A leather goods business plan has two numbers that matter more than any other: how much of a hide a pattern really uses, and how many hours a piece takes to stitch. Leather is bought by the side, irregular and scarred, so a quarter more than the pattern goes into every piece; and a hand-stitched wallet is mostly time, two needles through every hole. The plan has to pay those hours, make the designs that sell in batches, and know which pieces leave the most for each hour. In the example below, a leather shop in South Dakota sells card wallets, hand-stitched bifolds, belts and keychains at markets and online, and ends its first year about $14,600 ahead on $41,000 of sales, after paying $20 an hour for its time. Below is a description example, each part of the plan, the first year month by month, the startup budget, and a free template.
The short version
- Describe the shop in a paragraph: the leather, the pieces, where you sell, the goals.
- Cost a piece from the hide up: leather with a waste allowance, thread, hardware, finish, packaging, your minutes.
- Make in batches: ten card wallets cut and edged together take a third less time each.
- Hand-stitched bifolds sell for the most and leave the least for each hour.
- The first hides are the biggest purchase after the tools.
- TaroStack keeps leather by the square foot, hardware by the each, and every piece costed from what it used. More below.
Part 1: the business description
Big Sioux Leather Co., a made-up leather shop in Sioux Falls, South Dakota, I use in these examples, writes:
Big Sioux Leather Co. makes card wallets, hand-stitched bifold wallets, belts and keychains from vegetable-tanned leather in a home workshop, sold at two markets a month, at holiday craft fairs, and online.
Part 2: what each piece costs
The shop buys vegetable-tanned leather at about $10 a square foot, belt leather at $12, and adds 25% to what each pattern uses for the belly, the scars and the gaps between pieces.
| Per unit | Card wallet, in a batch of ten | Bifold, hand stitched | Belt | Keychain |
|---|---|---|---|---|
| Leather, with 25% waste | $3.75 | $12.50 | $6.75 | $0.63 |
| Thread, hardware, edge paint and finish | $0.50 | $1.10 | $6.80 | $0.55 |
| Box, sleeve or bag | $0.50 | $1.00 | $0.50 | $0.15 |
| Time at $20 an hour | $10.00 (30 min) | $50.00 (2.5 h) | $20.00 (1 h) | $3.33 (10 min) |
| Selling fees, 6% | $1.86 | $7.92 | $4.20 | $0.60 |
| Variable cost | $16.61 | $72.52 | $38.25 | $5.26 |
A card wallet made on its own takes 45 minutes; ten cut in one session, dyed and edged together and stitched in a run take about 30 each. A belt's buckle and rivets cost almost as much as its leather. How each piece was priced is in how to price handmade items, and the cost-plus method is in cost plus pricing example.
Part 3: customers and prices
| Product | Price | Variable cost | Contribution | Margin | A month at full speed |
|---|---|---|---|---|---|
| Card wallet, made ten at a time | $31.00 | $16.61 | $14.39 | 46.4% | 60 |
| Bifold wallet, hand stitched | $132.00 | $72.52 | $59.48 | 45.1% | 12 |
| Belt | $70.00 | $38.25 | $31.75 | 45.4% | 25 |
| Keychain | $10.00 | $5.26 | $4.74 | 47.4% | 80 |
On top of the $20 an hour already paid, a belt leaves about $32 for each hour it takes, a card wallet about $29, a keychain about $28, and a hand-stitched bifold about $24, because its two and a half hours are mostly stitching. A leather sewing machine that halved the bifold's hours would change that, and pay for itself in hours saved. At full speed the card wallets bring about $860 of the month's $2,750 of contribution, the belts about $790, the bifolds about $710 and the keychains about $380. Batch-made designs are the ones to offer shops; how to price them is in how to price handmade items for wholesale.
