How to Start a Craft Business

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Whether you’re a talented candlemaker, have been perfecting your line of bath bombs, or knit beautiful throws that your whole family loves, if you have talent as a crafter, you could be looking at a business opportunity. Crafting doesn’t have to just be a hobby, and there are many ways to use your skills to build a business. While craft businesses tend to be smaller, they can be rewarding both financially and in terms of the enjoyment you’ll get out of the venture. Whether you’re looking for a part-time business to run on the side or have bigger dreams of crafting to support yourself and your family, here’s what you should know about starting a craft business.

Business Overview

Craft businesses offer crafters the opportunity to transform a hobby into a business opportunity. Crafters who build businesses sell their homemade products to others through a variety of outlets. Many use websites like Etsy and eBay, while craft shows, fairs, and festivals offer additional retail opportunities. Some crafters may even open up small shops or pop-up stores, or they may sell their products through gift shops and other retail locations.

The products sold within the crafting industry are varied, and can consist of everything from handcrafted furniture and décor to beauty products, clothing, and blankets. Consumers buy these products for a variety of reasons, but their appeal includes the fact that they’re handmade, are sometimes one-of-a-kind, and are often customized.

Industry summary

From 2011 to 2019, the craft industry has demonstrated steady retail sales. According to Statista, in 2011, sales were $98 billion. Sales stayed at or rose over $98 billion for the next eight years, coming in at $1 billion in 2019.

Because so many craft businesses are often microbusinesses or are run as hobby businesses, it’s difficult to get comprehensive data on the number of businesses in existence. However, a look at Etsy can give us a sense of some of the craft industry. Wunderlabel states that Etsy has approximately 2.1 million sellers. Of those sellers, 87% are women, and 90% of sellers own their own business. While craft businesses can bring in full-time income, 81% of Etsy sellers anticipate that they’ll only earn supplemental income with their businesses, and Etsy businesses contribute an average of 12% to a household’s income. However, the largest Etsy businesses have gross sales of $290,000 and are staffed by an average of three employees.

Industry trends

Many trends shape the crafting industry. The Craft Industry Alliance notes that trends tend to involve popular colors that can frequently change. For 2020, expect to see more classic blues and chartreuses. These colors may be present in everything from garments to household elements to logos.

Like so many industries, crafting is also becoming more eco-friendly. This trend is evident in the use of natural dyes and secondhand materials, as well as the popularity of mending to reduce textile waste.

Certain crafts have also gained recent popularity. Stained glass is a highly trendy craft, and embroidery and other customization crafts continue to be popular. Digital and machine crafting is also becoming more common, thanks to the availability of more affordable 3D printers and laser cutters.

Even the wellness industry is affecting the craft industry. With an increased focus on self-care, crafters are creating products for relaxation and pampering, like bath salts, bath bombs, and soaps.

Who is the target market for your craft business?

A craft business’ target market will partially depend on the types of products it produces. Target markets may be homeowners who are looking for creative décor ideas, professionals or parents who want to indulge in some self-care with quality bath products, adults who are looking for a special gift for a wedding, bridal shower, or birthday, and more.

Skills, experience, and education useful in running a craft business

Starting a craft business doesn’t require a business degree, but certain skills and experiences can increase the chances of the business becoming a success. 

Crafting experience. Many crafts can be easily learned, but it’s helpful for a business owner to have plenty of experience with crafting so they can produce consistent, quality products. While buyers understand and value that they’re purchasing a handmade item, they’ll still expect the item to be a quality piece.

Creativity. A creative nature is a benefit for any crafter, both when coming up with ideas for new crafts and when marketing the business.

Customer service skills. Customer service is an important aspect of running a successful craft business. A business owner will need great customer service skills both in-person and over the phone or through email.

Business knowledge. While a business owner may have experience in crafting, it’s also important to have business knowledge to help with properly pricing products, tracking inventory, tracking payments and taxes, and other operational details. These skills can often be learned by taking an introductory business course online or at a local community college.

Marketing skills. Marketing is a major part of running a craft business. A business owner doesn’t just need to be a crafter – they need to be a marketer, too.

Costs to Start a Craft Business

One of the great benefits of starting a craft business is that it’s highly affordable. You can start a small business out of your home for a minimal investment, often under $1,000. Even if you want to expand to a larger business with more equipment, this tends to be a highly affordable industry.

Common startup costs for a craft business include:

  •     Equipment
  •     Supplies
  •     Shipping materials
  •     Website
  •     Signage

If you plan to sell your inventory at craft sales or other events, then you may need to invest in a vehicle with a large cargo capacity.

