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View Full Version : Starting a loss making business - is this the right thing to do?



fay144
13-03-2012, 11:53 AM
Hi All,

I've been making jewellery more or less all my life, and have spent the last 5 years doing evening classes in various silversmithing techniques, and building up my home workshop.

I view this as a hobby. I work in IT full time, and tbh, quite enjoy it.

I've sold a few pieces of work when people have approached me, but I've never looked out opportunities to sell my jewellery.

However, I've got to the point where I feel I now have a "style" and a clear idea of the sort of stuff I like to make, and I'd like to take it further, and try and get my work into a shop or two, and set up a website.

I've done some reading, and it appears that if I'm going to have an online shop, then I need to set up as a sole trader, and run it as a proper business. This seems exciting, rather than daunting to me, but I'm wondering if it's really the right thing to do?

The thing is, even if my jewellery would sell like hotcakes (unlikely!) I am not going to be able to devote enough time to this to make large volumes of work, so any profit that I make is always going to be minimal, and likely reinvested back into tools, development of new designs, etc. I'm sure I'll end up spending more than I make, which I'm happy to do - I feel like I spend a fortune at cooksons at the moment, and I don't sell anything!

What I'm really looking for is a self-funding hobby, rather than a business. So is it right to start it as a business? I'm been reading about crackdowns on online trading, so don't want to risk incurring any fines for not registering, but I can't help but think that this isn't really a business.

I would appreciate any advice!

Fay

theresa
13-03-2012, 02:05 PM
Hi Fay - If I were you, I would keep the day job (is part time an option?) to fund your jewellery making. It has always been tough out there but this year has been worse for a lot of artist/craftsmen that I know/speak to. Sales have dropped through the floor except for those lucky few who have commissions outstanding. New business seems hard to find. I know things will pick up again but in the meantime don't give up your job just yet.
Good luck!

Theresa

fay144
13-03-2012, 02:30 PM
Thanks for the reply Theresa.

I definitely won't be giving up the day job, as there is just no way I could make as much money in jewellery. I wouldn't really want to anyway, as I do enjoy it.

I guess my question is really that given that I'm always going to be doing this on an evenings and weekends basis, do I need to set up as a sole trader, fill in self assessment tax forms, etc? Or would it be legal not to bother, even if I have an online shop, etc, if I'm not actually going to be making any profit?

On one hand, I don't want to skimp on paying my taxes, even if it is only a tiny amount each year. On the other hand, I don't want to end up spending as much time administering a 'business' as I do making jewellery!

ps_bond
13-03-2012, 02:35 PM
Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.

fay144
13-03-2012, 02:42 PM
Oh, forgot to say, I do appreciate that "getting my work into a shop or two" isn't as easy as I made it sound! I realise that these must be pretty tough times for this sort of business, and this is an ultimate goal, rather than an assumption.

fay144
13-03-2012, 02:47 PM
Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.

Thanks for the reply, that's what I suspected.

It just seemed potentially dodgy - e.g. my understanding from what I've read is that if I spent a grand on a rolling mill, and then only sold 3 pendants in a year, then I could end up with a tax rebate on the amount I pay through my day job, since I'll make a loss in my business. That just seems wide open to abuse!

ps_bond
13-03-2012, 02:53 PM
Making losses in startup isn't a problem - but I think if you persistently made large losses, with no downward trend, that might trigger an investigation. Dialogue with the tax office is good thing - despite the image they end up with, they're frequently very helpful.

