How to Start a Small Craft Business

Tuesday, May 21, 2013

How to Start a Small Craft Business

You never know where a small craft business will lead. In 2005, Sheri Schmelzer started selling Jibbitz, a crafted charm that decorates Croc shoes, in her basement. One year later more than 8 million pieces were sold worldwide, according to Croc Shoes News. A sought-after product is the result of a unique craft idea produced by a skilled craftsperson. But, a successful small craft business requires both creative skill and business savvy supported by a plan.

Step 1

Identify a craft that will be the base for a profitable business. Your analysis should show a market for the craft, the ability to make the product profitably and the availability of components.

Step 2

Name the business. Find a name that is catchy and describes what you are selling. Check with your secretary of state's office to see if the name is available. Most small craft businesses are operated as a sole proprietorship with the legal name of the owner. If another name will be used to market the product, then register a fictitious name with the state.

Step 3

Obtain permits and licenses. Some jurisdictions restrict the types of businesses that can operate from home. Check with local authorities for requirements.

Step 4

Register to collect sales tax with the department of revenue for your state. Most states require a percentage of each sale to be remitted quarterly. Some cities and counties have an additional tax. A tax-exempt number is issued during the registration process so materials to make the craft can be purchased tax-free.

Step 5

Obtain a business bank account. Keep personal finances separate from the funds of the small craft business.

Step 6

Set up an area to make the product and run the business. Allow adequate space to store materials, make the craft and display finished pieces. Also designate a space to handle administrative functions, such as paying bills and accessing the computer. A home-based craft business will significantly reduce start-up costs.

Step 7

Purchase materials. Research manufacturers that provide components at a cost that will be lower than the local retail store to improve the profit margin.

Step 8

Market the craft items. Look at a number of outlets including craft fairs or craft malls, through consignment with local stores, on your own website, or through a community websites such as eBay or Etsy.

Things Needed

Tip

Continue to improve your craft. Join professional organizations and read magazines in the area of interest to stay up-to-date on trends.

References (3)

Resources (1)

Craft & Hobby Association

About the Author

Marjory Pilley began writing business and lifestyle articles in 2009. Her articles appear on websites like Think+Up and Chron. She holds a Bachelor of Science in accounting from the University of Florida and a Master of Business Administration from the University of Central Florida.

Photo Credits(4)

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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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Tuesday, May 21, 2013