The Hourly Earnings Project: A Follow Up

I've been back at work in the pottery studio for a week now, after a 2.5 week break for the holidays. I meant to write this blog post during my break, but Harriet got carried away. "Harriet Homeowner" is how I refer to myself in the third person when I am engaged in home improvement projects. Harriet spent four days scraping, spackling, sanding, and painting. She finally fixed the water damage on the ceiling from Snowmageddon 2010. She completely painted her office, followed by a symbolic purging of clutter, all of which was related to her previous career as a designer. She also sewed new curtains for the guest room, to make it pretty for incoming holiday guests. And Harriet's not done yet. Her new kitchen countertops will be installed later this month. Along with a new stove.

If you can't tell, I have extra money right now. 2014 was a record year for the pottery business. I'm still wrapping my head around the numbers. During the fall months, I realized I needed to write this post. It is a follow up to The Hourly Earnings Project. It has been four years since I finished it. I can clearly see how it drove the development of my business since then.

(If you are new to this blog, The Hourly Earnings Project was a year-long analysis of my pottery business, conducted in 2010. I tracked my income earned and my time spent, and calculated how much I was earning per hour. I also compared the hourly earnings values for various revenue sources. You can read all of the blog posts here, or you can read the condensed version that was published in Ceramics Monthly in the summer of 2011.)

My business operates at a much higher level now. My gross sales in 2014 were (believe it or not) more than double my gross sales of 2010. In 2010, I made enough income to support myself financially while living on a very shoestring budget. I was happy to give up my expendable-income lifestyle, in exchange for full-time pottery. I like peanut butter sandwiches. I was not expecting to return to my previous income level. But in 2014, I did.

There are some things about me and my work that changed in the past four years, which are not related to The Hourly Earnings Project:
• The quality, design, and craftsmanship of my work is much better now. Many of my prices have increased.
• My production speed is much faster now. And my endurance for working is much improved. In 2010, I noted that my typical studio day was 3 to 5 hours long, which would leave me tired and sore. These days, I comfortably work 6 to 8 hour days.
• In May 2013, I renovated my studio and purchased a second kiln. These things caused a significant increase in production too.
• At the end of 2013, I gave up my part-time job teaching pottery classes. This freed up a lot of time to spend on my business.

Now for the areas where The Hourly Earnings Project has made a difference. Here is the graph that illustrates its overall findings:
 

The most important change that this project initiated was a shift away from wholesale work and towards retail (art festival) work. In 2010, my income was split almost exactly in half between wholesale and retail. The Hourly Earnings Project showed me that retail work was a much better use of my time. It yielded 32% more income than wholesale. ($32/hour vs. $24/hour) By the time I finished these calculations, I had already committed to and paid for a booth at a wholesale trade show at the beginning of 2011. So I spent one more year earning half of my income with wholesale work. I had a respectable 24% increase in gross sales in 2011.

Then in 2012, I changed direction. I skipped all the trade shows, and instead I solicited orders directly from my existing gallery accounts. I cut my wholesale workload to 65% of the previous year's orders, and I made up for the income by increasing my art festivals from 6 to 11. I wrote on my blog at the end of 2012, that I felt like I had taken back control of my business. I made slightly more income in 2012 as I did in 2011, but with a lot fewer pots and without feeling exhausted.

In 2013, I pushed even further in this direction. Given that I had leftover energy at the end of 2012, I knew I could expand. I took aim at a productivity ceiling that I had been battling for a couple of years ... the one-kiln situation. In order to make room for a second kiln, I had to renovate my space. As noted above, this happened in the spring of 2013. I managed to keep my wholesale income steady, while increasing my art festivals to 14. I was able to add some high quality shows (in particular ACC Baltimore, and the Pennsylvania Guild of Craftsmen shows). Even though I missed 5 weeks of work due to the studio renovation, my gross sales increased by a whopping 44%. Hooray for the two-kiln situation!

Which brings me to 2014. Once again, I managed to keep my wholesale income steady, without attending any trade shows. I had the two-kiln situation for a full 12 months, rather than 7 months. I did 14 shows again, and continued to add great shows (such as the Central Pennsylvania Festival of the Arts). At some of the shows I've done for many years, I had record-shattering sales (like Artscape Baltimore, and Bethesda Row). My gross sales grew by another 41%. Holy crap!

My wholesale income is now only 13% of my gross. My decision to focus on retail work has really paid off.

