This transcript was generated from the episode audio and may contain minor errors.
[Music]
Is a 40% commission worth it for your business? Is any commission worth it for your business? What is the right point in which you want to give away some of your sales, your revenue, potentially your profit in exchange for getting clients, customers, other people that you wouldn't have otherwise had? That is essentially what's at stake here in today's episode. Welcome back to Side Hustle School.
I love hearing from creative side hustlers who have turned a hobby into an income stream. Today, we've got a question coming to us from Michigan, I believe, Ann Arbor, Michigan. Jessica began making jewelry as a fun side project and was thrilled when a local shop asked to carry her pieces. But as you're gonna hear about, the shop takes a big commission and she's realizing that direct sales are often more profitable. So what should she do at this point?
Should she keep selling? Should she try to renegotiate the terms? Should she focus entirely on other channels? Is consignment sales or when is consignment sales worth it? Let's unpack the options, help Jessica discover what is best for her business and hopefully this will be helpful to somebody else out there as well.
Stay tuned for the detailed question and my answer. [Music]
Hey there, I'm Jessica, a full-time nurse based out of Ann Arbor, Michigan. I started making jewelry for fun about six months ago and I was pleasantly surprised when a local shop owner asked me to sell my jewelry in her store. She takes 40% of the sales cost and as I progressed in my business, I'm starting to realize I make better sales outside of the shop and I'm frustrated by the large percent taken out. I like the store and I shop there myself and I don't want my relationship with the owner or employees to become awkward.
Should I keep selling my jewelry there? If so, should I try to negotiate even though that is the standard rate of commission they take out for all the artists or do you think I should just not worry about it? [Music]
Jessica, guess what? I think this falls into the category of good problems to have. Okay, a lot of people would be happy to have the problem of, oh, I'm bringing sales in, they're breaching new customers that I couldn't reach otherwise, but am I paying too much?
And I also have sales coming in from direct channels. So that's great. Lots of people don't have sales coming in from either option, right? So I think the variable here is in your time it takes to produce the product. So this is a bit different because it's handmade jewelry.
It's not a digital product or something that once it's made, your work is done. In that case, I tend to think you'd give away 90% of your profits in exchange for new customers. In fact, business owners all the time, big businesses pay to acquire customers. Like they're willing to lose money on their initial acquisition because they hope that the customers will buy from them later. So a lot of situations it's like, it doesn't matter what the commission is, this is great for you, okay?
So if that commission is what the other business owner needs in order to make it viable for themselves, then I would say, just keep doing it. Again, you gain much more than you lose. Now here, as I said, there is this cost, like the time cost, the production time, the cost that goes into that. So that may be a little bit different. So therefore you wanna say, okay, is there a way that I can streamline it?
If so, then great, I'm in that same situation of the digital course owner or whoever else is giving away lots of their profit in order to reach new customers. Or if this is like an artisanal thing, okay, well that is a case where maybe you do want to try to gently renegotiate. I would just always think about the other party's perspective. I wouldn't go in and be like, hey, this 40% isn't working for me. I would try to be aware of their perspective and be focused on a win-win if at all possible.
So just keep in mind the role of the shop. When you sell in a store, it provides benefits beyond just sales. Some people may even go in and see your jewelry and then go buy from you online. Like, they're not supposed to do that, but we all know that happens. So I would just not ignore any intangible benefits of having this kind of distribution.
If it doesn't work for you because it's too much work, then that's one thing. But otherwise, I think 40% commission in exchange for reaching customers that you don't have is a pretty good deal. All things being equal, I would say, stick with what you got. But of course you have to do what's best for you as always. Listeners, thanks for being out there.
Thanks for being around. Love to know your perspective as well. sidehustleschool.com. You can share a question. There are notes pages for every single episode, more than 2,900 so far, and they're all completely free.
So you can access those on the website or wherever you listen to podcasts. New episodes coming out tomorrow. My name is Chris Guillebeau. This is Side Hustle School. [Music]
From the Onward Project.
