PPP: The Business of Pottery
Running a profitable pottery business requires both sound business skills and a high-quality, desirable product line.
Over the past 25 years of my career as a ceramic consultant, I have frequently encountered potters who have a technical problem. Perhaps a favorite glaze has begun to run off their pots, or a key raw material in their body formulation has been discontinued. In many cases, they are preparing for a big show or sale in the next few days-they need help fast, or they will lose money.
But while specific technical problems are often the most visible sign of an impediment in the production cycle of forming, glazing and firing functional pottery, such problems sometimes indicate a lack of planning in other less visible, yet highly crucial areas of the business. If these problems are not detected and corrected early, they can sink the entire company.
When you first start a business making pots, it's easy to be successful. The pottery business has few barriers to entry, startup expenses are modest, and you can often sell your work with little initial effort. The problems begin when your relatives and close friends have exhausted their immediate need for pottery. In many cases, a false sense of security based on initial sales to a select group of admirers has led to an unsound business expansion program. With income earned from even reasonable sales, potters can pay off the purchase of pottery equipment, supplies, kilns and raw materials in a very short timeframe. However, a fast payback on capital and supply expenditures does not always mean real profits for the expanding business. At some point, producing greater numbers of pots won't necessarily translate into making more money, and what started as an enjoyable pastime soon turns into a real business competing in a real market.
Running a profitable pottery business requires more than just knowing how to make pottery. Statistically, the majority of all small businesses—pottery and otherwise—fail within their first five years of operation. However, you can take several steps to help ensure that your business succeeds.
Learn About Business
Before you try to start your own business, you should learn as much as possible about the different aspects of running a business. Many community colleges and adult education centers offer accounting, marketing, economics and other basic business-related courses. While sitting in a classroom might not appeal to some potters, it's a good way to acquire the basic skills needed to ensure success. Other sources of information include the many books published in recent years for craftspeople wanting to start their own businesses, as well as business-related articles in craft magazines and ceramic journals. These resources can give you a sense of what kind of pottery is being produced, along with how others are selling and advertising their products.
As with any business, many individual elements contribute to the total profit margin. Skills such as product development, marketing, advertising, accounting and sales all have to be mastered and executed to sustain any selling operation. Any time you spend learning about other small businesses will be well worth the effort later when your own business is in operation. For a more hands-on educational approach, you might want to spend some time as an apprentice at a profitable pottery operation. In fact, this was the traditional way craftspeople learned their trade. Potters often apprenticed to a "master potter" for a number of years to learn the tricks of the trade before they opened their own pottery. At that point, they would then hire and train the next generation of potters.
Develop a Business Plan
Amazingly, many potters who start their own business do not have a business plan or any cogent ideas on how to successfully grow their business. Some potters' long-range plans consist of packing the car up for the next craft show. However, if your business is going to be successful over the long term, it is imperative that you develop a real strategy for marketing and advertising your work. Your business plan should include a timetable for both short- and long-term goals, as well as a listing of primary and secondary markets for the sale of your pots. The plan should also provide a complete financial breakdown of direct and indirect costs of production, hourly wages for yourself, and profit margins.
Be sure to gain a thorough knowledge of—and realistic expectations for—the market in which you hope to sell your pottery before you enter that market. Selling handmade pottery in the U.S. at best appeals to a marginal niche market of potential buyers. Keep in mind that handmade functional pottery has to contend in many instances with commercial pottery, which can be mass-produced and marketed on a large scale at a lower cost. Understand ahead of time how many people will actually buy your relatively expensive handmade coffee cup sold in a limited geographic market, compared to an inexpensive machine-made cup available at many retail locations nationwide.
When applying for a commercial bank loan, a business plan and an explanation of your products and their sales potential are required. Often the simple act of drawing up a plan will force you to examine alternative strategies for selling your products. Even if you're not borrowing money, you should still have a plan that can help you chart your course of action. Be sure to review your plan regularly to determine whether your objectives are being met, and be flexible enough to change your plan if the market demands it.
Accurate, up-to-date financial records are key to being able to recognize the early warning signs of business difficulties. Many potters who have lost money didn't realize the nature and extent of their problems until it was too late to take any corrective measures. In such cases, the potters were often exclusively focused on the day-to-day requirements of making pots and didn't make the everyday business decisions necessary for survival.
