How to Start a Craft Business: A Step-by-Step Guide

You have the skills and the style. You can craft like it’s nobody’s business and you want to get your creations in front of as many eyes as possible. That’s probably why you want to know how to start a craft business. Don’t worry, with a little creativity and elbow grease, you can turn your passion into a full-fledged business. Read on to learn how to start a business of your own.

How to Start a Craft Business in 7 Simple Steps

Before you fire up your hot glue gun, you’ll want to consider these steps before you start a craft business. These steps will help keep you on track and make sure you don’t forget the important to-dos that will help you find success.

Step 1: Choose a Niche

As a creative, you know that there is a world of possibilities out there. Your crafting skills can likely translate to a lot of different products, but when starting a crafting business, choosing a niche market is important. For example, you may want to focus on a singular product that you’ve already mastered, like candles. The more scents and colors the better, but it is still technically one type of product. 

Similarly, you might choose a particular theme to apply to a variety of products like holiday decorations or stationery goods. Whatever path you choose to go down, start with a focused one. That way, you can limit the amount of supplies you need, form a brand identity, and master your production process quickly. 

When choosing which niche you will build your business around, it’s important to not only consider your skills and interests but also the market. Are there already five candle stores in your small town? If so, that might not be the right niche for you. Conduct a thorough market analysis to scope out your competition and find where there are openings for your unique products, as well as make note of how current businesses operate, what they’re doing well, and how your business can do better.

Step 2: Create a Business Plan

If you like the process of crafting, you probably also enjoy planning. Just like you plan the perfect craft, you need to plan how to make your business succeed. Enter the business plan. A strong business plan includes several sections that will help keep your business on track, outline your plans for your craft business, and prove your value to any potential investors. Even if you’ve already launched a business, you’ll want to pause and create a killer business plan. 

Not only is a business plan a vital tool for any business owner, but it will also be necessary if you choose to seek out funding to help launch or grow your business. To make the process easier and make sure you’re not missing any vital information, a business plan template or business plan software can make this process easier.

Choose a Business Name

While compiling your business plan you will want to decide on a business name. Ideally, your business name will be catchy, easy to remember, describe the types of products your business will sell, and tell the story you want it to. But most importantly, it needs to be available. Before officially settling on a name, check with your secretary of state’s website to see if your chosen business name is already in use. A quick Google and trademark search will also help you cover your bases. Once your name is decided, you should also consider reserving your domain name and social media handles now to establish your brand.

Choose a Business Entity

Your business plan will also cause you to decide how you’ll structure your business. Whether you are a solopreneur or have a trusty team at your disposal, you’ll need to decide on the legal structure of your business. If you haven’t decided which business entity is best for your business, now is a great opportunity to choose. You may want to consider a sole proprietorship, general partnership, limited liability company (LLC), or corporation for your business structure. 

If you don’t know what structure your business should be, you may want to chat with a business attorney or tax expert about what the right decision for your craft business is. You may not want to spend the extra money consulting a professional, but your business structure will affect your taxes, risk level, and other important factors. Once you’ve made the decision, you will need to register your craft business with the necessary federal and state agencies. 

Define Your Products and Services

Remember how you defined your niche earlier? Well, it’s time to get even more specific and outline the products or services your craft business will provide. Consider answering the following questions:

    • What type of craft products will you sell?
    • What will you charge?
    • Where will you purchase your supplies?
    • How much will supplies cost?
    • How much will production cost?
    • Do you still need to research or develop your product?

Once you have a polished business plan, you can use it as a roadmap to take your craft business from a daydream to a successful reality.

Step 3: Get the Proper Licenses, Permits, and Insurance

Are you ready to roll up your sleeves and do some paperwork? Even if it’s not your favorite activity, it is vital when starting a business. You’ll need to make sure you have any required licenses, permits, and insurance to start your craft business. The last thing you want is to get hit with a major fine or encounter legal trouble once you finally get your craft business off the ground. Depending on your location, business structure, and type of business, the types of licensing you need will vary. You may even need multiple business licenses at the state, federal, and local levels. The SBA is a great resource to help you get started, and you should also check with your local chamber of commerce.

If you’re going to hire some employees to help with your craft business, you will also have to obtain an employer identification number (EIN). An EIN is required for tax purposes, among other things. Even if you don’t think you’ll hire an employee anytime soon, there are additional benefits of getting an EIN worth considering. 

Finally, you’ll want to look into obtaining business insurance. This is never a bad idea ever, especially if you have employees. If you’ve hired any employees, you have to carry workers compensation, unemployment, and potentially disability insurance. You may also need general liability and commercial property insurance. Permits and insurance are another reason you may want to meet with a business lawyer. Their professional advice could help protect your business against future complications with the law. 

