This is actually a series of 3 episodes to discuss how you can plan your business for 2022. It’s important to be 3 parts because planning isn’t just about setting goals, but it’s also about looking back and then implementing action items so you can hit those goals. That breaks it down into 3 parts: looking back, setting goals and implementation.
Today’s part is about looking back!
Part 1: How to look BACK so you can Look forward – evaluating last year
What were your total sales?
What was your total profit?
Most popular item/type
Most PROFITABLE item/type per piece
What didn’t you like?
This might be the opposite of the above
What items were low in profits?
What were least popular items? (specifically ones you thought should be popular)
What were your worst orders?
What were your worst customers?
The above can help you learn
What was a waste of time?
What can you improve?
What opportunities do you know exist?
Once you have this information you should be able to narrow down where you should focus in 2022!
Resources and Links:
Learn on colmanandcompany.com/blog
Episode 121 – Business Planning with Marshall Atkinson
Episode 94 – Planning Your First Successful Marketing Campaign
Mark Stevenson: My name is Mark Stevenson.
Mark Vila: And this is Mark Vila and I’m glad to be back here with you, Mark. Hopefully there are some folks that are glad to hear our voices again. I’m sure there’s a handful out there. So thank you for picking up and back listening again. It’s been a while since we’ve really been able sit and record podcasts.
Mark Stevenson: Yeah and it’s not from any bad things happening. It’s strictly because ColDesi and Colman and Company have experienced phenomenal and record growth over the past few year and believe it or not, both Mark and Mark are not full-time podcasters. Mark handles all of the e-commerce stores and much of the Digital Heat FX product line for marketing. And I handle the rest of our machine sites and Google advertising and Facebook and things like that. And we overlap quite a bit, but believe it or not, when ColDesi’s busy, we are busy.
Mark Vila: And yeah there’s-
Mark Stevenson: Definitely glad to get back into the saddle of podcasting.
Mark Vila: This is little information for old listeners and new listeners alike. So bear with me for a minute, but I think this is worth a minute of your time, just so you can know who we are and where we’re from. Might as well do a little fresh refresh here.
Mark Stevenson: Good.
Mark Vila: So ColDesi, if you’re not familiar with us and our organization, we sell all types of customization equipment from t-shirt printing to embroidery, to if you want to print on a mug or a yard sign, or just about anything. If you want to put ink or thread into something, we have equipment that does that. And we sell all the supplies and blanks and all stuff like that.
In 2021 a few things happened that kept us real busy and it away from podcasts unfortunately. But one was launching of new equipment into our product lines. A lot of them. So we had sublimation printers brought in.
Mark Stevenson: Roland.
Mark Vila: Roland. What’s the biggest one?
Mark Stevenson: Probably the direct film-
Mark Vila: Direct film [crosstalk 00:02:22].
Mark Stevenson: … in the end of the year. It’s been crazy.
Mark Vila: We probably doubled the amount of skews in our e-commerce store between blanks and offering mugs and mouse pads and all stuff like that. So when we talk about growth, it’s not only in growth of number of customers, but also due to our offering and that was a lot of marketing work. So we’ve learned a lot from last year. We’ve learned a lot over the past, almost decade, working together. And we’re going to share that with you for the rest of this year.
Mark Stevenson: Yeah.
Mark Vila: So let’s get started in sharing some of the stuff we’ve learned. Hopefully you can learn something from what we’ve learned and it could be successful for your business out there, whether you’re new or you’ve been doing this a decade. I learn something new every day.
Mark Stevenson: Yeah, there you go. And again, if you’re a new listener, you may not know this, but we’re both pretty available. So we get emails from listeners all the time with questions about marketing and strategy and equipment and supplies and all of that stuff. And we welcome that. So you’re welcome to reach out after any of these episodes and ask us questions and things along those lines.
Mark Vila: Yeah. So let’s give some information out that’s thought provoking and question creating.
Mark Stevenson: That’s a good idea. You don’t want to just talk about ourselves for the next 50 minutes? I think we could do it.
Mark Vila: Yeah. Let’s do an episode just for that. I can go on-
Mark Stevenson: Just about us. Okay. I like it.
Mark Vila: I can go on for like three hours about my various [crosstalk 00:03:56].
Mark Stevenson: That’s fantastic. All right. So this is actually the first part of three episodes. Our thought here for launching in 2022 was really to help you guys look back. And we did a similar episode last year in order to prepare for the coming year, especially if you’re already in business. Now, if you haven’t started yet, and you’re just still trying to get motivated and pick equipment, that’s great. You’re still going to learn a lot from these episodes. But man, if you’ve been in business for anywhere between two months and 10 years, then I think the next three episodes are going to be key for you to maybe taking a fresh look at how your business works and what you want to do and accomplish this year.
