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How to Start a Craft Business in 7 Simple Steps [2023 Update]

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Many people are starting their craft businesses as a way to earn some money in their free time.

Unfortunately, not all of these businesses succeed.

Understanding how to start a craft business can be tricky.

The numerous vendors on Etsy, Amazon, and other online retailers make it even harder to find your distinct niche.

Still, if you plan and research the market, you might be able to make considerable income through your craft business.

How Profitable Is Owning a Craft Business?

You can make good money out of selling crafts.

Craft owners look to make about 5% profit on average. Yet, some successful crafts can make up to 20%.

Unlike other businesses, there’s no time estimate on when the money will roll in.

Craft businesses also don’t provide a fixed monthly income. You might sell a ton of orders one month and make zero profit the next.

The profit of your craft business is dependent on you. You’re in charge of making the products and pricing them!

This means you might raise your income by making hundreds of products, or you can make a few exclusive products with a high profit rate.

You should note that even if you run a moderately successful craft business, the earnings are unlikely to fully support you.

Most craft businesses make about $10,000 annually, which is less than the U.S. minimum wage.

What You’ll Need to Start a Craft Business [& Associated Costs]

The best part about craft businesses is that you don’t need a large capital or initial funding.

Anyone can start crafting from the comfort of their home.

The expenses-to-profit ratio of most craft businesses is generally low.

That’s because you don’t need to pay for store rent, utilities, or labor.

Instead, craft businesses rely on your skilled hands.

Still, you can expect your initial funding to be as low as $60 or as high as $50,000. The costs that go into starting a professional craft business include the following:

  • Materials: The bulk of your craft business expenses go to purchasing new materials. Depending on your craft, the materials might range from a couple of dollars to a few hundreds.
  • Equipment: Most craft business owners make their products by hand or already have the required equipment. Yet, you should factor in the cost of new, professional equipment that might help your business grow.
  • Marketing: Marketing your craft business takes up a significant amount of money. You’ll need to pay for the branding of your business, social media ads, e-mail advertisements, and other online marketing tools.
  • Online fees: Whether you’re selling on Etsy or Amazon Handmade, most online retailers charge a fee per every listing you make. They also take a percentage of sales.
  • Shipping: While customers typically pay for shipping, you’ll need to employ a reputable shipping company. You have to pay for the shipping of new materials, equipment, and marketing supplies.
  • Taxes: Many craft vendors overlook this expense. You should note that your small craft is a serious business as long as it makes money. This makes you liable to pay taxes and deductions.

Do I Need a License or Certificates to Start a Craft Business?

If you want to start a legitimate craft business, you need to have the appropriate licensing.

Since you intend to earn an income, the state needs to be aware of the business and the owner for taxing purposes.

Each state has different requirements for craft businesses.

You’ll also need specific permits depending on your craft.

The most common licenses you’ll need are:

  • Business License
  • Business Registration
  • Tax Permit
  • Sales Privilege License

Why You Should Consider Starting a Craft Business as a Side Hustle

While starting a craft business is unlikely to replace your 9 to 5 job, there are many pros to profiting off of your talent, including:

  • Make money in your free time: If you have a lot of free time, you can choose one of the many hobbies that make money and turn it into a profitable business.
  • Showcase your talent: Selling your talent and accomplishments can be significantly rewarding. It’ll also boost your confidence!
  • Get motivated: You might love a certain activity but find yourself lacking the motivation to do it. Starting a craft business might motivate you to work harder on your talent, especially after seeing the customers’ appreciation for your products.
  • Develop new skills: Starting a craft business will teach you valuable assets like project and financial management and marketing tactics.

How to Start a Craft Business in 7 Simple Steps

A common mistake craft vendors make is thinking their products will sell right when they start promoting them.

However, a lot of planning should go into any successful business, including handmade items.

Here’s a step-by-step guide to help you start your craft business:

Step 1: Find a Profitable Hobby

You can’t run a craft business if you don’t like the products you’re selling.

So, it’s crucial to find a hobby you’re passionate about.

If you want to make a profit, you must identify the market needs and what you can provide to the industry.

Once you find your niche, scope out the competitors.

This way, you’ll find something that sets you apart.

Step 2: Know Your Target Demographic

You must determine who will benefit most from your products and start selling to them! Knowing your audience is the best way to successfully manage your craft business.

