Starting your own craft business is relatively easy, but there are still a few things that you need to be aware of before you start.
I’ll focus on setting up your creative business in the UK, but the general advice is applicable where ever you are in the world.
I’ll also focus on how to start your handmade business from home because this is where most people start. That’s not to say that you can’t start straight away with a small workshop, retail space or to employ people, but most creative businesses start with just one person – you! So, here is how to start your craft business:
Why do you want to start a handmade business?
Before we get into the practical stuff of setting up a business, let’s first have a look at what’s the purpose of your craft business. This will influence how you set up and run your business. Here are some of the questions you might like to think about before you start:
Are you starting your craft business to supplement your main income or is this going to be your sole income?
Do you have an idea how much you want or need to generate from your new craft business?
Do you want to work on your craft business part-time or can you devote your time fully to the new venture?
Depending on how you answer these questions, you might want to scale down or scale up the setup, preparation and the running of your business. In reality, this means that if you want to supplement your current income by working in the evenings on your craft business and make the occasional sale through your friends and family, you really don’t need an all singing and dancing website or to rent a shop. This might sound obvious, but I’m specifically mentioning this because if you want to keep things small, you really don’t need to feel guilty when you are not doing wholesale, trade fairs and chasing after elusive PR opportunities in glossy magazines.
Work out what products you want to sell
So, you might think this is an easy one to answer! I’ll sell what I make!
And that’s a great place to start, but to make your creative business profitable, you might need to fine-tune your current product offering.
For instance, if you are already making a cushion covers, have a look at the current home décor trend. Is there something that you can incorporate into your design that will make your cushion covers more desirable, more on trend? How much can you charge for a cushion cover? Is it worth selling the filling as well or just the cover? What if you need to post your product? How would the postage cost affect your sales?
At this stage I wouldn’t worry too much about your potential competition, but healthy research into what’s out there is always useful.
Once you know what you want to sell, do a product costing to make sure that all your hard work will be worth it in the end.
To do a product costing, use a simple spreadsheet and add all the product’s material (proportionally to the unit, including any material wastage), time that it takes to make it (based on your chosen hourly rate), any tools depreciation, cost of marketing, administrative tasks (again proportionally to the unit), profit and any other cost that you might think off. At the begging of your creative business journey, you will be guessing most of these figures, but guessing is better than not working out your costs at all!
Decide on your business name
Your business name will become part of your branding and it can be quite daunting to decide on something so important. I’ve written a step by step guide for you to help you and you can find it here.
Have a vision and make a creative business plan
The type of creative business plan you write depends on the type of business you want to create. The only time you’ll need a proper business plan will be for a bank loan application or perhaps for any startup mentorship applications. Any other time, you’ll be probably writing a business plan just for yourself.
It might be tempting to skip this part. Let’s face it you are starting a craft business because it’s your hobby, you don’t want to be bogged down with any ‘boring business stuff’! But, believe me, when I say, that by writing down the simplest of plans for your new creative business, you will become more focused and you’ll be able to monitor your progress as your business grows and develops.
Initial Investment Cost
Most start-up businesses need an initial investment to start their business. As a craft business, you can keep your expenses fairly low, but there are still areas I would recommend you address before starting.
Your initial investment will most likely include the cost of any product materials, any new tools and marketing. Your marketing might include the cost of setting up a blog, website or marketplace shop, business cards, craft market fees and any craft organisation memberships you decide to be part of.
Decide on your creative workplace
The chances are that if you are starting a craft business from home, you already have a space where you do your sewing, making or crafting. Often this could be just a table in a dining room, which you need to clear out every time your family needs to eat. Once you start your craft business, you’ll find it more and more time consuming to swap between your ‘craft table ‘ and functional dinner table. And what if one of your children accidentally breaks product that’s ready to be packed and send to the customer?
So, whilst you think it might be O.K to start your craft business from anywhere in your house, I would strongly recommend to see how you can find a designated area in your house that could be properly shut off from everyone else, where you can just leave your work and come back to it if you need to.