Step 4: Decide Where to Sell Your Goods

You know what you want to sell, but where are you going to sell your goods? A local arts and crafts fair may be a low-key way to test the waters and get customer feedback. Or you can start by selling your products in local boutiques before opening your own storefront. 

Of course, you can always create an ecommerce website or sell on a digital marketplace like Amazon or Etsy (basically the best place on the web to sell crafts). There are plenty of great ecommerce platforms for you to choose from, so do your research on which platform will best suit your needs and then get building to create the perfect business website.

Step 5: Find Small Business Funding

Now that your crafting is going large scale, you may need help covering expenses. Of course, your business can start as small or big as you want it to. But if you need help making your craft business a reality, you may want to pursue some helpful small business funding options. Consider all the options available to you. And remember, what works for one craft business may not work for yours. Take your time to make this decision and trust your gut.

  • Business loans: New business owners may struggle to obtain some business loans, such as SBA loans, but if your craft business has been operating successfully for a few years, you might qualify for this type of funding. 
  • Business lines of credit: This type of credit has more flexibility than a standard business loan. That’s because a business line of credit gives you a set amount of money that you can draw from when you need to cover the cost of business expenses. 
  • Business credit cards: Consider applying for a business credit card if you’re a startup business owner with a lack of credit history or time spent in business. You may find a business credit card is a more accessible option. Not to mention, a 0% intro APR credit card is like having an interest-free loan, as long as you pay off your balance before the introductory offer is over and a variable APR sets in. Of course, whether you plan to use it as a financing tool or not, we recommend every business open a dedicated business credit card to keep your finances separate.
  • Equipment financing: If you need equipment to produce your crafts, such as sewing machines, you might want to consider equipment financing. For this type of financing, a lender will loan you money specifically to fund equipment purchases. The equipment will be the collateral for the loan, which is why it may be easier to qualify for this type of funding.
  • Startup funding: For brand-new businesses, check out startup financing options. You may qualify for an SBA microloan or a business grant. Crowdfunding is also a popular option these days for quick startup funding. 

Once you have funding, expenses, or income, it’s important to keep your personal and business expenses separate. You can do this by opening a business bank account. You’ll want to consider either a business savings account or a business checking account. Generally, new businesses opt for a business checking account. More established businesses that have a lot of cash on hand (that will be you one day!) are better served by a business savings account so your balance can earn interest.

Step 6: Find and Manage Craft Supplies

When crafting was just a hobby, you were probably content with running down to your local craft store for supplies. While that is still an option, you may want to think bigger. Chances are you can find your supplies cheaper by buying them in bulk from a wholesale supplier. Shopping around (most likely online) for supplies will help you find the best deals possible. But before you start shopping, you should calculate how much inventory to carry. Knowing exactly what type of supplies you need, and in what quantity, will make finding a supplier much easier. Not to mention, this will be the best way to estimate the cost of your supplies. Don’t be afraid to ask other all-star crafters where they purchase their supplies; surely plenty of fellow entrepreneurs will be happy to share their insider tips. 

Once your supplies are on the way, you’ll need a reliable inventory system that you can follow. The last thing you need is to run out of supplies right before a big order is placed. An easy way to get organized can be with an inventory management app. These apps will help you keep track of the comings and goings of your supplies.

Step 7: Start Marketing Your Wares

Now that you have a business name and brand, a professional business website, and you know what products your craft business will sell, it’s time to start spreading the word so you can drum up a steady client base. A solid marketing plan will make sure you’re taking a thorough approach to advertising your business.

Think about how you can show off your goods in a fun and enticing way. If you haven’t already secured your social media handles, do so now and start posting images of your unique crafts. Instagram and Facebook will be non-negotiables for your business marketing strategy. 

When it comes to planning your marketing strategy and sales plan, consider two things. Promotion and positioning. These two factors will help your marketing strategy succeed. How can you successfully position your products to customers? By explaining what makes them special and valuable. Identifying your position is what your “sell” is. Once you have a sell, you can use that as the base of your promotional plan. The end goal of your promotional plan should be to get your products in front of as many potential customers as possible.

The Bottom Line

You have the creativity, drive, and most importantly the crafting skills to make your dream business a reality. You also are ready to write a business plan, obtain the right permits and insurance, secure business funding, and order supplies. Now that you know how to start a craft business, you can get back to doing the work you love.

Contributing Writer at Fundera

Jacqueline DeMarco

Jacqueline DeMarco is a writer and editor based in Southern California. She has written on everything from finance to travel for publications including LendingTree, The Everygirl, Coveteur, and Apartment Therapy, among others. In her spare time, she enjoys traveling, especially if going somewhere she can spend time with animals.
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