Mark Vila: And you make a good point. When we do this episode, if you’re new, you may be thinking, “I can just skip about this first episode of looking back at last year, because I don’t have a last year.” However, this information isn’t just about last year. It can be about last week and last month too. So if you are new in business, you should really take all these notes down so you know what to track over the beginning months of your business. And you can look back month to month or week to week or day to day, whatever it might be and you’re going to be ahead of the game versus folks who started their business last year or a few years ago and haven’t tracked any of this stuff. And now they got to go find this information.
Mark Stevenson: The title of the episode is 2022 Business Planning. This is part one looking back. And if, for example, you are panicking right now because your CPA or your accounting is telling you, you made a lot of money last year and you owe a lot of taxes, but you can’t find it or you can’t identify how that happened or can’t verify that’s true … Which I know I’ve talked to more than one person that’s in that situation. “How did you do last year? “I did great?” “How much did you make?” I don’t know. I really can’t put my finger on it.
That’s part of what this is for, and we’re going to collect all the information you need. So if you’re driving, that’s cool, but really plan on printing out the podcast notes for the things that we’re going to be talking about so you can go back and actually get these numbers.
Mark Vila: And that’s at customapparelstartups.com?
Mark Stevenson: Yeah. And it’s not going to be a theoretical look. This is a practical look. There’s no theory. Let’s go through the steps on how to look back at last year or last month or whatever the period is so you can look forward to the coming year.
Mark Vila: And I’ll try to interject a little bit for brand new businesses out there if there needs to be any translation to what you’re going to track to.
Mark Stevenson: Yeah.
Mark Vila: I’ll try to keep that in the front of my mind. To just start, this is a list that you can write down or-
Mark Stevenson: Yeah.
Mark Vila: Okay.
Mark Stevenson: This is going to be a list and a conversation.
Mark Vila: It’s a list and a conversation. So these are things you should be looking at, tracking considering. Every business that’s globally does this.
Mark Stevenson: Yes.
Mark Vila: This is standard stuff so if you’re new to business and you’re not sure where to get going, this is just a great list of things. So why don’t we start right at it?
Mark Stevenson: Okay. And we had our ColDesi company meeting for the year, and we talked a lot about these numbers. And the first one is what were your total sales? And what does that mean? Let’s be specific. What do we mean by we’re talking about total sales? Because that’s not an accounting term.
Mark Vila: Mm-hmm (affirmative).
Mark Stevenson: What we’re talking about are the amount of money that you took in. And if you have invoices that you made in December that haven’t been paid yet, I would include those two.
Mark Vila: If you accepted cash-
Mark Stevenson: What we’re looking at-
Mark Vila: … and didn’t write it down.
Mark Stevenson: Write it down, because-
Mark Vila: Maybe you have your own separate notebook.
Mark Stevenson: Because not, we’re not looking for accounting numbers.
Mark Vila: Yeah.
Mark Stevenson: We’re looking for performance numbers. So January 1st to December 31st, how many, how much money did you generate in your customization company or your side hustle? And then the tough calculation is what was your total profit? So Mark, do you want to break down how you would get to a profit number?
Mark Vila: Yeah. Now this is one of those things that just logically is very simple, but what gets lost is the details. So your profit is not going to be what the t-shirt cost to make or what the mug … I’m sorry, what the mug cost or what the t-shirt cost, how much ink or thread you put on it and how much you sold it for. That is a pretty reason way that we will do often to do a quick calculation of profitability of an item.
Mark Stevenson: Right? Gross profit.
Mark Vila: Gross profit. Yeah. And we do that ourselves. We make sure that certain items we sell here at ColDesi have to have a certain minimum margin to cover all of the other costs that get taken into deciding what your … We’re not deciding, but calculating what your profit’s going to be. These include things like staffing or any software expenses that you have, or any outsourcing people that you give money to. So you’ve got the profitability of individual items, which we talk about plenty, but then you’ve got the profit of the business.
Mark Stevenson: Yeah. Which is why we always say, when we do our ROI calculations, that you’re going to have to come up with your own labor number, because we don’t know how much you spend per hour on yourself or on any employees. How much do you spend on advertising? So really you need an expense number. So what was your top line? How much money did you take in? And then how much money went out to make that happen?
Mark Vila: And I would do your best before you do the math to write down on a spreadsheet or a notepad or whatever everything that costs you money to do this business. And if you want to get really granular with it, you can even say 10% of the internet for my home and things like that, if you want to. If there’s a side hustle for you. But it’s important to figure do you have a website? How much do you spend for that? Do you have a Gmail account that’s a professional version or an Outlook that’s a professional version? Did you have to upgrade your iCloud for Apple because you’re storing things there and now that costs you an extra $9 a month?
Try to factor in all of this stuff and then first or last, whatever you want to call it, you should factor in how much you want to pay yourself because we want-
Mark Stevenson: Yeah. Or how much you did pay yourself.
Mark Vila: How much you did pay yourself or how much you should have paid yourself, if you didn’t.
Mark Stevenson: Yeah. Should have. I think that’s probably a better [crosstalk 00:11:30].