Perhaps this could be a spare bedroom or a box room that’s a guest room at the moment, but it’s only used occasionally? Or how about a shed in the garden or garage that can be remodelled into a craft workshop?
Check your house or flat legal agreement for using part of your home as a business
You should check your bank mortgage agreement or your rental lease if there are any points claws that might prevent you from using part of your home to use for a business. Even if there isn’t anything that prevents you from using part of your home for trading, do inform your mortgage lender or landlord as a matter of courtesy.
Tick all the legal boxes
To register your new handmade business, you need to decide what type of business you want to be – a sole trader or a limited company. Most people who start working from home register as a sole trader, because it’s much easier and it’s really all the legal structure they need to trade. Registering a limited company is a much more complex process and people usually progress to this stage when they expand their business.
To make sure that you can legally trade, you need to register with HMRC within three months of starting your craft business. The HMRC website has a very simple registration process, and it’s completely free.
Once you register, you’ll also need to submit your self-employment tax return, which is due each year on 31 January at the latest. You can still submit a paper version of your tax return in September/October, but it’s much easier to complete all forms online.
Your first tax return won’t be due until up to 18 months later, depending on when you register. For instance, if you register on 20 August 2019, your first tax return will be due in 2021 for the period from 20 August 2019 – 5 April 2020.
Find out if you need any certifications or other permissions to trade. This depends on your business niche, but it could include for example a toy’s safety certification (toy maker), a food hygiene certificate (artisan food business) and if you are selling soaps, fragrances or other beauty products these need to be tested and have the right labelling.
Insurance is a piece of mind, and no matter what type of craft business you are starting, you’ll always need one. To sell online and in person, at craft fairs, you need relevant insurance just in case something goes wrong and you or your product injures somebody or causes any kind of discomfort that could lead to a claim against you. You can also get insured against theft, damages or accidents at work, which is useful especially if you have expensive equipment or a lot of stock that you take with you to a craft fair. Each insurance company will assess what you need and price your insurance individually, but for basic insurance up to 1 million with selling online, you are looking at £35-70 per year.
Before you insure your craft stock, tools and equipment separately with your craft insurance, it’s worth checking what your existing home insurance covers. It might be also worth checking whether adding your craft business insurance to the existing home insurance wouldn’t be more cost effective than taking on separate insurance.
Work out your craft suppliers
If your new craft business develops from your hobby, the chances are that you already have the best suppliers for your material and tools. Once you start your craft business, you should review your material suppliers as it’s one of the variable costs you can bring down a little if you need to adjust your profit line.
Check the current supplier’s prices – how do they compare to the competition?
If you are happy with the price and quality, ask if your current supplier can offer wholesale prices. This might mean buying more of one fabric pattern and perhaps narrowing down your range of products.
If a material element of your product seems expensive, can you purchase it somewhere else cheaper? Can you buy a slightly different one that’s more affordable and perhaps from a different material?
If not and the expensive element of your material is essential for the final look of your product, can you incorporate it’s cost to the final product cost?
Is there a company that can supply the majority of what you need, so that you can save on postage cost and ordering time?
The chances are that you will be reviewing your suppliers as you go, but it’s worth doing an in-depth research at the beginning to give you the best possible chance to succeed.
Decide on how you want to sell your products
The good news is that you don’t need to go the whole hog! You certainly don’t need to have all singing and dancing website or rent a shop to start your creative business. A lot of successful craft business owners started to sell just via their Facebook or Instagram page with no website or shop presence! Here are just a few options you might like to consider for selling your crafts:
Sell directly to shops
Rent a shelf in a shop
Rent a pop-up shop for a limited time
Track everything and review your craft business as you go
Set up a simple spreadsheet with income and outgoings and add everything in as you go. Review your spreadsheet every month and compare it to your business plan (even if you made a very basic one).
There is, of course, loads more that goes into starting a craft business, so I’ll be writing more detailed guides on each topic in the next few months and adding them to our blog.
Until next time – happy crafting!