On the flipside, if you pay higher-rate tax, when you make a profit you suddenly you have to pay 40% of that over, so it's swings & roundabouts.

fay144
13-03-2012, 03:11 PM
Thanks for the advice Peter, that's very helpful.

snow_imp
13-03-2012, 04:10 PM
Like you I am full time in IT and would like the jewellery making to be a self funding hobby. I opened an online shop in Sep 2010. I registered for self assessment as a sole trader from that date as the Tax Office said I needed to. I put in my first tax return for 2010/11 in Jan this year, there were no sales at all that year so technically everything I spent was a loss - and ended up with a small tax refund as tools could be put through as a separate item. Don't know if the tax office will ever start questioning things, I'm just going to see how things go from here but fully expect that the jewellery is "offset" against real salary (possibly forever). That's the end of my "two cents"! :)

Patstone
13-03-2012, 04:20 PM
Well you better get ready to send me emails to HMP then. I havent registered with the Tax Office and have no other income, apart from 4 rental properties that just about pay their own way, apart from pension and hubbies wages which are just about enough to pay our way. I also make silver jewellery for a hobby, and have sold in the last two years since I started jewellery making about £200 maximum, my tools and stuff have cost a lot, and so does my website and have had no sales from it so far. If sales start taking off (which I doubt) I will then have to register. I have a separate bank account for the silver side and have kept every invoice but if it wasnt for hubby's wages, I would have to stop making stuff.

fay144
13-03-2012, 05:45 PM
Thanks for all the replies, it's helpful to see what other people do in a similar situation.

Sounds like the same as you is the way to go for me, Snow_imp. Thanks.

Kwant
13-03-2012, 06:25 PM
If you keep full records and an open dialogue with the tax folk, I cannot see the problem if indeed your "hobby" just covers itself and does not make a profit or even a small continuous loss. It is the paperwork that will prove your intentions. If however your bank account does not reflect this then get used to the taste of porridge and a very small room albeit with all mod cons, tv, games machine, fridge and a steady stream of shower time suitors :0)

fay144
14-03-2012, 10:09 AM
Thanks Kwant. Yes, you are right, I will need to take this seriously even though it's just part-time, and make sure that I do have the records to back up what I'm doing.

I'm not averse to paying tax or anything - the more I pay the better in fact, as it means the more I'm earning! Just being realistic.

Claire
14-03-2012, 04:00 PM
This has been a really interesting exchange Fay. I'm kind of in same boat as you at moment. Thinking about all of this stuff as I think about getting a bit more 'serious' about my passion. Food for thought...
Claire

tinker30
14-03-2012, 04:54 PM
what about selling your pieces on ebay? to see if there is a market for the pieces that you make and to see if people would buy at the price you are wanting to sell. that way you could just sell when you have made some pieces and you wouldn't have to make a whole batch of things, and you could build up a reputation and then if its goes well then you could create a site.

medusa
14-03-2012, 05:20 PM
what about selling your pieces on ebay? to see if there is a market for the pieces that you make and to see if people would buy at the price you are wanting to sell. that way you could just sell when you have made some pieces and you wouldn't have to make a whole batch of things, and you could build up a reputation and then if its goes well then you could create a site.
I wouldn't recommend ebay for selling new quality stuff. There is just so much on there and so much of it is cheap tat that you'd get lost amongst it all. I'd go for etsy or folksy or one of those places. It is cheaper than ebay and more targeted.

tinker30
14-03-2012, 05:24 PM
sorry i didn't know about etsy, but you get the general idea. or even a facebook page, twitter or that kind of thing.

medusa
14-03-2012, 05:26 PM
etsy's good. very cheap to list, they don't take a whopping great commission and it has the capability to allow you to commission items. I :heart: it :)

Kwant
14-03-2012, 05:41 PM
I sell on Etsy too and for me it is good as there is no recurring fee other than the very low listing fee so it is easy to manage and keep costs under control and as Medusa says the sales commission is reasonable. I think it also looks nice as a site, and very easy to use.

fay144
14-03-2012, 05:43 PM
Thanks for the ideas!

Yes, I was looking at Etsy and Folksy. It would be interesting to know how much people sell through these sites, as it seems like there is a *lot* of stuff on there, and a lot of people who don't seem to have sold anything. Looking onto the forums, on Folksy at least, I got the impression that the only people buying from there are people who are also selling. It's good to know that there are some people managing to stand out and make a success of it!

