Whether you’re a talented candlemaker, have been perfecting your line of bath bombs, or knit beautiful throws that your whole family loves, you could be looking at a business opportunity if you have talent as a crafter. Crafting doesn’t have to just be a hobby, and there are many ways to use your skills to build a profitable business.

Whether you’re looking for a part-time business to run on the side or have bigger dreams of crafting to support yourself and your family, here’s what you should know about starting a craft business.

Business Overview

Craft businesses offer crafters the opportunity to transform a hobby or passion into a business opportunity. Crafters who build businesses sell their handmade products to others through a variety of outlets. Many use third-party websites like Etsy and eBay or even create their own through Shopify or Wix, while craft shows, flea markets, fairs, and festivals offer additional retail opportunities. Some crafters may even open up small shops or pop-up stores or sell their products on consignment through gift shops and other retail locations.

Related: How to start selling on Etsy

The products sold within the crafting industry are varied and can consist of everything from handcrafted furniture and holiday decorations to beauty products, clothing, and blankets. Consumers buy these products for various reasons, but their appeal includes the fact that they’re handmade, are sometimes one-of-a-kind, and are often customized.

The craft industry is saturated, so if you want to build a profitable business, you’ll need to find ways to differentiate your business and products. It’s best to start by researching the existing businesses and their products. Then, try to find a way to do things differently or consider which products aren’t currently offered. Buyers have thousands of products to choose from on sites like Etsy, so focus on building a product and a brand that will stand out.

Starting a craft business doesn’t require a large financial investment, and it’s something that you can do in your spare time without taking the leap into a full-time business.

Industry Summary

The craft industry has experienced steady growth in recent years, fueled by consumer demand for personalized and locally-produced items. More people are seeking meaningful alternatives to mass-produced products, gravitating towards handcrafted goods and appreciating the skill and artistry behind them. Craft fairs, online marketplaces, and social media platforms have made it easier for crafters to showcase and sell their products, connecting them with a broader customer base.

Steps To Start A Craft Business

Step 1: Research Market Demand

When you’re looking to start a craft business, understanding your market is as important as honing your craft, as it helps you identify customer needs and preferences, allowing you to tailor your offerings accordingly.

Your first step is to figure out who will be interested in your handmade crafts. Are they women in their 30s? Parents looking for unique toys? Eco-conscious individuals? Determining factors like age, gender, location, and interests will help you understand who you’re selling to. Knowing your audience influences everything from product development to marketing strategies.

Once you know who you’re targeting, it’s time to scope out the competition. Look at craft businesses both in your local area and online. What products do they offer? How do they price their products? How do customers perceive them? This doesn’t just show you who you’re up against but also reveals market gaps waiting for someone with your creativity to fill.

There’s no substitute for seeing firsthand what’s out there. Attend local craft fairs and events to get a sense of what’s popular. Which booths are drawing a crowd? What items are people excited about? Talking with attendees can also give insights into what they look for in craft products and what they can’t find.

Utilize platforms like Etsy and other online handmade marketplaces to analyze sellers, products, and sales within your craft category. Study customer feedback to gauge demand and understand customer preferences. Additionally, join craft-related groups or forums to connect with potential customers and gain insights into what they are looking for in craft products.

Step 2: Write a Business Plan

Now that you have conducted market research and gained a better understanding of the potential for your craft business, it’s time to write a business plan. While the idea of starting a craft business is undoubtedly exciting, a business plan serves as a reality check for your idea. A business plan helps you evaluate the feasibility of your idea and ensures you have a viable path to success. By documenting your plans, goals, and strategies, you can objectively analyze whether your craft business concept is practical and can be profitable.

Related: How to write a business plan

Step 3: Register the Business

If you’re starting a craft business, it’s important to properly register your business and make it legal. The specific requirements for registration and licensing can vary depending on your state, but here is a general overview of what you need to know.

Determine your business structure: This is about how your business is legally organized. The four main types of structures are:

• Sole proprietorship: As the most straightforward and cost-effective structure, a sole proprietorship is ideal for individuals starting a craft business on their own. With a sole proprietorship, you are the sole owner and have complete control over your business. This is the default for any new business.
• General partnership: If you’re starting a craft business with one or more partners, a general partnership is an option. In this structure, all partners share the profits, losses, and liabilities of the business equally. A partnership agreement outlining roles, responsibilities, and profit distribution is strongly recommended.
• Corporation: A corporation is a separate legal entity from its owners, providing them with limited liability protection. Forming a corporation involves more complex legal requirements, including filing articles of incorporation, appointing directors, and keeping detailed records. This structure is more common for larger-scale craft businesses with multiple owners.
• Limited Liability Company (LLC): An LLC offers the liability protection advantages of a corporation while retaining the flexibility and simplicity of a sole proprietorship or partnership.