For example, one potter was pleasantly surprised to be accepted into a large craft show that was held a few hundred miles from his studio. The potter packed up his products, spent money on gas, tolls, hotel expenses and entry fees—but he did not consider these costs to do business vs. the potential sales of his work. Once the costs for pottery production, packaging supplies and car depreciation were calculated, the expense to attend the show greatly increased. Besides losing four days of work, the potter did not sell enough pots at the show to cover his expenses. By keeping records of this experience, the potter will have a tool to better gauge future opportunities to sell his pots.
Calculating fixed and variable costs is essential in setting accurate wholesale and retail pricing for your pots. Fixed costs include studio insurance, rent or mortgage payments, heating/cooling and lighting costs, and any other recurring costs to do business. A fixed cost becomes progressively smaller on a per unit basis as the driver cost factor (cost determinant) increases. For example, the fixed cost for rent will decrease as more pots (cost determinant) are produced, and the fixed cost for each pot will decrease as more pots are created.
Variable costs change in total proportion to changes in the driver cost. For example, if a potter makes covered jars and needs corks for the lids, these would be calculated as a variable cost because the cost will change in relation to the amount of pots produced. Variable costs also include materials and supplies to produce pots, including stationery or studio clean-up materials.
Keep in mind that several different accounting methods can be used to determine fixed and variable costs. The central idea is to choose a system of bookkeeping that will yield accurate, reliable quarterly or monthly financial statements that reflect the true cost of producing your pottery.
Make Products You Like
Making pottery is hard work, and it's especially difficult if you don't like the products you're making. Choose products that are fun to turn out while expressing your own aesthetics, and then search for the proper market so they will sell. Be careful not to cater exclusively to market demands-chasing the market with a popular glaze color might produce positive short-term results, but it can also make potting just another dull job if that's the only product you make. It might be more difficult and time consuming at first to find the appropriate market for your ware, but such efforts will be worthwhile when you are selling products you love to make.
Many potters do compromise, though, and produce a number of objects they know will sell. Once the "guaranteed-income pots" are finished, they go on to make the work they enjoy producing. If you choose this path, be sure to maintain a balance between the "guaranteed-income pots" and those that express your own aesthetics and ideals. It is also best to review your product line at regular intervals and make adjustments based on profits and your own interest in making a particular product. One potter I know shifts gears any time he feels his pots are just "widgets" on the production line. He sets aside a day or two for brainstorming, using a notebook filled with ideas for pots he'd like to make that are interesting and exciting. Often the line of pots he produces after this short break sells at higher prices than his standard production ware.
Set Your Limits
You only have a finite amount of time and energy to make pots, so it is best to limit the line of items you produce. A select range of well-thought-out functional pottery makes production less complicated and diminishes the potential for forming, glazing and firing problems. Making five different sizes of casseroles, for instance, can complicate production and inventory, while three different sizes might sell just as well. In wholesale situations, where many similar-sized pots are made, you can often have your hands full just filling the various orders in a timely manner.
A small production line with a wide price range ensures a balanced opportunity for sales. Every pot in the line should stand on its own and produce a profit. If an expansion of the line is needed, consider making sets of bowls, cups, plates, goblets, etc., which can increase the number of pieces sold as well as profits. Often prospective customers will be specifically looking for a set of cups or bowls, rather than individual pieces. By offering a combination of both individual products and sets, you can appeal to a larger market. In fact, producing full dinnerware sets, which can consist of a dinner plate, lunch plate, soup/salad bowl and cup, can greatly increase sales. Most importantly, the prices should reflect the extra time and effort required to produce a set of functional pottery.
Don't make custom individual pots to order. Almost every potter has been placed in this situation by family, friends or customers. Turning down a request for a personalized plate or bowl is often difficult, but producing a pot based on another person's direction as to color, shape and specific design characteristics can be arduous and labor-intensive. Letting the customer design the work and then evaluate the finished piece is always risky. If custom work is needed, show samples of what the customer can expect, and don't stray from the sample options. If the piece doesn't meet the customer's requirements, making a replacement usually eliminates any potential profit and takes valuable time that could have been used to make other saleable pots.