My grand plan was to:
1) build up a small amount of stock, crystalising my ideas for my "range", and taking some good photos
2) register on Etsy or similar
3) approach some local shops and galleries - there are quite a few in my areas, though they tend to take a 50% commission and work on a sale or return basis
4) set up my own website (I design web sites as a day job and have been a bit removed from the tech side in recent years, so actually looking forward to this)
5) continue to build up a stock of a few items per week, in order to do a craft fair near christmas.

So I think I'll be able to move forward through those steps slowly, without too much overhead to begin with, and with the opportunity to incorporate feedback from local shops etc prior to making too much.

It's great to be able to discuss these things here, thanks to everyone for the input!
Fay

Kwant
14-03-2012, 05:57 PM
I don't sell very much there but as it is so cheap to use and it is an internet presence you can promote if you have the time etc, it seems like a good interim step from nothing to having your own website, as it were.

snow_imp
14-03-2012, 07:17 PM
I'm in the process of getting an Etsy shop up and working - really just need to get my finger out and take more photos. I already had an Etsy accounts as I've been buying from people on there for a year or so. Going to see how it goes selling there when I get organised.

wheely
15-04-2012, 10:56 PM
Is selling on etsy considered a 'buisness', and/or ebay?

art925
16-04-2012, 10:02 AM
My suggestion would be to speak to an accountant, the money I pay each year for my bussiness and personal finances to be filed more than pays for itself annually.

Good luck with the new venture, it is not as bad as everyone makes out on here, just find a niche.

Les

ps_bond
16-04-2012, 10:10 AM
Is selling on etsy considered a 'buisness', and/or ebay?

Selling *anything* is classed by HMRC as income; whether it constitutes a business or not they're generally less interested in than whether you're liable for tax!

HMRC have said they're using robots more (the software variety, not R2D2) to look for patterns of payments into bank accounts/paypal to try to identify people who aren't paying tax. They're particularly interested in a number of traditionally cash-in-hand businesses - riding instructors being one example cited.

art925
16-04-2012, 06:25 PM
Selling *anything* is classed by HMRC as income; whether it constitutes a business or not they're generally less interested in than whether you're liable for tax!

HMRC have said they're using robots more (the software variety, not R2D2) to look for patterns of payments into bank accounts/paypal to try to identify people who aren't paying tax. They're particularly interested in a number of traditionally cash-in-hand businesses - riding instructors being one example cited.

I believe that even sales from from car boot, should be classed as income...
I have been known to work on a barter system, offering an exchange of services for services, my most recent was the exchange of recycling broken gold chains into 4 rings for a lady in exchange for clothes from her shop. It will give my accountant a headache but needs must.

Les

Melanie De Castro Pugh
23-04-2012, 07:59 AM
I'm looking at making this kind of decision too, as a stay at home mum I have no specific income so pay no tax, and any money I make from selling jewellery goes right back into tools etc. I'm going on a free Business in Focus course next week to find out more about it. Should be interesting...


Melanie

http://www.spinysharklythings.com

art925
24-04-2012, 02:57 PM
I hope you find some good information Melanie, please do share what you learn. My accountant has emailed me this week to say that he has found me an extra 12,000 euros over the next 2 years...to do with my business loan I think...

Very happy bunny..
Les

ScottyC
26-04-2012, 11:04 AM
My 2 cents sell on ebay there is no other web site out there that can reach so many people
yes there may be a lot of tat, but if your stuff is good and stands out from the rest then
it will sell, if not then it will get lost in the rest of the other so called tat.

Scott

medusa
26-04-2012, 12:51 PM
My 2 cents sell on ebay there is no other web site out there that can reach so many people
yes there may be a lot of tat, but if your stuff is good and stands out from the rest then
it will sell, if not then it will get lost in the rest of the other so called tat.

Scott

but to make your stuff stand out, you need to have the right keywords. I sell antique jewellery on ebay and get good prices because people are actively searching for say Charles Horner. If you have a 'handmade sterling silver necklace', then you are in competition with over a thousand items, the majority of which aren't even handmade.

Personally, if I wanted something like say Dennis or Kwant makes, then I'd be looking on etsy or folksy, not ebay.