Mark Vila: Because what we’re looking for is profitability of the business. The business should have some profit.
Mark Stevenson: Yes.
Mark Vila: How do you describe it? You describe it in a good way. What’s the profit?
Mark Stevenson: No, no. You’ve got it because you’ve got to allow something for yourself. The profit of the business is not how much is left over in your bank account, especially if you’re using your personal bank account. It’s not how much money that you take out. It may be good to think about that. It may be good to keep that in mind, but you want your business to be independently profitable, objectively profitable. So if you took in a $100,000 last year and you spent $50,000 on identifiable supplies and hard costs that went into … cost of goods sales that went into those sales, then you’ve got to add what are you paying in rent? Is it a percentage of your mortgage? What are your internet costs? What are your phone costs? What are your supply costs? How much do you spend on boxes?
You’ve really got to be as granular as possible because if you’re not, then you’ll be having a conversation with us in maybe 18 months, which is usually how long it takes, because you’re not making any money because you’re not charging enough or because you’re paying too much for your supplies or because you’re paying too much for labor or something like that.
Mark Vila: Yeah. Exactly. That’s great. So what you want to do is get your total sales, you get your total expenses, including giving yourself money. However much money you took for yourself. And the thing is, it gets tricky with the side hustle, if we’re talking about those too, which we are. Because you probably just took the money and, I don’t … paid a car payment with it. So you got to figure out a way, like how much money did I take? Is there money left in the bank for the business now, after all of that? And then you figure it out to say, “How much money did the actual business make after I paid self?”
Mark Stevenson: Yep.
Mark Vila: And then that profit is a great number to know because-
Mark Stevenson: And the-
Mark Vila: No, go ahead.
Mark Stevenson: The reason that you’re doing all that is so you can track your progress for next year, because there’s a real potential, and I’ve seen a lot of people do it, that you could increase your sales quite a bit and make less money.
Mark Vila: Yeah.
Mark Stevenson: You could be less profitable. You could do twice the amount of work and only make an extra $1,000 dollars in a year.
Mark Vila: Yeah. You-
Mark Stevenson: All those things are possible.
Mark Vila: Yeah. And that could be personally and the business too.
Mark Stevenson: Yeah. Absolutely.
Mark Vila: That could mean you could work an extra 30 hours, but you don’t pay yourself anymore and the business expenses just go up. You made the same amount or less money, but put in an extra 30 hours work and you didn’t even realize it. So knowing all this is powerful [crosstalk 00:14:31].
Mark Stevenson: The fun math and the math that we do all the time is how much you make when you make a shirt. So 10 to 15 bucks. So it feels great to make a shirt, sell it to somebody, get 20 bucks in your hand, take 10 of that and go out and buy lunch. That’s the easy math, especially if it’s a side hustle. But if you’re doing that with a 100 shirts, now it makes a big difference.
Mark Vila: That’s a fun lunch, by the way.
Mark Stevenson: It’s not as much fun. Yeah, it is a fun lunch.
Mark Vila: That was a fun lunch.
Mark Stevenson: There you go.
Mark Vila: That was a lunch where you went and took a nap afterwards.
Mark Stevenson: There you go. All right. The next step in collecting information … And balance this out. We don’t want you to not go forward because you don’t have the numbers that you spent on internet in February. We want you to keep moving forward. The next steps are to figure out what your best products and the best people that you deal with are. So number four, number three is to pick your most popular item or type of item.
Mark Vila: Yeah.
Mark Stevenson: So in other words, if you are strictly in the custom t-shirt business, then you’re going to say, “What was my most popular shirt? What did I sell the most of?” And please try not to make this anecdotal because what can happen is you may remember 150 piece order you did for a high school and consider that as your most popular item last year, but you could have sold 20 of a different shirt every month for the entire year for 240. That would be your most popular item.
Mark Vila: I actually like to think about this in a couple of interesting ways, and this is how I think you can have a little bit of fun with these numbers, if you make it fun for yourself. Because sometimes there’s a difference between your most popular item and the most popular item that has the potential for growth or that you’re going to plan on selling to other customers.
So one of our most popular items at Colman and Company might be a type of spangle reel. It’s one of our most popular items. Now, this item is a very popular item, but if I’m going to choose marketing expenses, I’m probably not going to try to continue to promote that particular color of a spangle reel. If you don’t know what a spangle reel is, it’s because you don’t have a specialty type of machine that it’s the only thing it works for. It’s a very specialty machine, very specialty profit, very special product and I’m not going to sell more of those spangle reels to folks who print yard signs for a living.
So there’s some things to consider that if we’re talking about t-shirts, if a school liked a particular brand of shirt, not because you’d like to sell it, or you think the shirt is of a good quality or any of those things, but that’s the shirt they’ve been using for the past six years. And when you got that customer they said, “We would just like it on the same shirt. We know it. We feel comfortable with it.” And you say, okay, that might be your most popular shirt because it’s to your biggest customer.