Another money- and time-losing situation occurs when a customer wants a replacement piece for a set that's no longer in your production line, or wants you to match a piece made by another potter. Don't fall into these costly dead-end traps. Differences in raw materials, firing cycles, glazing techniques and other variables make it difficult to reproduce a pot exactly to match pieces made in the past by you or others. A workable alternative is to make extra pieces in a set during your original production run. While storage and handling of the extra pots may be a problem, a greater loss in time and effort occurs when trying to duplicate pots made in the past. Additionally, customers can often be persuaded to buy the extra items at the time of their original purchase of a pottery set, thereby increasing your sales.
Keep it Simple
To maximize your product quality and profits, it is important to simplify your production process. Keep your clay body and glaze formulas simple by using as few raw materials as possible. Many simplified formulas produce the same fired results as formulas containing numerous individual raw materials. In many cases, the actual amounts of raw materials used in a glaze or clay formula can also be rounded off to the nearest whole number. For example, in a glaze formula requiring 45.2% flint, you can simply use 45%. However, if your formula contains coloring oxides, stains, opacifiers, dyes, binders or suspension agents, the exact amount of these materials should be used. For instance, if your glaze formula requires cobalt oxide 2.3%, using even just 1/10% more or less can affect the precise intensity of fired color.
Using fewer raw materials in your studio will save you time and labor in making glaze and body formulas. It will also simplify ordering and allow less money to be tied up in stocking inventories. Additionally, if you experience product quality problems from a change in a material's chemical consistency or particle size, you will spend less time trying to track down the defective material if you have minimized the number of raw materials used in your formulas.
Keeping things simple also applies to the layout of your supplies and equipment. Just as good kitchen design depends on the layout of appliances to save steps when preparing food, good studio design relies on the placement of equipment for the most efficient production. For example, moist clay should be placed near the wedging table, which should be near the pottery wheel or hand building table.
If you take the time to carefully evaluate your production process, you can often find ways to streamline a number of areas without affecting the quality of the end product. For example, many potters who once fired their ware to cone 9 have instead begun firing to cone 6 because the lower firing range translates into less wear on the kiln, faster cooling and increased turnaround times. Many functional pottery forms, if thrown correctly, do not have to be trimmed to complete the form, and some decorative techniques, such as slip trailing or carving the moist clay, do not necessarily yield increased sales. Try producing a simpler version of your forms and test-market them to see if they sell as well as your more complex pieces. You might be surprised at the results.
Your overall goal should be to establish a system that enables you to make your products in the most efficient, low-cost, direct method possible.
Choose Reliable Suppliers
Good suppliers are paramount to business success. Choose suppliers based on their reputation and history of reliable customer service—a supplier will not treat you any better than they've treated past customers. Late clay deliveries, low raw material stocks and incorrectly mixed clay body formulas are the supplier's concern and priority—not yours. Your focus should be on producing salable pots, and any problems originating with your suppliers should be corrected by them.
Sometimes even the most reliable suppliers can deliver a defective batch of clay or glaze. Pay close attention to how they handle such problems. If you are not satisfied with the results, talk to the supplier and specifically outline your complaints. If the matter is not resolved at that point, you might want to look for a new supplier.
Select the Right Kiln
Using the right kiln can also help you maximize sales. Choose a kiln that's easy for you to fire accurately for your line of pottery. If you fire your products in a gas- or wood-fired kiln, make sure you understand the theory and practice of reduction, since these kilns have countless atmospheric variables that can produce variations in your clays and glazes. While the major reason for choosing a fossil fuel-fired kiln is to change the metallic coloring oxides in clays and glazes, incorrect firing can contribute to inconsistent results and reduced profits if your customers expect a consistent product line.
Many potters find that they can produce more reliable clay and glaze results with electric kilns because they don't have to worry about air and fuel mixtures. Electric kiln firing produces different results in clay bodies and glazes compared to gas or wood firing, but the oxidation atmosphere of the electric kiln can produce unique effects with some experimentation.
You should also closely monitor the quality of your products. High defect rates and a lack of accurate technical corrections result in major production delays and losses for a number of pottery producers. Defective pots and "seconds" that have small imperfections don't contribute to profits. Additionally, making replacements for defective products takes valuable time, and increases the labor required to load and unload products from the kiln. The replacements also use space in the kiln that new pots should have occupied.
