth.
There are ways to
make the most of
business mentoring:
See next slide
5

There are ways to make the most of business mentoring:
1. Understand why you need or want this
mentor. Usually, the mentor is someone
whose knowledge and/or experience
exceeds your own to such an extent that
their input can have a substantive positive
impact on your business´ performance and
your ability to run it.
2. Know where the issues lie.
Although the mentor should be able to
indicate some of the areas that you might
want to focus on, you are in the best position
to understand your business and the goals
that you want to achieve. The mentor is
there to help guide you toward these goals
5

3. Have the right attitude. You need to
enter this relationship with the right
mindset and attitude. See your mentor
as someone who is trying to help you
carry your business forward, and has
valuable advice to give you.
4. Know how your mentor can add value.
A mentor cannot be “ all things to all
people” and to make the most of their
input, you need to understand where
their expertise lie and find ways that
these are applicable to growing your
business.
5

5. Find the time.
It’s easy to get caught up in the day to day
challenges of running your own business and
putting bigger challenges on the back burner.
The mentor is there to help you to develop
and achieve your longer term goals. You
should put everything out there and explore
creatively with your mentor.
5

Build a professional network of peers
Besides offering connections to potential customers or investors, a
strong peer network can become a boundless source of support,
accountability, and fresh ideas to test out and build on- new projects,
collaboration. A key skill is finding a balance between creative
independence and qualities allowing mutually beneficial networking.
There are a range of creative /business support & Professional
Development Networks that creative entrepreneurs can tap into through
social media platforms, forums etc.. Research and make a list that is
relevant to you.

Build a professional network of peers
Example
I design textiles in Ireland, I should connect into
Design and Crafts Council of Ireland www.dccoi.ie
Institute of Irish Designers www.idi-design.ie
Design Business Ireland www.designbusinessireland.org
Interiors Association www.theinteriorsassociation.ie
Tap into an ongoing calendar of events/talks/summits
at Local, National , International levels such as
OFFEST, DESIGN WEEK, several of which we
will explored in Module 2.

Some Rules for Success

Value
Vulnerability
Creative Entrepreneurs
need to value their
vulnerability when it
comes to setting up in
business. At first, it will
be hard to fumble
through but persistence
to drive this for yourself
and with the support
available to you
anything is possible.

We love Simon Sinek's
Top 10 Rules For Success
(@simonsinek)
6. Stack the deck
7. Be the last to speak
8. Be authentic
9. Find your passion
10. Start with Why
1. Break the rules (lets go one
step further, that rules?)
2. Train your mind
3. Be patient
4. Take accountability
5. Outdo yourself
Check out his video -https://www.youtube.com/watch?v=nJxQ2kUGJkA&t=2239s

TOP TIPS
Learn something about the
customer every day
Get out & about to learn what
customers really need , what’s
important to them. Get
networking, make phone calls,
connect. This prevents a start-
up from creating a solution
first and then looking for a
problem to solve. A big
advantage for start-ups is they
can pick a small section of the
market and do that really well.
1 From Paul O’Dea, Company trans
Strategies

TOP TIPS
Be more flexible
than a gymnast
You need to experiment,
change and weave towards
the market. Start up’s often
transform themselves many
times on the route to success.
Be flexible listen carefully and
take feedback. It’s a skill to be
able to understand & take
action on the important
advice you receive.
2

TOP TIPS
Get a trusted, challenging advisor/
mentor as difficult as Steve Jobs
3
Start up’s need “somebody who’s
relentless in moving away the
cobwebs from the vision and able
to help unearth the vision from
the heads of the founders”. Find
someone who will be there for you
in the long-term but who won’t be
afraid to be critical when you need
to hear it.

TOP TIPS
It’s a marathon, not a sprint
“Starting a business is hard. It will
stretch you to your limits.”
Start with passion.
4

Next up…Module 4
Marketing for Creatives
We will explore the following :
• You are your brand
• Creating your brand
• How to build a brand with very little funding
• Effective tools for online promotion
• How best to get noticed online

Module 3 your creative business strategy

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