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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on January 13, 2022
Investment range
$1,050 - $6,600
Revenue potential
$40,000 - $200,000 p.a.
Time to build
0 – 3 months
Profit potential
$30,000 - $150,000 p.a.
Industry trend
Growing
Commitment
Flexible
Here are the most important considerations when you are starting your craft business:
Starting a craft business has pros and cons that you should consider before deciding if it’s right for you.
Trends in the craft industry include:
Some challenges also face the industry including:
Startup costs for a craft business range from $1,000 to $6,500. The amount will vary depending on the types and amount of supplies you purchase. The high end of the range includes developing your own website. You can stay toward the low end by selling on marketplaces like Etsy.
You’ll need a handful of items to successfully launch your craft business. Here’s a list to get you started:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corportation | $150 - $200 | $175 |
| Licenses and permits | $100 - $300 | $200 |
| Insurance | $100 - $300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $0 - $3,000 | $1,500 |
| Initial craft supplies | $500 - $2,500 | $1,500 |
| Total | $1,050 - $6,600 | $3,825 |
Your profit will depend on your cost to make the crafts and the price that you sell them for. This will assume that you can make items for $5 and sell them for $20, giving you a profit margin of 75%.
In your first year or two, you could sell 2,000 items in a year, bringing in $40,000 in annual revenue. This would mean $30,000 in profit, assuming that 75% margin. As your brand gains recognition, sales could climb to 10,000 units a year. With expected annual revenue of $200,000, you would make about $150,000.
There are a few barriers to entry for a craft business. Your biggest challenges will be:
Now that you know what’s involved in starting a craft business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research craft businesses online to examine their products, price points, customer reviews, and what sells best. You’re looking for a market gap to fill. For instance, maybe the market is missing a leather goods craft store.
You might consider targeting a niche market by specializing in a certain aspect of your industry such as ceramics.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Your products will be determined by what you’re able to make. Consider what variations you can make to those items and related items that you could make as well.
The prices you charge will depend on how much it costs to make them, but you also need to research what similar products are selling for. You should aim for a profit margin of at least 75%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. Remember, the price you use at launch should be subject to change if warranted by the market.
The target market will depend on the type of products you’re making. If you make trendy jewelry, for example, your target market will probably be younger women. You can most likely find them on sites like Instagram or TikTok.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a storefront. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Discover over 360 unique craft business name ideas here. If you want your business name to include specific keywords, you can also use our craft business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer to create a professional business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to craft businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your craft business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Personal funding is your best bet since startup costs are low.
Starting a craft business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level licenses and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your craft business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You can use industry-specific software, such as CraftyBase, CraftMaker Pro, or erplain, to manage your supply purchases, inventory, sales, and bookkeeping.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your craft business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your craft business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a craft business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in crafting for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in crafts. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
For an at-home craft business you probably will not need employees unless you want to hire people to help you make your items.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Sometimes the best business ideas start as hobbies. If you’re a craftsperson for fun, why not do it for money? Millions of people are doing just that, selling on sites like Etsy, and collectively making over a billion dollars. Your talent is your best asset, so capitalize on it and turn it into a successful company. Now that you have knowledge in your tool belt, you’re ready to start crafting your entrepreneurial adventure!
Yes, you can make money selling crafts by creating unique products and selling them at a price higher than their cost. With minimal ongoing expenses beyond supplies, most of your revenue can be profit.
There are many online marketplaces where you can sell crafts and handmade items. Etsy is the most well-known, and it’s easy to set up your own Etsy store.
Handmade jewelry tends to sell very well. Other popular items include glass etchings, crocheted items, painted bottles, and leatherworking items.
You need to set a returns policy that gives customers a limited time to return items for a refund, or you could opt to set a no-refund policy. If you allow returns, you’ll need to determine who will pay to ship the item back and how that will occur.
Handmade fashion jewelry is relatively inexpensive to make, as are candles. Crocheted items are also fairly inexpensive to make, although crocheting can be time-consuming.
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