But when you look at your other customers, the ones that you get organically, the people who call you from Google, the people you get referrals from, it might be a different shirt. So I might look at that and say, “Well, the shirt I sold the most of was this one, because it’s my biggest customer and that’s what they chose. But the most popular shirt from sales that I generate on a daily basis is this other shirt.”
Mark Stevenson: Yeah.
Mark Vila: So there’s a couple of answers here and I think it’s great to know this stuff and it’s because it’s important when you’re selling, it’s important when you’re making decisions. When you look at the profitability of those shirts, you might say, “The profitability of my most popular shirt is my lowest profitable shirt.” It’s because you’re selling it to a school at the lowest possible margin you could afford to do it, but it’s a reoccurring business you don’t do any work for and you’re happy to do it because you can make money with it. Versus see another shirt that might be significantly more popular that you sell less of but that’s the one you want to grow. That’s one might sell 10 times.
Mark Stevenson: I think that rolls right into number four, which is what’s the most profitable individual item or type or piece that you sell. So again, if you’re doing custom t-shirts and you sometimes do mugs, and you’re making 10 bucks on the custom t-shirt and you’re making $15 on the mug. Or you’re doing embroidery and you knock out left chest logos all day and you make eight bucks a piece, but the most profitable item you do is a jacket back that you make $200 on.
So you’re going to go down this list and you’re going to figure out, like Mark said, what’s your most popular item. And that should be pretty easy. What do you sell the most quantity of? Those are the most popular. And you can give it a couple of different categories. Like what do you sell the most quantity of because you’ve got one person that orders a million products? And what’s the most popular item based on just your overall customer base? And then taking a look at which one is the most profitable.
So Mark, why don’t you lay out what would go into figuring out what a profitable product is for the pieces.
Mark Vila: I think you should know a few things when it comes to profitability. This doesn’t have to be technical terms, but you should know the basic. How much did it cost to make? How much did you sell it for? So there’s a dollar amount. There’s a net profit there of just how much did it cost? This cost two bucks an ink, the shirt cost $4. It was a $6, I sold it for $12. I made $6.
Mark Stevenson: Yep.
Mark Vila: So that’s a basic profitability. You can go to websites like Calculator Soup is one or just Google search profit margin calculator and find one. You should know by definition and how to reach the calculation, either through a website or learn some of the Excel formulas or math formulas you could do on your calculator, what’s the profit margin of an item. How do you calculate gross profit? How do you calculate your margin? Things of that nature.
Important to know the difference between markup and margin. So just something basic … I don’t want to teach you about that. It’s boring math stuff. But you just go to one of those websites, there’s articles. Read it. You’ll understand what it means. And you should look at items with two things. You should look at what are the items with the best margin, because these items are the most profitable percentage wise.
Mark Stevenson: Okay. So what we’re saying there is the difference between something you buy for a dollar and sell for two, you make a dollar. It’s great margin. Versus something that you buy for $10 and you sell for $12.
Mark Vila: Correct. So-
Mark Stevenson: You make twice as much money, but the margin isn’t the same.
Mark Vila: Right? So in those examples, just as understanding just some basic stuff. I know a lot of people might know about this, but it’s important just to think about it. And I like to go through and think about this stuff again every once in a while, even though I know it. If an item costs 10 and you sold it for 12, it’s approximately 16% margin, 20% markup, $2 gross profit.
Mark Stevenson: There you go.
Mark Vila: Now that doesn’t sound very good. If an item costs $6 and you sold it for $16 … I’m on Calculator Soup by now, by the way. I’m not doing this in my brain. If an item costs $6 and the revenue is %16, your margin is 62 and a half. Your markup is 166% and your profit is $10.
Now an important thing to consider is the difference between that margin and that markup. If you are buying a key chain for $1.67 for the blank and you are selling it for $5, it’s a 66% margin. Love it. That’s great. It’s a $3 roughly gross profit.
Okay. How many of those am I going to sell? A 100. That’s $300. I mean, cool, but $300 isn’t going to change my life or my business. Can I sell 10,000 of these things? Okay. Now I’m interested because it’s a dollar amount thing. It’s about the $3.
Mark Stevenson: Yeah, I-
Mark Vila: Go ahead.
Mark Stevenson: I think the message there though is really when you look at the most profitable item or piece that you sell, you’re basically just gathering that information so you can make those based on what Mark Vila was talking about. When you move on to the planning stage you’re going to look at, “Okay, this is what I sold. This is how much profit I made. Here was the margin. Which one of these do I want to emphasize or continue with next year?”
