How to Start a Laser Engraving Business
If you have an artistic eye and are looking for a unique and profitable business to start, a laser engraving business may be a great opportunity. The costs to start one are relatively low, and your potential profit margins are high. Custom laser engraving is easy to do, and you could build a great business and be your own boss.
A laser engraving business uses a laser engraver to mark items such as jewelry, awards, mugs, phone cases, wedding gifts, toys, book covers, and many other pieces. It offers customers the opportunity to personalize items to their specifications.
According to Markets to Markets, the laser marking industry is expected to grow 6% per year to become a $3 billion market in 2024. Laser marking is much more accurate and precise than traditional marking methods, fueling the growth of the industry.
According to IBIS World, the industry has declined 2.4% per year for the last five years, but growth in disposable income is expected to increase demand. Personalization is very popular, and companies utilize laser engraving to mark items with their logos. The industry is sensitive to economic fluctuations, so demand declines during economic downturns.
Your target market will be people who have items to personalize for themselves or as gifts, and companies who need their logos on engravable items or custom signage in stainless steel, wood or acrylic. Companies or teams that need awards engraved are also a potential market.
Checklist for Starting a Laser Engraving Business
If you’re thinking about starting a laser engraving business, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your laser engraving business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect laser engraving business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Legal 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 Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a laser engraving business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
Laser engraving businesses often operate as a home-based business, mall kiosk, or as an additional service for a gift business, trophy shop, etc.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
There are no specific licenses for a laser engraving business, however, there are common local, state, and federal business registrations a laser engraving business may need which include a sales tax permit and an Employer Identification Number.
Step 6: 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 laser engraving business is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Common marketing techniques for a laser engraving business include social media marketing and online advertising on sites such as Amazon, eBay, and Etsy. Developing a website can be a significant expense, but it can also give your laser engraving business greater visibility online.
You may also be able to partner with gift shops and wedding planners to get referrals.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There is a certain amount of risk because a mistake could damage a valuable item that you are trying to mark, which is why insurance is critical.
There are several types of insurance to consider when starting a laser engraving business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
The cost to insure an engraving business will vary depending on a number of factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 10: Hire Employees
You may need to hire employees to help you run your laser engraving business if you grow a large customer base.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your laser engraving business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a laser engraving business?
Here are some of the typical costs you will face when you open a laser engraving business.
– Laser engraving machine (be sure to watch out for the machine’s wattage and whether it is strong enough to etch the materials you want to work with. A 25-watt laser will work with most common materials and is good for starting out, but won’t work well with wood, rubber, etc.)
– Laser cutter
First year of insurance
How much does a laser engraving business owner make?
The price for engraving a small item is about $25. Larger items can be much more. If you get clients who need a large number of items engraved, such as a company that needs a large number of logo items, you can make a lot of money in a short period of time. Profit margins are very high because once you have the laser engraver, it does not cost anything to use it.
Are there grants to start a laser engraving business?
It’s extremely rare to find a grant to start a laser engraving business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a laser engraving business?
There are several specific skills that you will need to open a laser engraving business.
Experience. Experience utilizing a laser engraver would be beneficial.
Training. Some companies that sell laser engravers offer training which is essential if you have never used a laser engraver.
Software experience. Software programs are used to create designs and marks such as Photoshop, Illustrator, CorelDRAW, etc., so some experience using various types of software is helpful.
Business knowledge and experience. You will need to have some basic knowledge of marketing, finance/accounting, and human resources.
People skills. You’ll need to build rapport with your customers so that you retain them as customers and keep them coming back.
What is the NAICS code for a laser engraving business?
The NAICS code for a laser engraving business is 332812.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?