Part 4: the first year, month by month
Fixed costs are $345 a month: market fees ($150), the website and online shop ($40), insurance ($30), blades and tool upkeep ($30), marketing ($60), and software and card fees ($35). Sales start at 15% of full speed and reach it in month 11:
| Month | Card wallets | Bifolds | Belts | Keychains | Sales | Profit | Cash, year to date |
|---|---|---|---|---|---|---|---|
| 1 | 9 | 2 | 4 | 12 | $943 | $87 | $87 |
| 2 | 12 | 2 | 5 | 16 | $1,146 | $181 | $269 |
| 3 | 15 | 3 | 6 | 20 | $1,481 | $335 | $603 |
| 4 | 18 | 4 | 8 | 24 | $1,886 | $520 | $1,123 |
| 5 | 24 | 5 | 10 | 32 | $2,424 | $767 | $1,890 |
| 6 | 30 | 6 | 13 | 40 | $3,032 | $1,046 | $2,936 |
| 7 | 36 | 7 | 15 | 48 | $3,570 | $1,293 | $4,229 |
| 8 | 42 | 8 | 18 | 56 | $4,178 | $1,572 | $5,801 |
| 9 | 48 | 10 | 20 | 64 | $4,848 | $1,879 | $7,680 |
| 10 | 54 | 11 | 23 | 72 | $5,456 | $2,158 | $9,838 |
| 11 | 60 | 12 | 25 | 80 | $5,994 | $2,405 | $12,243 |
| 12 | 60 | 12 | 25 | 80 | $5,994 | $2,405 | $14,648 |
The year's sales are $40,952 and the profit $14,648, on top of about 98 hours a month at full speed paid at $20 an hour, about 670 hours and $13,300 in the year. Profit from the first month, because a home workshop's fixed costs are small. Wallets and belts sell most before the holidays and Father's Day; cut ahead for them.
Part 5: the startup budget
| Item | Example |
|---|---|
| Hand tools: chisels, bevelers, round knife, mallet, stitching pony | $600 |
| Cutting mat and granite slab | $200 |
| Edge burnisher | $300 |
| First hides and hardware | $900 |
| Dye, finish and thread | $150 |
| Market tent and display | $600 |
| Website and photos | $400 |
| Working cash | $1,000 |
| Total to start | $4,150 |
At $14,600 a year, the $3,150 spent before working cash is earned back by month 7. How many of each piece to make before a craft fair is in how much inventory for a craft fair.
Get the template
Download the leather goods business plan workbook. Four sheets: your pieces with price, variable cost and a month's volume at full speed; the first year, month by month, with sales, profit and cash; your fixed costs; and your startup budget with working cash. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Three sides of leather in two weights and four colors, buckles in three finishes, rivets, snaps, thread in six colors, a batch of card wallets cut this week and stitched next, and finished pieces at home, at a fair and online. A notebook can't say how many square feet of the chestnut side are left, how many brass buckles there are, or what a belt costs now that the buckles went up.
How TaroStack does it
TaroStack keeps leather by the square foot, hardware by the each, and every piece costed from what it used.
Leather and hardware as stock. Leather is bought by the side and used by the square foot; buckles, rivets and snaps by the each. TaroStack does the unit math, and counts are done on a phone, so the chestnut leather left is a number.
Pieces as recipes. A belt is a recipe of its leather, with the waste allowance, buckle, rivets, finish and bag, and a batch takes them off stock at what they cost, with the minutes it took, so each piece's cost is what it used.
Reorder before the holidays. Leather and hardware come up on a reorder list in days of cover, and the price creep report shows when a supplier's buckles went up, so the $70 belt is checked against this month's cost.
| The job | Notebook | In TaroStack |
|---|---|---|
| Chestnut leather left | Measure the side | Stock in square feet |
| Brass buckles on hand | Count the drawer | Stock by the each |
| What a belt costs now | Last year's number | Each batch, at what it used |
| What to reorder before the holidays | Guess | Reorder list in days of cover |
Counting, recipes and batches are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.