A lack of confidence about the financial side of her business meant Jo Lochhead was partial to burying her head in the sand. Getting out of that rut has been transformational.
Three years ago, The Crafty Kit Company was in a make-or-break situation. In a bid to save the business, Jo Lochhead looked internally for answers to the question of how to continue.
“I began to look a little bit deeper as to why I was running the business,” Jo said. “What was the whole point of it? Why were we doing this?”
“Out of that [reassessment] came our core values, which we’d never had before,” she went on. “I know it seems obvious that you should have them but we, like a lot of businesses, just didn’t.”
“As soon as we defined those, the business changed – not overnight, but it was pretty quick, and we grew quite rapidly.”
Since the creation of the core values, the business’ turnover has doubled three years in a row, and Jo expects the business to reach £600,000 turnover by the end of 2021.
“What changed three years ago was that we stopped thinking about ‘me’ and ‘us’ and ‘the team’ and started thinking about our customer. It’s something as basic as that,” Jo said of the rapid change.
“We started at looking at who’s buying our products and why they buying it? What is their need? What is their pain point?”
Jo said that she can pinpoint the moment her approach changed, referencing a post she made on Facebook which asked customers what they liked about needle felting.
The responses were highly emotive, with many respondents detailing how crafting helped with their mental health and wellbeing. Some said that it was a form of stress relief, a way to get “me time” and even a gateway to their “happy place”.
“That was when we began to realise what our purpose was – it flipped everything around,” she went on. “It was no longer about making a profit, or making money, or reaching this financial goal – it became about how many people can we serve? How much joy can we bring?”
Following the Facebook post, Jo and the team began to redefine their metrics, and found that financial goals dropped far down the list as they turned their focus to delivering products that made people happy within a supportive community.
Another key moment in the business’ success came with the creation of two avatars, Christine and Katie.
In response to a customer survey, Christine was created. An older crafter, she predominantly uses Facebook, so the business started to cement its position on this social media platform.
“We created a private Facebook group, which started off with 200 members,” Jo said. “It now has over 1,300 members, so it’s grown very quickly.”
Through the Facebook group, the business was able to fulfil some of its core values, including creating a supportive community.
“That Facebook group is a community – it’s one of our missions to create a community of likeminded people that can support each other, as well as us supporting them.”
As well as support and discussions, Jo runs crafting workshops with the community via Facebook Live and Zoom, which have been met with high levels of engagement.
Katie is the business’ second avatar. A younger crafter, the business needed to branch out from Facebook in order to appeal to her and others within that demographic.
“Katie came about because I employed Rebecca. Rebecca’s 32, and she [pointed out that] it’s not just Christine buying our kits – what about millennials?” Jo explained.
Aside from being a younger crafter, Katie’s characteristics also include an enthusiasm for crafting and sustainability. Unlike Christine, her social media platform of choice is Instagram.
Before launching The Crafty Kit Company, Jo had owned another craft-orientated business. Among other reasons, Jo cited a lack of knowledge surrounding finance as a factor in that business being unsuccessful.
She described her previously tactics as being reactive, adding that, on occasion, she would only look at the figures for the business some months after they recorded a loss, and then not understand why the business was struggling to make a profit.
“Not having that knowledge, and not having that confidence around the numbers, was one of the reasons why that business didn’t do well – I didn’t read the signs and I didn’t act,” she mused. “I’ve been on this long journey to remedy that.”
Jo had worked with “a few accountants” during her business career but found that the once-a-year meetings hadn’t been very helpful – often resulting in advice that was reactive or too late in the day to action effectively.
Through trial and error, Jo has been able to find a new accountant to help her with the new business and has numerous reasons as to why the relationship is now far more effective.
“My current accountant is a combination of an accountant and a consultant,” she said. “We have regular management meetings, going through the accounts regularly – being proactive. They’ve created reports for me that I can understand and steps that we can put in place that will actually grow the business. Plus, I now know what metrics that I should be studying and keeping track of. It’s more forward-looking.”
The switch to a new accountant had been costly, but Jo said that the move was a worthwhile investment. About three years previously she had started to use a business coach and had seen her investment in this external resource bear fruit.
“I was at the point of declaring bankruptcy with this current business and deciding what to do. Should I go back to my old job or should I really make a go of it and how am I going to make a go of it?” Jo remembered.
“The decision was made for me because I had some hefty bank loans, so I decided I was really going to make a go of it, and I was introduced to a business coach through a mutual friend.”
“It was a massive leap of faith that this process was going to work,” she said of her initial trepidation around working with a business coach, but that the positive experience meant she was able to see the benefit of investing in a more hands-on accountant.
“I’d already [invested in external help] and seen the results – I knew that if you have that confidence, it could work,” Jo added. “I pay quite a lot to my accountant each month – it’s around £450 a month – but it’s totally worth it.”
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While The Crafty Kit Company still remains relatively small, Jo has no plans to hire a financial director or head of finance – partly thanks to the external resources and getting far more comfortable with the discipline.
“I feel I’m well-placed to tackle the next stage of business growth, but I’m not sure what that next stage will be,” Jo said.
“We’re in a good place to keep the business moving forward and growing,” adding that her additional confidence surrounding finance was key to this view of the future.
“The most important thing I’ve learned is to take some time out of your business – literally making an appointment with yourself – and keeping that appointment to really dig into the numbers of your business,” Jo said.
“Take the time to understand the trends: where is the business heading? If it’s not heading where you want it to, why not? What can you do to get it back on track again?”
Jo added that it had taken her some time to understand that a lot of the information she required to better run her business was readily available, she just hadn’t made the time to look through it.
“All the information is there; it’s just taking the time out to look at it – it’s as simple as that.”
She went on to say that, without proper understanding, avoidance of uncomfortable topics was likely to happen, but that this approach was never beneficial.
“If you struggle with understanding what the numbers mean, which is the situation I was in before, why would you carve out the time? All it does is fill you with anxiety, because you don’t know what you’re looking at, so it’s just a vicious circle.”
Jo explained that, with increased understanding and confidence, business leaders would find themselves drawn to looking more closely at different aspects of their business.
“When you have the understanding and the confidence, how can you not set the time aside and either celebrate the numbers, or remedy the stuff that’s not so good?”
“It’s having that understanding in the first place – that’s the key.”
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