I have a not-so-secret secret. In addition to my little business, I am a knitwear designer. Very shortly I'll be adding knitting patterns to my product lineup, focusing initially on socks (because I love them so) but with other garments to follow. Since I operate my business as a business, with the intent of earning money and making a living, the seemingly common attitude by knitting consumers that patterns should be free (and thus by extension have no value) is a matter of concern to me. Intellectual products are as valid, and as valuable, as physical products. So, inspired by today's poignant blog post by Michelle Miller over at Fickle Knitter Design, I thought I'd offer my take on what it costs to produce a knitting pattern specifically, and the basic costs of running a knitting/fiber related business in general.
Direct costs are those expenses that can be tied directly to the production of an individual product or service. Just like there is a cost for me to make each of my stitch markers, such as for beads, wire, glue, etc., there are direct costs in designing patterns.
Labor. Time and effort are the most obvious cost in producing a pattern. Designers each have their own way of doing things, but in my case, an idea is first sketched and roughly charted in a notebook. Once the idea is sufficiently fleshed out, I chart the design in knitting pattern software. The design gets tweaked, re-tweaked, and re-tweaked again until it's ready for swatching. I knit my own designs first to ensure that the pattern will work. Once I feel that a pattern is ready to be finalized, I grade it if there are multiple sizes (which often requires producing additional charts), and then write up the formal pattern, which includes charts, written instructions, notes, etc.
The design and writing process takes many, many hours of work, with many more additional hours spent swatching and knitting the item. Time is valuable, and the labor put into producing a product (whether a design, or a marker, or a hand-dyed skein of yarn, or....) is valuable. It should not be free.
Materials. Yarn is the next obvious cost in producing a pattern. While some yarn is generously provided by hand dyers and yarn companies, I purchase the majority of the yarn I use in my designs. There may be additional items needed to produce a knitted design, including embellishments such as ribbon, beads, etc.
Services. Several people other than the designer are involved in producing professional knitting patterns. Technical editors are employed to ensure that the information in the pattern is accurate and the written instructions and charts are error-free, and test knitters verify that the pattern is understandable and serve as a double-check that there are no errors. Some designers also use graphic artists to put the pattern into final format. These professionals all charge for their services, and are well worth the cost. Because of them, a designer's idea is turned into a quality product.
Production. Printed patterns of course require paper and ink, and often a plastic sleeve. Designers that print their own patterns use heavy-duty printers (expensive!) and commercial quality inks (expensive!). Some designers use local printing companies, and others use online printing services. Whether done in-house or shopped out to a service, printing costs money. And someone has to stuff the damned pattern into the damned plastic sleeve.
There are costs involved in providing digital (downloadable) patterns as well. Sometimes the patterns need to be reformatted (pixels and all that technical stuff), and depending on the downloading mechanism, there may be delivery costs involved.
Indirect costs, also known as overhead, are those expenses incurred in running a business that cannot be directly tied to an individual product or service.
Labor. In addition to the labor involved in making an individual design/product/service, there is a whole lot of time spent in getting that product out to the public and in managing the business. There is bookkeeping to be done, reports and statistics to be run and analyzed (if you want a successful business, that is), sales taxes to be reported and paid, websites to be managed, product pictures to be taken, supplies to be ordered and inventory to be managed, emails to be answered, booths to be staffed, packages to be taken to the post office, etc. etc. and damn et cetera.
In addition to day-to-day business tasks, research and development is a major activity. I spend a lot of time reviewing supply catalogues and going to trade shows, looking for new materials to incorporate into my marker designs. Knitting/fiber magazines and websites are read regularly so that I keep myself informed on what is happening in the fiber world, in terms of new products and vendors, techniques, pricing, trends, etc. I keep up with trade journals so that I know what is happening with LYSs, especially in economic terms, so that I can try to adjust my business as necessary in response. I communicate with other business owners about the latest and greatest whatever to determine if it may benefit my business. And, when required, I spend time monitoring the silver spot market (Seriously! Do you think I ever imagined myself monitoring, let alone even knowing about, the silver spot market?).
Materials. In the case of knitting designs, there are needles, markers and other similar tools of the trade that are used on multiple projects. Good lighting and magnifying lenses may be required, and a decent camera is definitely necessary. A computer and printer are needed, as are professional software programs for bookkeeping, charting, and graphics. For my markers, I use six different types of pliers, several of which require two of each to produce a marker. Jewelry-quality pliers are expensive! Every business has its own requirements, some of which can seem rather odd (baby wipes and toothpicks, anyone?).
Office and General Business Expense. There are the typical paper-pens-and-pencils type of expenses. Then there is the cost of website hosting, gateway fees, business cards, PO boxes, business licenses, and more. A percent of every credit card sale goes to the merchant provider. Since most sales these days, both wholesale and retail, are via credit card, the fees add up.
Space. Knitting can be done on the corner of a couch. But anyone producing at a business level probably needs some dedicated office or studio space. Whether that's an off site rental, an outbuilding, or a section of the garage or dining room, it needs to be equipped, lighted, and heated. If you're in the fiber business, you probably need a water source. You probably need storage space as well -- just my small fiber business alone takes up an entire room. I've been converting an outbuilding to a studio space for my marker business, and have had to install windows for a natural light source so that I can see what I'm doing (expensive!).
Marketing. Would that my wares just sell themselves. But if I want my products to be seen and purchased, I need to market them. Thus there is magazine and online advertising costs, direct mailings to wholesale customers, and attending shows. Show costs include not only booth fees and travel (expensive!), but display supplies such as drapes, table cloths, mannequins, banners, lamps, etc. For wholesale trade shows, there is the cost of printing price lists, membership fees in the trade organization, and more.
Really Indirect Costs, and Other Considerations
There are several different kinds of indirect costs which probably don't apply to most small businesses and the discussion of which is really beyond of the scope of this post. But, some of these expenses are a real cost of doing business. There are also other somewhat intangible things that can affect how successful a small business can be. They are important, and should not be totally overlooked. Below are just two examples.
Cost of Money. The production of a product requires raw materials which sometimes must be purchased in bulk, requiring a huge cash outlay. This cash comes from either business reserves or very often the small business owner's personal funds. The raw materials sit in inventory earning the business no revenue until such time as they can be used and sold. There is an "opportunity cost" to this, in that the expended funds can earn no interest income or be put to other immediate uses. As an example, I previously mentioned monitoring the silver spot market. If I project that the price of silver is going to increase significantly, I will purchase a large quantity of silver components at a lower price. It can take me a long time to use up that inventory, and until I do I am out a big chunk of change.
Know-how. Briefly, "know-how" is an intellectual property term which refers to the expertise and experience an individual brings to a particular task. It has specific connotations in the industrial world, but can be applied to the fiber business as well. Patterns and products do not just spring forth from an untrained mind. And good patterns and products do not spring forth from those who have not put in a lot of time studying, practicing, training, and educating themselves. Gaining knowledge and expertise has a cost, and that knowledge and expertise has intrinsic value.
A good knitting pattern can provide an individual with so much: hours of entertainment, perhaps an introduction to a new style or technique, and the means to a beautiful finished product. That has value, and the creator of the pattern deserves compensation for providing that valuable product.
So, um, er, can you tell that maybe I used to be in finance? I can get all fired up about indirect costs. But I really much prefer yarn and stitch markers.