Steps to Starting a Craft Business

Step 1. Write your Business plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2. Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC.  Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements. 

Related: Comparison of Business Entities

Step 3. Select your Location

Most craft businesses are started from home in a space like a spare room or a basement. As a business grows larger, it may be necessary to invest in a rental workspace. Rental costs will depend on the size and location of the space.

Related: Choosing a business location

Step 4. Apply for Business Licenses and Permits

While there aren’t typically licenses specifically for craft business, some of the common local, state and federal registrations most craft businesses may need include a sales tax permit and possibly an Employer Identification Number.

Related: Common business licenses, permits and registrations by state

Step 5. Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a craft business is another.  Funding to start a craft business business can be difficult, since a majority of the costs will go towards inventory.  In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs. 

Related: Finding the money to start a business  

Step 6. Get your Marketing Plan in Place

Marketing can be one of the largest expenses that craft businesses face. The industry is competitive, so businesses need to market to set themselves apart and to reach potential customers. Marketing activities can include building a website, maintaining social media profiles, advertising online, and more. The costs of these activities vary, but a business owner who can do some or all of their own marketing can save money over the cost of hiring a professional marketer.

Related: Low-cost ideas to market a new business

Step 7. Get Insurance

A craft business needs several types of insurance for full coverage:

  • General liability insurance protects the business if customers are ever injured while on the business’ property or because of injury caused by the business’ products. This insurance policy can cover expenses like legal fees and medical bills. 
  • Commercial property insurance can help to cover the cost of equipment and inventory that’s damaged or destroyed during an event like a fire.  If you are working out of your home, be sure to check your homeowner’s policy to make sure business activity in included. 
  • Workmans comp insurance helps to cover expenses like lost wages and medical bills if an employee is ever hurt while on the job.  

Insurance policy cost will vary depending on many factors, like if customers are coming to your home office, the value of your equipment, and whether or not you have employees. To get the most accurate idea of what to budget for insurance, request quotes from multiple insurance providers. Then, compare not only the premiums, but also look at how the quotes stack up in terms of coverage limits, exclusions, and deductibles, compare, too.

Step 8. Hiring Employees

While a craft business is smaller, it’s possible that the business owner can handle all of the work alone. As that business grows, the owner may choose to bring on an employee to help with the workload, whether that’s shipping orders or helping to staff tables at events. According to PayScale, sales clerks earn an average of $10.31 per hour.

If a business hires employees, it’s important to also budget for other expenses, like paid time off, health insurance contributions, and workmans comp insurance.

Related: Hiring your first employee

How much can you potentially make owning a craft business?

Craft business profits vary widely. Keep in mind that while many crafters see their business’ income as supplemental, it is possible to build a craft business into a full-time venture. Factors like the business’ years in existence, its profit margins, the types of products it sells, and even its location can all affect its income.

Things to consider before starting a craft business

The craft industry is saturated, so if you want to build a profitable business, you’ll need to find ways to differentiate your business and products. It’s best to start by researching the existing businesses and their products. Then, try to find a way to do things differently, or consider which products aren’t currently offered. Buyers have thousands of products to choose from on sites like Etsy, so focus on building a product and a brand that will stand out.

Starting a craft business doesn’t require a large financial investment, and it’s something that you can do in your spare time without taking a leap into a full-time operation. Look for ways to save money throughout the process, like by taking a photography course so you can take your own product photos. It’s also important to familiarize yourself with the sales portals that you’ll be using. If you’re selling on Etsy and eBay, research the fees that you’ll pay as well as the sites’ return and buyer dispute policies. The same is true of PayPal and other online payment platforms. By staying aware of your costs and carefully building your business, you may be able to grow it into a large and successful operation.

Resources:
American Craft Council
Association for Creative Industries
Craft Industry Alliance

Additionally, Amazon has several good books for starting a laundromat such as:
Etsy Empire [Updated 2020]: Proven Tactics for Your Etsy Business Success and Selling Handmade Crafts and Handmade Jewelry – Free on Kindle Unlimited
ETSY BUSINESS: 5.000 Month Beginners Guide – Start to Huge Profits Selling on Etsy Around Your Crafts (includes Tips, Seo and Social Media Marketing) – Free on Kindle Unlimited
How to Start a Craft Business: 30 steps to start your business in the RIGHT way – Free on Kindle Unlimited
Art Of Candle Making Business Startup: How to Start, Run & Grow a Million Dollar Success From Home!
How to Start your own Bath & Body Business