Now, when I look at the back of the napkin profitable item, what’s our most profitable item, I take the what we sold it for, what it costs us and how long it took us to make, because that time factor is really huge. If we use that embroidery example, and I can do a left chest logo in eight minutes, then I can look at how long did that take me to make? How many of those can I make an hour? If I made seven bucks a shirt, what would that mean from an hourly wage? Is that really as profitable as I’ve got a digital heat effect system. I spent $6 on a shirt, I spent $3 on a transfer. It’s nine bucks. I sold it for $25 and it took me five minutes. There’s that calculation of profitability where you really have to make sure that you’re considering the time it takes.
Mark Vila: Yeah. That’s a really great point and that’s definitely something you could dive to pretty deep and it’s worthy of you doing on your own out there. Calculating per hour.
But I want to just switch back real quick to that margin comparison real quick to complete the thought. So the margin that we spoke about before on the key chain that that cost you a buck 50, that you sold for five bucks and it’s a 60 something percent margin, you make three bucks on it. Great margin. 60 something percent margin if I’m looking at my most margin profitable items. That might be the most profitable one that I sell in my business at 66% margin. That’s a great margin by any definition in just about any business.
Now, conversely though, if we’re looking at, say, a high end polo type of a shirt, that’s a brand name polo, and maybe that blank is costing you $33 or something like that and you’re selling them for $65. And that’s a real world example I consider, because in a previous company I worked for, we got Nike polos and the company spent $65 a piece on them. I know because I had to buy them. Then I went back into looking at the cost years later when I’m in this industry and I was like, “Oh, that polo only cost the guy about 30, 35 bucks.” So he made about $32 on each one of those polos. That’s a 49% margin. Not as good as the key chain by a good amount. 16, 17% less margin, which is generally speaking not good. But the gross profit’s $32.
So going back to if I sold a 100. If we sold a 100 polos, that’s three grand. Yeah. If we sold a 100 key chains to the same customer, because it was a 100 people they were buying it for, that was $300. So you look at dollar amount and margin and there’s no line drawn on which one is better than the other. It’s just important to know all of that. So it’s a good rule of thumb to just know that information so it can help you calculate your prices sometimes. But when you’re looking at-
Mark Stevenson: There you go.
Mark Vila: … a margin percentage. And then you look at the gross profit and determine, “How much effort do I put into this item?”
Mark Stevenson: Yeah. I like that. In the end, what you want is you want a short list of the things that you felt you did the best with. And then you’re going to move on to, after you figure out what your best items were that you sold, you’re going to at what were your best orders last year? And I’m going to use the same kind of math that we’ve been talking about for figuring out the most profitable for which individual orders were the best.
What you’re going to do is you’re going to take what were your most profitable orders? Did you get a 100 piece orders for those $65 polos? And you consider it was the best order, because maybe it’s the kind of work that you want to do, which we’ll talk about in a second. You could two step the key chains, make less margin and sell 10,000 of those and maybe that’s what you would consider the best order. I want you to make a value judgment kind of like of what your best order was, because that’s going to move on to the next one.
For example, for ColDesi, let me just stop and say that maybe last year we had the world’s biggest cheerleader uniform manufacturer buy a dozen rhinestone machines from us. Maybe that’s what we are going to do the math, we’re going to figure out that’s our best order. It’s the best order not because we made the most money on that individual one, because those guys already know what they’re doing. So as long as the machine is working right, all we have to do is send it to them. So there’s some calculus that’s involved and you’re identifying what your best order is.
Mark Vila: So the best order, when you’re saying is not necessarily just in margin and dollar amount, but there’s an objective point to it too?
Mark Stevenson: Yeah. There’s a subjective point to it and we’re going to talk about what you liked doing and what you didn’t like. You’re going to look back and there are orders last year, I guarantee it, if you’re a busy shop, that made you miserable. They may have been your biggest order. They may have been great profit. You would never describe that as your best order because it was a nightmare to fulfill.
Mark Vila: Yeah, the best order might be a balance of … I would maybe define your best order as if I could recreate this order every day or every week and then just make enough money to reach my goals with that, that is the best order.
Mark Stevenson: Yeah.
Mark Vila: Right. That’s the best order. So it’s not necessarily going to be clear. You may have two or three winners. I’m okay if you narrow it down to two or three. But preferably you find that one gold order and why do you want to know this?
Mark Stevenson: Well, it’s because as we go through rest of the process for picking next year, you’re going through this process so you can decide where you want to focus next year. You may have fond memories of depositing a check that you got from a big order that you hated doing last year. You definitely don’t want to do that every month, regardless of how much money you make. Not your best order. And it goes into the next point, which is who are your best customers and what does that look like for you? Our best customers, no offense from you folks that haven’t bought from us yet, but they’re the ones that have come back to us last year and bought the second or third machine or fourth machine. They know what they want. They know how our training works. They know how our support works. They’re already in business. So they know what it’s like to be successful per order. They’re just expanding. Those folks are a joy to work with. If you’re coming back to buy your second machine, then it means you love us already. We’re not convincing you of anything.