When you pinpoint potential customers, you’ll know the price range and the main distribution channels of your products.

In addition, you’ll come up with a marketing tactic that fits your customer base!

Step 3: Create a Business Plan

It’s easy to get carried away once you officially start your craft business.

That’s why you should create a business plan and stick to it from day one.

You should know what to expect and what you want to achieve.

The business plan should include the following:

  • Executive summary
  • Marketing and sales strategy
  • Competitive analysis
  • Business team and personnel
  • Financial projections

Step 4: Start Crafting

You should have sufficient inventory before launching your craft business, especially if you’re promoting your products online.

You don’t want anyone ordering your handmade items only to find that they’re out of stock!

For this reason, you should make at least ten items for every product you offer.

So, you ensure your craft business has a strong launch.

Step 5: Brand Your Products

Branding is one of the most important aspects of craft businesses.

Customers are more likely to buy from brands they like and trust, even if there are other available options.

The best part about owning a craft business is that you can add your personality to the brand.

You should also utilize the artisanal handmade aspect of your products.

Once you know which direction your brand is heading towards, you need to stick to it.

This means having a consistent logo, slogan, and brand name. If you need help naming your business, check out our guide to 100+ craft business names.

Step 6: Obtain the Business Licensing and Registration

Before you’re ready to launch your business, ensure you have the appropriate legal compliance.

Talk to a tax professional and have all the paperwork ready.

Step 7: Promote Your Business

It’s time to officially launch and promote your craft business.

You can participate in craft fairs or figure out where to sell items online.

Typically, Etsy, eBay, and Amazon are ideal online hosts for craft businesses.

Things to Consider When Building a Craft Business

Now that you’ve thoroughly planned your business, there are some important aspects to consider.

Asking yourself the following questions can help you determine whether you should build your craft business.

Can You Run a Craft Business by Yourself?

Yes! As long as you know how to make the products, you can be the manager, the employee, and the supplier.

Though, a couple of helping hands might speed up the process.

Yet, you can start your craft business at your pace.

Once you’ve earned enough, you can expand the business and hire others.

What Are the Accounting Needs of a Craft Business?

Many craft vendors are intimidated by the financial aspects, so they hire an accountant before even launching the business.

If you’re just starting your craft business, chances are you won’t need an accountant early on.

You can figure out the pricing of your products by yourself.

As for taxes, it’s no different from doing your household taxes.

Should Your Craft Business Remain Local?

Though Etsy stores and other online e-commerce sites provide more chances for profit, you’ll need to constantly update and promote your product.

Instead, you might consider starting a small-scale, local craft business.

You can do this by disregarding online retail completely.

Network with your local retail shops, farmer’s markets, and any other spot where you might sell your product.

This allows you to inspect if you can operate your craft business in the long run.

Then, you can consider expanding into a larger market or even globally.

INSPIRATION: Craft Business Ideas

You might have some hidden talents you can turn into a side hustle.

Here are some crafts that you can learn in no time and turn into a business:

  • Bath products: You can easily learn how to make all different sorts of bath products, from candles to bath bombs, through online tutorials!
  • Hair accessories: There’s plenty of scope for creativity when it comes to hair accessories. In addition, it’s an easy craft to learn!
  • Knit products: Though knitting requires a lot of practice, it’s a relaxing hobby. You’ll also have incredibly profitable and unique products.

Frequently Asked Questions

What is the most profitable craft to sell?

The most profitable crafts are those that are in high demand and require distinct skills.

These include jewelry crafts, sewing, and arts. Each of these crafts includes numerous categories.

For instance, you can specialize in making certain types of jewelry, such as friendship bracelets or resin jewelry.

Is selling handmade crafts profitable?

Selling handmade crafts can be incredibly profitable.

You don’t need to pay for expenses such as rent or utilities, and you’ll get to price the products yourself.

So, you can earn as much money as you like!

Similar Businesses to Consider Starting

If you don’t have a specific hobby to turn into a craft, here are some related business ideas to consider:

Wrapping Up

Hopefully, you now have a clear idea of how to start a craft business!

Craft businesses are the ideal side hustle that might even provide a full income if you plan well.

That’s why you should take your time setting up your craft!

Following our guide will help you estimate whether your hobby fits with the market needs and identify your target customers.

Let us know in the comments what hobby you might turn into a craft, and share this article with your friends who have some extra time to start a craft business.

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