Batik, a Post-retirement Business Venture
By Vikka Molldrem and Ann Ziegler
Lots of newly retired people dream about starting their own business based on some activity they love. We came up with producing and selling our own hand-waxed and dyed batik clothing. We enjoy working together and felt we had mastered the art sufficiently to produce an attractive product. Though a craft business may be less of a capital producer and time commitment than other dream jobs, the issues you need to work through are similar. This article delineates those issues and details how we addressed them.
First, you need to have clear goals and a clear timetable. Is your primary aim to supplement your income, give you a chance to meet new people, use skills you’re proud of or simply to fill up some spare time? Obviously, regardless of your primary goal, your business needs to be financially solvent. But what you envision as your primary goal answers many other questions:
● How much capital and time will you need to invest and how will that affect other aspects of your life?
● How long can you go without earning a profit?
● What legal and tax implications will you face?
● What will be the consequences for you, financially and otherwise, if you can’t make a go of it?
● How much commitment and determination will you need and for how long?
In our case, the business came as a natural extension of a favorite hobby. The seed was planted when people admired batik clothing we made for ourselves. When we decided to begin producing batik for sale in late 2007, our goal was to challenge ourselves. Could we produce and market attractive, artistic batik clothing that was affordable and could be produced in quantity? If we found that we could achieve that goal within a couple of years, we would determine whether to expand our operation. We agreed we could commit up to 15 hours a week and a few thousand dollars to buy supplies and create an inventory. We decided that if we were either losing money or were no longer having fun with the project after a year, we would quit.
Second, determine whether this is something you will do on your own, or with family or friends. Any number of people suggested to us that embarking on a business venture together was the best way to destroy a good friendship. But we each brought different strengths to batik design and production, and could fill in for each other when other obligations got in the way, so for us, a partnership was the only way to go. We have avoided conflict by agreeing to our roles in the process, keeping each other informed about everything we do related to the business, and having strong trust and confidence in each other. The key is good, open communications, both where we agree and where we disagree, and a willingness to compromise.
Third, develop a business plan. For a small operation like ours that doesn’t require outside capital, this doesn’t have to be a formal, written plan, but it is still important as a way of making sure all the important issues have been considered – financial, technical, legal and operational. We discovered over time that many of the assumptions we made when we did our initial business planning were not quite correct, and we missed some cost factors. (For example, we neglected to factor in the cost of wastage in our pricing assumptions.) As we made these discoveries, we revised our technical and financial assumptions. But because we carefully went through the process at the start, we have had no big surprises.
For business planning, we drew from the Small Business Advisor, published by The Entrepreneur magazine, an excellent primer on starting and managing a business. That gave us the basic outline of issues that needed to be addressed, such as:
- purpose and scope of the business, including where we would do the work and what we would produce;
- developing a marketing strategy;
- pricing and resource requirements including our own labor;
- accounting and legal considerations.
Fourth, do the research. You can’t really complete a business plan without first having a clear understanding of your costs of production and your potential market. For our business, we focused on four main areas:
● What was the primary consumer group we were targeting?
● What prices could we reasonably charge?
● How could we reduce labor intensity?
● How could we receive an adequate return, but keep prices competitive?
We did come up with some innovative methods to speed up the production process, but determining the target group and pricing was a much greater challenge. Our batik clothing is unique. There are only a handful of places in the US that produce hand-batiked clothing, and none of these sell in the Annapolis area. Therefore, there wasn’t a good basis to determine where to market and what prices the market would bear. We looked for similar items in local department stores and boutiques to see what styles of casual clothing were selling and for how much, and we did some informal market surveys. Although this approach did provide some guidelines, when we began we still felt we were feeling our way in the dark.
Fifth, take care of the legal requirements. Both the US Small Business Administration and the state of Maryland have instructive, user-friendly Web sites (in Maryland, especially see the checklist for new businesses at www.dat.state.md.us/sdatweb/checklist.html). Counties in Maryland have different requirements for vendors’ licenses, so those need to be looked into as well. As a home-based business with no employees, we had only a few legal issues to address:
● forming a partnership;
● registering our business name;
● obtaining a tax and use license for each state in which we planned to sell retail;
● Confirming that our business had no personal property tax obligation.
We have an obligation to submit any sales taxes we collect quarterly, as well as an obligation to file our partnership’s income tax annually. Other legal requirements depend on the nature of the business. For example, we had to check requirements for labeling (can we replace the original manufacturer’s label and if so, what information needs to be retained), and for use of fire retardants on children’s clothing. The Internet is an excellent source in clarifying the current regulations.
Sixth, set up procedures for accounting and inventory control. Because we started very small, we didn’t put much effort into this. That was a mistake. Even with relatively small inventory and sales, it becomes difficult to keep the books unless you have a good system. We got confused about what inventory we had on hand, how much we had sold and how much we had collected in sales taxes. This year we developed an inventory numbering system and invested in QuickBooks, but this is an area we still need to work on, particularly if we expand operations.
Finally, decide where and how you’ll market your goods, and start doing it. This has been our biggest challenge. We decided to start with high quality craft shows, to give us an indication of whether our batiks were saleable and at what price. We learned happily that people do find our clothes attractive, that some are willing to buy and that our prices are considered reasonable. There are downsides to craft shows, however. You need to produce quite a lot of inventory without really knowing which styles will sell. The cost of setting up a booth at a craft show can be high, so you have to sell a lot to make any money. In outdoor shows, bad weather can be a real killer. And then there’s the requirement to staff the booth for all the long hours of the show. These expenses meant it appeared that our return on our labor was nearly zero. Nonetheless, craft shows bring network opportunities with other vendors and with potential customers that can have a long-term payoff.
Last December at one craft show, a store owner asked to purchase outright our children’s clothes. As she selected what she wanted, we realized that she had a good feeling for what her customers would like, one of the issues with which we struggled. We decided to approach other merchants. Since we sell wearable art, we selected upscale boutiques in areas that receive a lot of tourist traffic. We usually provide clothes on a consignment basis, and the typical markup by a retail outlet is 40 to 50 percent. To make our clothes affordable, we had to drop our prices substantially from our craft show prices. But this has been more than compensated by other factors. The store owners know their clientele, so they can order items that they know will attract their customers and will fit in well with their other stock. Since we’re providing clothing in the styles and colors they want, sales are much better and we no longer need to maintain a large inventory. Though our success rate hasn’t been 100 percent, currently three shops are selling our wares in Rehoboth, Easton and St. Michael’s. And based on these successes, we’ll seek more outlets next year.
Our business is still a work in progress. Over the next year we’ll look for other good retail outlets, participate in a few more shows, and work on getting an up-to-date, user-friendly Web site. We have also joined local artists association, which give us new opportunities to display our art and to get ideas from the work and experiences of others. We are far from earning a living wage, but our bank account is healthy. Looking back on the experience, our ability to work together has proven to be one of the most important and enjoyable aspects of running our business. Flexibility, respect for one another’s opinions and a sense of humor are vital to a successful collaboration.
When not busy batiking, Ann Ziegler, formerly a primary school director enjoys life in Chester. Vikka Molldrem, recently retired from a career position with Aid for International Development, can often be found kayaking along the Rhode River. They can be reached at email@example.com