So maybe your best customers is that high school that just orders 150 shirts a year. Maybe your best customers are the ones that … Maybe it’s the one person that buys the occasional full jacket back leather custom embroidery and you’re an artist that loves doing that. That’s your best customer. Maybe your best customer is the one who bought five things from you but they spent months sharing those images on social media and they sent you tons of other customers.
I can name the names of some of our best customers. They bought multiple machines from us, they’re busy, so they bought li buy a lot of supplies from Colman and Company. They’ve already gone through all of their learning processes for their equipment so they don’t spend a lot of time and support and they participate in all of our Facebook groups and they help other people. Those are great customers. We want lots of those.
Mark Vila: Yeah. So really what you look for is your best orders and your best customers and you say, “Dang, this business would be beautiful if all the customers looked like this and all the orders looked like this.”
Mark Stevenson: Yes.
Mark Vila: So that’s the dream. That’s the goal potentially. That’s one of the goals. And then you want to know this so when you’re developing your goals, you’ve got the answers there. Like, “I want to try to find more customers like this, more orders like this. How do I do that?”
Mark Stevenson: In marketing speak we call that a customer avatar. Your ideal customer. What you’ve done through, when you look at your total sales and your profits, and you spent time looking at the most popular items that you sold, the most profitable items that you sold, your best orders and your best customers, you’re creating a picture of the ideal situation for your business. And you’re using that, using information from last year, actual information, not the stuff off the top of your head or the friendliest person on the phone that you talked to that you didn’t really make any money on. Or that big order that you were excited to get and excited to get out that you looked at and you actually lost $5. You’re going through all that so you can create this ideal circumstance that you want to organize how you’re going to go after more of that for next year.
Mark Vila: Yeah. And this is one of those things where you might find what you would call your best order and your best customer and then you might do the math and you’d be like, “Dang, that’s not the business I want. I want to make more money than that.” But it’s the starting point. So maybe you say, “What if this was a customer that I could sell deeper into. I could sell them more stuff. What if I found customers like that, but maybe they were bigger?” So you sold to some sandwich shops and you really like that kind of hospitality thing. Maybe you can catch some hotels or maybe you can catch a bigger restaurant or somebody who owns a chain of pizzerias. So you look at it as a blueprint.
And I also think the best order and the best customer thing can be a little bit of the scale because your job, your work, your business, isn’t always going to be beautiful things and wonderful things. So you scale, “Okay. That was a little annoying, but it was real profitable. That customer’s a little annoying, but real profitable. But on the scale of measuring this, this is a nice zone to be in. I could live here.” So I think it’s a fun game. I think it’s interesting. It tells you a lot about yourself as a business owner. It tells a lot about the brand of your business that you want it to be and then about where you want your business to go.
Mark Stevenson: And I think it’s important to go through that exercise. What Mark was just talking about and what he brought up before the podcast was it’s important to invert everything that we’ve talked about so far. So you were always looking for the best, the most profitable, the ideal items, things along those lines. Take a look in your business last year and figure out what you didn’t like. What didn’t you like doing? You could even start with what are the lowest profit items that you sold last year? And maybe it’s a small embroidery order that you undersold because it was a cheap blank and it just took you more time than it was worth. Or maybe it was a custom t-shirt order that was very profitable, but it was a pain to do because the customer was terrible about the graphic. Whatever it is, you want to take a look at the opposite of each one of the things that we’ve talked about. Make a list. What were your lowest profit items that you sold in the store?
Mark Vila: Yeah. What items did you sell the least of would be another. This one I find is an interesting one, because there’s a difference between items that you sold the least of because people just don’t like it or your customer base just doesn’t like it, or it’s too at expensive or too cheap for your customer base or your brand. Those are just not good items for your business. But there’s also items that you know or you believe should have been popular, but they weren’t for some reason. And maybe you know why. Maybe you didn’t try to upsell it enough, or you only discovered it in November and it became real popular in November, December, but you didn’t sell it all year. So you didn’t sell too many of them, but you know there’s good potential.
So I think you’re looking for two things on that list of the least popular items. One are, what can I just stop selling? What should I stop offering? Should I just cut it off? Every time I have to do it, it’s extra work for me. I don’t really make that much money on it. Nobody’s really that interested in it. It’s just something that clogs up the … A mess. It creates a little bit of a mess every time one of those is on the order. Like a particular mug that you have to do all these crazy adjustments to your mug press for, and people don’t order them in very much volume and the margin is not that great. You sold eight of them and each one of those eight you spent an hour redoing your art and messing with paper and cutting paper to specific sizes. You cut the item off.
The second thing you look for are items that you should have sold more of and then you’ve tried to figure out why you didn’t. Like I said, maybe you just never upsold it, even though you know everyone who got one loved it, but you only sold 20.