Always note defects from any cause, whether a pot is dropped on the way to the kiln or it cracks during firing, and keep track of your average rate of defects. Your total defect rate (from any source) should average less than 8%—higher defect rates indicate a problem that needs to be addressed immediately. Identify the problem, find the cause, correct the problem, and get on with your work.
Cut Costs Wisely
While buying handmade objects has an appeal for a distinct market segment, the actual number of people who value handmade pottery is very small. The potential pottery buying market in the U.S. is limited, and the prices that can be set for a piece of functional pottery are relatively low. For this reason, it is important to understand all of your production costs before setting wholesale and retail prices for your ware. An hourly wage and a profit margin must be included in the total selling price of each piece. Many potters only include a profit margin, and after all the hidden costs are calculated, they are actually working for a few cents per hour.
Calculate the time and labor required at every stage of production. Cut costs where possible, but think about how each cost reduction affects the whole process. For instance, building a wood-fired kiln just to take advantage of "free" wood won't offset the increased amount of time and labor required to fire the kiln.
You can also save money through smart marketing strategies. One method that often works well is to build a mailing list of former customers and notify them of a "kiln opening." The date and time of the opening should be printed on the card. There is nothing more cost-effective than to have customers show up at your pottery studio and purchase the "warm" pots right out of the kiln. All you need are some boxes and newspaper for packaging. The less you have to handle your products between making and selling them, the less chance there is for breakage, and the higher your return.
Sell to Several Markets
If you can sell your products to several different markets, you can greatly increase your profits. Wholesale distribution and retail craft shows are the most widely publicized outlets for pottery sales, but they only represent a small segment of the entire market. Selling your pots at wholesale prices can be difficult because you must accept less money for a given product than if it were sold through a retail store. If your variable and fixed costs are not calculated correctly and included in your pricing, you can find yourself selling many pots but earning very little profit. In fact, some potters actually generate losses by selling at wholesale prices because they do not accurately track their costs.
Craft shows can also be a costly way to sell products. Entry fees, exhibit costs, shipping charges and travel expenses all reduce profit margins, and one or two poor-selling shows can significantly cut your income. However, such shows can also be an excellent opportunity to meet potential customers and use the comments they make about your pottery and display booth for future reference. Additionally, craft shows provide an opportunity to quickly generate a large amount of income compared to other pottery selling methods. Make sure you are exhibiting at the right show for your products, and make the show work for you by maximizing your display. Your booth should be clean and well lit, with a varied price range of pottery on display. A good booth design will have an open, inviting atmosphere, which will attract more people and encourage higher sales.
People who don't buy anything at the show might wish to contact you later to purchase your products, so you should also have business cards and postcard photos of your work available at your booth. You might also want to have a "guest book" available for visitors to leave their contact information, which can be a valuable marketing tool for you later on.
One of the most cost-effective ways to sell pottery is to have customers come directly to your studio. In addition to mailing marketing pieces to your database of past customers and show contacts, you can also use the Internet to draw people to your studio. Your local newspapers and television stations can also be a good resource for publicizing your studio. In short, the more people who see your work, the greater your chance of gaining new customers.
Watch Your Time
Although many different aspects are involved in making and selling pottery, the one factor that dominates everything is labor. The designing, forming, glazing, decorating, firing and packaging operations tend to be very labor-intensive, so try to maximize efficiency in each operation. Design your products with all aspects of making them in mind, so that each element carries its own weight and contributes to the eventual sale. You should also use clay bodies, glazes, kiln firing atmospheres, temperatures and decorative techniques with wide tolerances to minimize problems and downtime. Choose materials and techniques based on their reliability and consistency. Clay bodies with narrow tolerances in terms of firing temperature or kiln atmosphere will not produce reliable, consistent pottery. Likewise, glazes with short maturing ranges can easily be under- or over-fired, and will not be reliable or profitable.
Time is the one element in making pottery that cannot be replaced. Use your time wisely, understand how to maximize sales and profits, and you will be well on your way to ensuring the success of your pottery business.
Author's Acknowledgment: I would like to thank Angela Fina and Michael Cohen, professional potters in Massachusetts, for their suggestions on booth display.