Dennis
26-04-2012, 07:36 PM
Cooksons have just launched their new magazine 'the Bench', you may have it by now and might be inspired by the featured designer, Anita Bates. However I am worried about her pricing and fear she is just giving her stuff away. What do you think? http://www.ezzentiallysilver.co.uk/Home. Dennis.

Obsidian Butterfly
26-04-2012, 08:34 PM
I personally think her pricing is very reasonable. I have been told myself by many people, including my jewellery teacher, that I under price my jewellery that I sell, but I honestly believe that in the current economic climate, I have to price my work accordingly. Yes, handmade is worth more than the factory made jewellery that is on the shelves of primark, but at the moment the majority of people don't have the money to buy these expensive items. I personally try to keep my work simple, and reasonably priced to entice the client, and then once my name is out there, I can then introduce a more luxury line. By doing this I have had commission orders for more complicated jewellery, that I can therefore charge a higher price for. Established jewellers already have their corner of the market, and its hard for us new jewellers to squeeze in.

ani_b
26-04-2012, 09:32 PM
Hi Guys,

Thanks for the comments. It's always great to hear other people's feed-back and I'm a total sponge when it comes to advice.

Dennis, my brother is always telling me that i should put a £100 on all my prices, however i totally second what Laura has said ( thanks Laura), that in this age old art I am still realitly new and I can only charge what I feel comfortly with.

I think putting a price on the work that we do is sooo sooo hard and I have done fairs where there has been various different Silversmiths ranging from the top end of the scale downwards and anyone still does well.

I started doing silversmithing as a pleasure and yes, it has taken me a while to think "you know what I am good at what I do and if people think I'm expensive (and they do) then they are not for me and it's about feeling confident when asked about the price rather than embarassed.

Thanks again :)
Anita

www.ezzentiallysilver.co.uk

mizgeorge
26-04-2012, 10:45 PM
In honesty Anita, I think some of your prices are too low. It's hard to tell with some pieces as you don't give weights or diameters on your chains, but I suspect that if these are hallmarked items, you're not really paying yourself enough for the time you're taking to make them.

You might also want to have a look at a couple of things on your website - to comply with distance selling regulations, you must give a geographical address, and really should have a terms and conditions page somewhere.

Congratulations on the feature :)

louisella76
27-04-2012, 07:36 AM
I registered for self assessment as a sole trader from that date as the Tax Office said I needed to. I put in my first tax return for 2010/11 in Jan this year, there were no sales at all that year so technically everything I spent was a loss - and ended up with a small tax refund as tools could be put through as a separate item.

Hi - I'm in a similar position in that I'd like to expand (allbeit on a small scale!) what is currently a hobby to something more and am looking into website options. I'm curious about the comment above regarding the tax refund.
I've been buying tools since September however will only be (hopefully!) registering a business with HRMC in the summer. Does anyone know if there is a cap for how far back you can claim expenses against tools for? I'm not sure if it needs to be bought within the same tax year (therefore everything pre-April will be invalid)?
Thanks

ani_b
27-04-2012, 07:53 AM
In honesty Anita, I think some of your prices are too low. It's hard to tell with some pieces as you don't give weights or diameters on your chains, but I suspect that if these are hallmarked items, you're not really paying yourself enough for the time you're taking to make them.

You might also want to have a look at a couple of things on your website - to comply with distance selling regulations, you must give a geographical address, and really should have a terms and conditions page somewhere.

Congratulations on the feature :)
Thanks mizgeorge, I didn't realise about the distance selling reg or about the t&c's. Is there anywhere on line where I find out about the selling reg and a template for the t&c's.

I do think it's hard working out prices, how do you work out much your hourly rate should be? Some people have said that you should charge 4 times the weight of the silver. I work that out and it's wow that much! Soooo confusing. :-)

Dennis
27-04-2012, 07:07 PM
We discussed this earlier in the month Anita, so you will find some answers here: http://www.cooksongold.com/forum/showthread.php?t=4142. dennis.