Mark Stevenson: So [crosstalk 00:39:52] I like this for a couple of reasons, because it also goes to the what items were low in profit. It’s a combination of if you didn’t like doing it, no matter what the profit was or the potential is, I would not produce those. You could find somebody to outsource it to if you’d like, but that’s not negotiable for me. If there’s something in my position or in my side hustles that I don’t like doing, I find someone else to do them for me. And if I can’t do that, then those things are never done. So what your least popular items are, is that because you don’t like doing them, it’s because people don’t like them or it’s because there was a failing in some way. You didn’t market them, et cetera.
But things that you enjoyed doing, or they were pretty good and they had have some profit that you didn’t sell enough of, or you didn’t think you made enough profit on, those, I think, are worth that special examination because most of you are not charging enough for what you do. 98% of you are undercharging anyway. So you could look at something that I didn’t like doing it because this mug, it took me 15 minutes to make and I only made five bucks and the customer wasn’t that happy. Says, “Okay, well is it because it should have been a $15 mug? How do you feel about that? Do you like it more now? Should you be selling it for more?” And that rolls into the next one, which is what were your worst orders last year? And I bet if you were in business all last year, that theirs are going to be on the top of your mind and you’ll have no problem writing those down.
Mark Vila: Yeah. And these are worst for the same reason as why other ones were the best.
Mark Stevenson: Yeah.
Mark Vila: It’s a type of customer, it’s a type of item, it’s profitability, it’s the time it took to make. All of these-
Mark Stevenson: Difficulties.
Mark Vila: Difficulty, all of these things together. And if you probably just would prefer to not do that ever again.
Mark Stevenson: Right.
Mark Vila: For [crosstalk 00:42:28]-
Mark Stevenson: That’s specifically the purpose behind writing that down is so you don’t.
Mark Vila: Yeah.
Mark Stevenson: We’re giving you permission right now, because the next question is who are your worst customers? Is not to make those things anymore, not to take those orders anymore and not to deal with those customers anymore.
Mark Vila: I have a tough question then.
Mark Stevenson: Sure.
Mark Vila: Hard. This is hard.
Mark Stevenson: Go.
Mark Vila: I’m a reasonably new business. I made $30,000 last year net income. So I made a decent amount of money, but I can’t quit my day job. 20 to 30% of that money, so a third of it, 10 grand was from a customer that I don’t like the orders and I don’t like them very much, but I make money off of it. It stresses me out and it stinks. Do I just not take those orders anymore? That’s so much [crosstalk 00:43:38] of my money.
Mark Stevenson: If it’s mortgage money, I would take the orders. But if it’s not, then what’s going to happen is you’re just going to continue to do more of that and you will be miserable because what if that customer grows and doubles in size next year? So you spend 20 hours in a week of what would otherwise be free time doing something you don’t want to do for people that you don’t like. I cannot imagine that this is what you envision for your side hustle.
Mark Vila: Okay. It’s a bit philosophical.
Mark Stevenson: Yeah. It is.
Mark Vila: There’s some soul searching.
Mark Stevenson: Honestly, it’s also good business advice.
Mark Vila: Yeah.
Mark Stevenson: Because you are not going to stay in business otherwise. You just won’t. If 30% of your income is doing things you don’t want to do for people that you don’t want to do it for, then you’re just not going to stay.
Mark Vila: While we’re talking about this and we’ve got a little bit of time left and we’re almost done, maybe you could just give some advice. If somebody is in a situation like that, how might you exit?
Mark Stevenson: I would do a couple things. The first thing I would do is if you have any kind of relationship with this client at all, you could pick up the phone and have the conversation and you could say, “Hey, listen, Bob, I appreciate your business from last year. It was great and it was significant for me. But I had a couple of things happen. Your attitude towards the purchase in the business really didn’t match my style of the kind of person that I want to do business with. And the timeframe was too short and I didn’t quite make enough money.
As I look at 2022, I’m evaluating the business that I want next year, so it’s up to you. Do you want to work with me next year on changing those things? And we can try it again if you enjoy doing business with me. And if not, then maybe I can refer you to somebody else for that business.”
And then you never know. Maybe the guy didn’t realize he was being a jerk. Or you might have an opportunity there. And then I would immediately start looking for replacement business. I would even ask that guy, if you have the courage. Says, “Listen, I hated do business with you. Do you know anybody nice that needs custom t-shirts?”
Mark Vila: Okay. I actually agree with helping to find a replacement too. And if you know you don’t want to have that conversation, like you just really know you don’t want to have that … And it doesn’t have to be somebody who’s a third of your business. It could just be this one annoying person that calls you every week and it’s 1% of your business. You can just find a way to exit out to them. Just say, “Hey, I’m going to refer you to somebody else. The type of work that you’re doing, I’m having some focus shifts in 2022. I don’t want you to be high and dry. Here’s somebody else. Here’s a couple other companies that do it.”
And if you have some business relationships to people, you can even ask. Some people will take the business. Be like, “Hey, I got this guy. He’s kind of a jerk, but he orders every week. You want it?” And some people are glutton for punishment and they’ll be like, “Give me the money.”
