If you’re blessed with a knack for taking a raw material—wood, wool, wax, you name it—and turning it into something beautiful, you’re lucky. Research shows crafting can reduce stress, build self-esteem, and promote healthy aging.
Beyond the health benefits, crafting can offer a chance to make money. As of 2022, the global handmade items market was valued at more than $752 billion, and the industry is forecast to grow at an annual rate of 9.1% between 2023 and 2028.
If you have a passion for creating, launching your own craft business can allow you to enter a growing industry and earn money doing something you love. Here’s your guide for how to start a craft business.
How to start a craft business
- Conduct market and audience research
- Design your products
- Decide where to sell your products
- Create your brand identity
- Create a marketing plan
- Plan your business finances
- Form your business
- Purchase supplies and make products
- Set up your online store
Starting a business is a lot of work. You’ll need to acquire new skills, expand your knowledge base, and build your professional community.
As a skilled craftsperson you already possess vision, dedication, and attention to detail, all qualities that will serve you well as an entrepreneur. Follow these nine steps to develop your craft business plan and start earning money selling your products.
1. Conduct market and audience research
Market research involves gathering data about your target customers, your competitors, and the potential market demand for your products. You can read competitor websites, consult trade journals, and browse industry blogs for ecommerce and small business trend reports relevant to your target market.
This research also helps you define your target audience and gather information about your target customers’ desires. You can use this information to create your product line, develop your brand identity, and plan marketing outreach.
You can refine your initial ideas as you conduct market research. For example, if you make wooden birdhouses, you might identify your target audience as homeowners between ages 40 and 75 who live in the countryside or suburbs and have an interest in wildlife. Further research might tell you that a specific subset of this demographic—women aged 55 to 75 in the Southeast and Midwest—purchases 70% of all novelty garden products, and 20% have an interest in birding. You might take this smaller demographic group as your target audience, further research their needs and purchasing patterns, and use this information to develop your brand identity and initial product line.
2. Design your products
The next step is designing your product line. To maximize your chances of success, build your products around the needs of the target audience you identified in your market research. You can also look for gaps in competitor offerings. If birding message boards are flooded with queries about where to find birdhouse replicas of famous buildings like the Chrysler Building or the US Capitol, you might offer these products to take advantage of the unmet market need.
Know if your products or industry has regulations you must follow in order to manufacture or sell them. For example, food safety standards, and soap and cosmetic guidelines and regulations outline the best practices for making and selling these goods to the public.
3. Decide where to sell your products
Many craft business owners sell at local craft markets or through partnerships with local merchants. Others join an online marketplace like Amazon Handmade or Etsy.
You can also start an online craft business by launching your own online store. You don’t need an expensive and complicated website to get started. You can set up a Shopify store using a free theme, customized with your photos, fonts, and colors.
Once you’ve made a plan, estimate the costs associated with selling on each platform and choose the best option for your business.
4. Create your brand identity
Your brand identity is your company’s messaging and visual style. It includes your business name, logo, typography, color scheme, voice and tone, and brand imagery. Think of it as a graphical and narrative representation of your company’s unique personality.
Business owners use market research to develop brand identities that both reflect their company values and resonate with their target audiences. If you sell handmade sporting gear to a target audience that values personal challenge, adventure, and novelty, you might select a bright color palette and a bold visual style. If you sell aromatherapy candles to an audience seeking tranquility, you might opt for soothing pastels and low-contrast images.
5. Create a marketing plan
A marketing plan is a strategy for getting your products in front of potential customers. Although you will continue to refine your marketing strategy over time, creating an initial plan can help you estimate your marketing budget so you’re ready to hit the ground running after launch.
The plan includes your marketing goals, key messages, and marketing channels, such as social media, email, online advertising, and influencer marketing. If you plan to use social media sites, you can also set up social media accounts for your business during this stage.
Some ways you can consider marketing your new business include:
- Social media marketing
- Email marketing
- Collabs and influencer marketing
- Public relations and earned media
6. Plan your business finances
Financial planning is essential to running a profitable business. It involves estimating your expenses, pricing your products, and calculating your profit margin. If you plan to approach potential investors or apply for a small business loan, you’ll also need to create a formal business plan.
Consider the following types of expenses at the outset:
- Startup costs. The cost of licensing fees, necessary equipment, and initial marketing and branding investments.
- Direct costs. The cost of craft supplies, packaging, shipping, and any other costs associated with making a product and completing an order.
- Overhead costs. Software licensing expenses, marketplace selling fees, marketing costs, insurance, and other recurring expenses associated with running your businesses.
Once you’ve estimated your expenses, you can use this information to price your products. This process has three steps:
1. Calculate the direct cost of each product
2. Factor in overhead costs and startup expenses
3. Apply a markup
Determine your selling price by adding a markup. This is your profit, which typically ranges from 20% to 100% of the item’s cost to produce. You can use a profit margin calculator to determine your markup.
Check your price against rival offerings to see how they compare. You may need to adjust them based on what you find or how the market responds to your product and price. If sales are disappointing, resist the urge to simply reduce your markup to be more competitive—if you do, you risk taking a loss on every sale. Instead, see if you can reduce overhead or production costs. If you can’t, you might be comparing yourself to the wrong businesses. Look for competitors selling premium products at a price comparable to yours.
7. Form your business
The next step is forming your craft business. This involves selecting a business structure, such as a sole proprietorship or a limited liability company (LLC). Consult your state’s website—usually the Department of Revenue and Taxation page—to determine if you need a business license or to register your business.
In some cases, your additional obligations will depend on your business entity type. Many states don’t require sole proprietorships to obtain business licenses, but you’ll still need to register your business name using a doing business as (DBA) to open a business bank account, accept payments, and keep your personal and business finances separate.
If you plan to sell outside of our own state, you may also need to register and be prepared to remit sales taxes to those states or regions.
8. Purchase supplies and make products
Once you’ve formed your business, you're ready to start making products. Research wholesale suppliers, select vendors, and order the supplies you need to launch.
The number of products you’ll need to make will depend on your business model and estimated sales volume. If your products are custom or made-to-order, you might only make enough to use in high-quality product photographs. If you plan to sell at craft fairs or in brick-and-mortar stores, or you anticipate large order volumes, you may decide to build up an inventory before launch.
9. Set up your online store
If your plan is selling crafts online, your final pre-launch step is setting up your online store. You can use an ecommerce platform like Shopify to design an ecommerce website, list your products, and accept various payment methods. You can also list and sell your items on an online marketplace like Amazon Handmade or Etsy.
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How to start a craft business FAQ
Can you start a craft business with no money?
Craft businesses can have low startup costs, but at minimum, you’ll need to factor in equipment and materials expenses. If you plan to sell products online, you’ll also need to pay for setting up an online store or listing your products in an online marketplace.
Do I need a business license to sell my crafts?
Whether you need a business license to sell crafts depends on the legal structure of your business and applicable state and local laws. Consult your state’s Secretary of State or Department of Revenue and Taxation for specific guidance.
Can I sell my crafts at local craft fairs and markets?
Yes. You can sell products at local craft fairs and markets, on an online marketplace, or through your own online store.