(A side note about art festival income ... learning how to be a good festival artist is a lot like learning how to make pots. It takes a lot of practice and repetition. My approach to doing shows now is much different than a few years ago, born out of the sheer number of shows I've done. I will write in detail about my current approach in a future blog post, I promise.)

I launched my online store in December 2011, and calculated its hourly earnings value over the subsequent year. (This came after the Ceramics Monthly article, which is why it didn't appear there.) As you can see in the graph above, online sales have almost the same hourly earnings value as retail sales. But as I noted in this blog post, the volume of online selling is so low. And as I've mentioned a few times on this blog, I really don't like packing and shipping. I planned to keep the online store open anyways, but by the middle of 2013, I had lost interest. I stocked the store sporadically for a while, then came up with a better plan near the end of 2013. Now I keep it closed for 11.5 months of the year. When my annual Open Studio is over, which is my last show of the year, I open the online store for the last two weeks of December. The sales don't happen over two weeks, they all happen during the first two days. I don't mind the packing and shipping when it is confined to two days, especially because I don't have anything else to do except process online orders. The sales volume seems more lucrative, but I know that's just an illusion because they happen all at once. Overall, I'm happy with these boundaries. Once again, I'm going to praise BigCartel, for having flexible plans that allow me to have things my way.

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(edited on 1/27/15 to add the next few paragraphs, just some more thoughts that came to mind in the last few weeks)

On the subject of everyday vs. fancy ... the analysis revealed that making higher-priced, upscale pots yields a better hourly earnings value for my time. I noted that this bummed me out a little, because making everyday functional pots is far more pleasurable to me. How has this influenced my business in the last four years? It hasn't. I have basically ignored this finding. I still make some of my upscale line of work, it's a small percentage. Specifically, it is 22% of my work in terms of dollar value, but less than 6% of my work in terms of the number of pots. These percentages were not planned, they just naturally developed based on sales. I made what I needed to replace. I can tell that my upscale pieces are still yielding a higher hourly earnings value, because the days that I designate for those pieces can be completed in fewer hours, while yielding a better dollar value of inventory. But I'm still committed to the everyday pieces as the bulk of my work. Could I make more income if I brought 80% upscale pieces to every show? Maybe. I don't care and have no intention to find out.

Big shows vs. little shows ... in the original project, all of my art festivals yielded a fairly consistent hourly earnings value. Except for one little art festival which was kind-of a disaster in comparison. This has definitely shaped my choices going forward. I put a lot of thought and research into picking shows, and most of the shows I've added recently belong in the "big show" category. This doesn't mean I've given up on small shows, or one-day shows. I just hold them to the same high standards. It's rarer to find little shows that can draw a big crowd, but they do exist. As I mentioned above, I will write about my whole approach to doing shows in a future blog post, which will include my thought processes for picking shows.

My Open Studio continues to be my most important event of the year. Not just for sales, but I now see the value of giving my customers a chance to see inside my studio. I'm pretty sure it makes them appreciate the process better. And it motivates me to clean. This latest one was outrageous in terms of sales, though in the past four years the sales have been up and down. I've learned that weather plays an important role for December events. This year I had clear and mild weather, last year I had a sleet storm. Big difference in sales. I've also learned that I do better when I am alone, rather than having a guest artist. Given the amount of pots I want to display, I need all the space to myself. My conclusion from The Hourly Earnings Project was to limit this event to once-a-year, so as not to over-harvest the precious resource known as my mailing list. I'm sticking to that. I am now convinced that once-a-year, during holiday season, is the right formula for building demand. Besides I don't really want to deep clean more often than that :-)

One last reminder about this project ... my findings are not meant to apply to everyone's pottery business. These are the right choices for my pottery business. I don't want to send the message "wholesale bad, retail good" because that's not universally true. It's true for me because I live in a region where art festivals are very strong. I enjoy them and I'm good at working with crowds. I've met other potters for whom the wholesale format makes a lot more sense. My message is to take the time to figure out for yourself where to spend your energy. If I had not done this analysis, I would still be attending wholesale trade shows every year, and still wondering if that was a good idea. Making this one fundamental shift, away from wholesale and towards retail, made a dramatic difference for me.

(end of addition)
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Onward to 2015! I have no expectations to exceed my monster sales of 2014. But at the same time, I think there are good reasons to be optimistic.