Mark Stevenson: It’s up to you. This is really taking your own temperature, because I fired a customer last year for one of my side businesses and I did it because I looked back and I did the math and I wasn’t making enough money to put up with the amount of work that I was doing. So it’s just, “Hey, listen, here’s what I can do. Happy to help you find somebody else. If you need me to consult for a transition period, that’s cool, but I think you’re better served by hiring somebody internally to do the work or finding somebody that’s better suited for your.
Mark Vila: Okay. Yeah. Great.
Mark Stevenson: You do the same thing.
Mark Vila: I just think it’s part of the conversation to be had for this, because some of it is like, “This is all the things I want to do, I want to do, I want to do,” that you’re going to set goals for. And there’s also stuff. What do I not want to do?
And I also think that there’s potential for some growth in this. If you want to say, “I won’t get this all done in 2022, so I’m going to shoot for some shifts in 2022 to make sure in 2023 I’m in a better spot, because I know sometimes life is not that simple.” So you do your best to point your ship in the right direction, I think is the biggest thing. Point it in the right direction, not continue on the same path because eventually the water just gets worse and worse and worse. It doesn’t get better over the horizon if it’s really bad now. So you’ve got to make that shift.
Mark Stevenson: I like that. So in summary for this episode, what we really want you to end up with after you do some of the work is we want to know how much sales you made, how much profit you made, what was your most popular product? What was your most profitable product? What were your best orders? Who were your best customers? And flip that all around. What didn’t you like doing? What items were the lowest in profits? What items do you think have the most potential in spite of the current situation? What were your worst orders and who were your worst customers?
Mark Vila: Yeah. And then you can have some general statements too. “What was the best use of my time? What was the biggest waste of my time? What did I improve on the most? What can I improve on this next year? What opportunities existed that I took advantage of and got?” And what opportunities do you know exist, you’re not going after yet? There’s the up and down to both of those things. But by going through this exercise, you have all those answers right in front of you. It’s like meditation for your business and then we can move on to the next episode, which is going to be on setting goals.
Mark Stevenson: Yeah. I’m going to write that down. Meditation for your business.
Mark Vila: I think of it like that because I listened to … I don’t remember who it was. It was somebody on social media that I saw. Was a short video clip, but it resonated. And the gentleman said something like, “If you want to know what to improve about your life when you go to bed, meditate on the thought. Just think, ‘what do I need to improve about my life? What am I not doing good?'” And he said, “You keep thinking about that and then something will come in mind and you’ll know that that’s the thing you need to fix and it’s probably going to be the most uncomfortable thing because that’s what your brain will do to you.” And then you know what you can do.
Mark Stevenson: Yeah.
Mark Vila: And I find that this exercise is like that for your business, because your business depends on more than just thoughts and feelings. It depends on numbers and actual people and actual customers and customers. So you can’t just lay in bed and think about that. There are some philosophical things you can consider about your business laying in bed meditating, but this is done in front of a computer or a tablet. And once you know the answer, you already know what the plan is for next year or this year. You know [crosstalk 00:51:12].
Mark Stevenson: I love that. All right. So the next episode is probably going to be setting goals. I may squeeze another one in on direct to film printing.
Mark Vila: Okay.
Mark Stevenson: It’s a relatively new technology that’s just incredibly hot and we’ve got Don Copeland, an incredibly knowledgeable product manager, that is anxious to share the state of that market, do a survey of equipment available and just try to help you guys all identify whether or not it’s an opportunity that you want to add to your 2022 list. And then look for part two of the series on 2022 business coming soon.
Mark Vila: Yeah. Thanks a lot for listening to this, and I would just like to wrap up with a little commercial. Listen to it. It’ll take two seconds. On colmanandcompany.com, if you don’t buy from us now because you buy supplies somewhere else, or you tried buying from us before and we didn’t have what you wanted or the price or colors or whatever weren’t right, I’d encourage you to go check us out again. Colmanandcompany.com. Or you can go to coldesi.com and follow the supplies link. We’ve have doubled the amount of items on the store in a year.
Mark Stevenson: That’s a lot.
Mark Vila: So there’s a lot of items on there. There’s over 80,000 plus skews available. So there’s a lot of stuff you probably haven’t seen. And go ahead and do a little target style browse on the store. I recommend. Just you walk up and down the aisles, if you’re in Target or Walmart or something. Do that, click on all the links. You might see some interesting things. You might see some stuff you want to buy, or you might just learn something because we have so many videos-
Mark Stevenson: Tons of video.
Mark Vila: … so many articles.
Mark Stevenson: Yeah.
Mark Vila: That even if all we do is teach you something and you don’t buy anything from us, we’re happy to have done that for you, and maybe one day in the future, we can earn your business there. And the same at coldesi.com.
Mark Stevenson: Yeah. I like that. It’s true. Okay. This has been Mark Stevenson.
Mark Vila: And Mark Vila.
Mark Stevenson: You guys have a great business in 2022.