I finally finished sewing my 7th bag. I will introduce it tomorrow. It took over 10 days. Although I don’t intend to sell it, it is clear that it is not profitable if I spend such a long time per bag.
That made me think about at what price we should sell our work. Let’s talk about it.
How to overcome the startup phase of a business
Sometimes, we want to know how much profit we should make in the startup stage of our own business.
There is a conflict between profit and our current skills.
We want to stop unprofitable work. Unrewarded labor exhausts us. That is one reason why we desire independence.
However, when we try to start our own business, we often encounter unprofitable work. Our skills are still undeveloped. What we can do is limited.
In my case, I am currently trying to create bags to sell. However, now I need a week to make one cloth bag. On the other hand, the fair market price of the bag I can currently create is about half a day’s living expenses. It is easy to calculate that I cannot generate enough income to live on. It looks like unreasonable labor.
We often encounter such a problem related to profit, especially in the initial stage of building our own business. Such estimation may discourage us.
That makes us consider how much profit we should aim to make.
In my case, I prefer to sell my products at a price slightly lower than the market average, even if it is an unreasonably affordable price for me. Today, I will explain why. This perspective might allow you to stop worrying about unworthy labor.
My business rules
In my case, I usually grow my business with the following fundamental rules:
- In the initial stage of building a business, I sell my products at a price a bit lower than the market average.
- If a project makes a loss, even if it is only once, I immediately withdraw from it. No exceptions are permitted to this rule.
- In the initial stage of building a business, my living expenses are excluded from the costs. I consider only production and sales expenses as costs.
- When the profit can sufficiently cover my living expenses, it is the starting point of the business. I start to consider living expenses as part of the cost. Until then, it is a startup. In other words, a startup has fewer requirements.
Let’s look at why below.
Why profit margins are not crucial
In my opinion, profit margins are not crucial in the early stages of a startup. Although we have to improve it in the long run, it will naturally be better when we focus on making more fans and better products.
Fundamentally, we cannot freely determine product prices. Business requires having customers to sell to. Without the opponent’s approval, there is no deal. It means we have to follow the market price unless we create something entirely unique and valuable.
However, we don’t have to care about the profit margin from the very beginning. We can improve them steadily if we are logical and love that activity. Even if we take a week to make one bag, we can gradually reduce the time spent. In addition, we can make it more beautiful and creative. We don’t have to care about the profit margin at first.
In addition, that brings us our enthusiastic fans. Our attitudes make them feel that we are trying to achieve something more important than money. That touches their hearts.
They are looking for something special and interesting. Although they want to make their life more energetic, they are not creative. That makes them feel like joining in the activities that others are passionate about.
Supporting someone who has a goal is also a form of joining in the activity. The more unique and valuable our vision and potential are, the more our activities attract people.
Showing our passion
In this situation, the current quality level of our skills doesn’t matter; our visions, potential, and passions for the future matter.
A typical example is a singer. A person who can show their passion in songs can gain fans, even if he is not so skilled.
The same goes for our products. We don’t just want to create products. We want to change something in the world with them. In my case, I am not just making bags. I am creating functional bags to manage our belongings, reduce confusion, and make our lives easier.
Selling our products at a price lower than the market average would be proof of our passion.
That passion makes others want to participate in our pursuit. Becoming our fans and promoting our products voluntarily is part of that activity.
Such improvements in production and making fans will naturally increase the profit margin.
On the other hand, if we stick to short-term profits while still immature, we will lose those opportunities. That would be why those who want immediate results and chase superficial money in the early stage are not suited to be entrepreneurs.
Conclusion
That is why I prefer to sell my products at a price a bit lower than the market average, even if it is an unreasonably affordable price for me.
Profit margins are not crucial in the early stages of a startup.
This perspective might allow you to stop worrying about unworthy labor.
Thank you for reading this article. I hope to see you in the next one.