Sole proprietorships are generally the preferred structure for craft businesses due to the low cost and ease of starting.

Related: Comparison of business structures

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).

Related: State guides for general business licensing

While there aren’t typically licenses specifically for craft businesses, there are some registrations, such as a local business license, sales tax permit, and possibly an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 4: Set Up Operations

Once you’ve established your ideas and plans for your craft business, it’s time to begin setting up operations for production. This step involves creating a dedicated workspace, finding reliable suppliers, and determining the right pricing strategy.

Begin by setting up a dedicated workspace that suits the needs of your craft. Whether it’s a workshop, studio, or a designated area in your home, organization is key. Arrange your tools, equipment, and materials in a way that maximizes productivity and creates a safe and comfortable working environment.

The next task is to find reliable suppliers to obtain quality materials and components for your craft products. Retail craft stores may be your best source when starting out, but as the business grows, wholesale suppliers may be able to offer more selection and bulk discounts.

Last, determine the right pricing strategy for your craft products by considering factors like production costs, market demand, and competition. Conduct a cost analysis to understand all your expenses, including raw materials, labor, packaging, shipping, and overhead costs, to price products profitably.

Step 5: Determine Sales Channels

When it comes to selling your crafts, you have options for in-person and online sales.

In-Person Sales:

• Craft fairs and markets: Renting a booth at craft fairs and markets allows you to sell your products face-to-face. Customers can see and touch your crafts up close, enhancing their purchasing experience.
• Pop-up shops: Temporary retail spaces, such as holiday markets or creative pop-ups, provide a low-risk opportunity to test your products and make sales. These venues allow you to reach customers who are actively searching for unique items.
• Wholesale: Selling your crafts in bulk to gift shops or boutiques can expand your reach significantly. However, be sure that your wholesale pricing allows for adequate profit margins.

Related: Do I have to charge sales tax at a craft fair?

Online Sales:

• Your own e-commerce website: Setting up your own website gives you complete control over your brand image and customer experience. Platforms like Shopify and Wix offer user-friendly website builders specifically tailored for craft businesses. Remember to showcase your products with high-quality photos and engaging descriptions.
• Online marketplaces: Platforms such as Etsy and Amazon Handmade connect you with millions of potential buyers. While these platforms charge commissions on sales, they provide access to a large customer base. To stand out from the competition, focus on using eye-catching photos, optimizing your listings with SEO, and engaging in marketing efforts.
  
  Related: How to start selling on Etsy
  
• Social media: Leveraging social media platforms like Instagram and Facebook allows you to market directly to your followers. You can use these platforms to add shoppable posts or direct customers to your online shop. Concentrate on creating visually appealing content and engaging with your audience to drive sales.

Hybrid Approach: Many successful craft businesses utilize a combination of online and in-person sales channels. Start by selecting the options that best align with your products, skills, and target customers. As your business grows, you can diversify and expand into additional channels. The key is to find a balance that allows you to showcase your crafts effectively while reaching your desired audience.

By carefully considering and selecting the right sales channels for your craft business, you’ll maximize your opportunities to sell your products and establish a strong presence in the market.

Step 6: Prepare to Launch!

Before starting your craft business, there are a few important tasks to consider. While the specific needs may vary for each individual, here are some common loose ends to tie up:

Business insurance: Business insurance may be worth considering for craft businesses, especially if selling a high-risk product or if an event venue requires vendors to have one.

Setting up bookkeeping: Establish an effective bookkeeping system using accounting software like Wave Accounting (FREE) or Quickbooks. This will help you manage daily transactions, prepare financial statements, and handle tax obligations accurately and efficiently.

Opening a business bank account: Separating your personal and business finances by opening a dedicated business bank account can simplify bookkeeping and provide a clear record of your business’s financial transactions.

Accepting credit cards: Offering the convenience of credit card payment options can attract more customers to your craft business. By partnering with a payment processor or using a mobile payment solution like Square or Stripe, you can easily accept credit card payments anywhere.