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Written by: Howard Tillerman
Howard Tillerman is the Chief Marketing Officer for Step By Step Business and an award-winning marketing professional.
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 July 27, 2021
Investment range
$2,000 - $20,000
Revenue potential
$68,000 - $320,000 p.a.
Time to build
0-3 months
Profit potential
$54,000 - $128,000 p.a.
Industry trend
Growing
Commitment
Flexible
Key aspects to consider when initiating your embroidery business:
There are many factors to consider when deciding on the business you want to pursue, so here’s a breakdown to get you acquainted with the embroidery industry.
Weighing the pros and cons is essential in measuring long-term value and potential return on investment. Before you make that first stitch, here are a few points to keep in mind:
Trends that shape the embroidery industry include:
Challenges in the embroidery industry include:
Starting an embroidery business is surprisingly affordable, with low-end startup costs of around $2,000 for a home-based setup. If you have a bit more capital and would like to open an embroidery shop, you could spend $20,000 or more to get started. The average startup cost for an embroidery business is around $11,000.
For a commercial embroidery business, your primary expense will be a computerized embroidery machine, as well as an increased marketing budget to draw business.
You’ll need a handful of items to launch your embroidery business. Here’s a list to help you get started:
If you have a shop or intend to set up a large-scale embroidery business, you may need additional equipment including a computerized embroidery machine, shop furniture and fixtures, computers, and other equipment.
Here’s a sample cost breakdown to give you a better idea:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Business licenses and permits | $100 - $100 | 100 |
| Branding, marketing and advertising | $1,000 - $7,000 | $4,000 |
| Embroidery tools and supplies | $600 - $1,250 | $925 |
| Computerized embroidery machine | $0 - $10,000 | $5,000 |
| Hiring | $0 - $250 | $125 |
| Insurance | $100 - $400 | 250 |
| Website and software | $200 - $1,000 | 600 |
| Total | $2,000 - $20,000 | $11,000 |
There are essentially three main questions to ask when considering the potential revenue from your embroidery business.
With a home-based embroidery business in your first year or two, you can expect to embroider 5-10 items every day. That puts your average at 7.5 items per day. If we assume you make $25 per item, then you’ll see more than $68,000 in annual revenue. Assuming a profit margin of 80%, you’ll earn more than $54,000 in annual profit.
As your business grows bigger, you can potentially decorate 25 to 45 items daily, and average at 35 items a day. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of almost $320,000, you’d get a tidy profit of $128,000.
Although your overall revenue and per-unit revenue will depend on a variety of factors, it’s worth noting that even small operations can significantly grow in profitability as you strengthen your market share. You might take a cue from the founders of the Foundry Printshop, who, despite humble beginnings, are now on their way to $1 million in annual sales.
While getting into the embroidery market isn’t particularly difficult, there are some challenges that you should take note of:
At this point, you’ve got all you need to know to determine the viability of your embroidery business. The next step is to refine your idea into an action plan.
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.
Let’s start with identifying your business opportunities.
Traditionally, embroidered products were used in household items such as bedding, table linens, and clothing. But these days, the biggest opportunities are in the corporate sector. Many organizations are now opting for embroidered uniforms because of their higher durability compared to other types of decorated apparel.
But the appeal of custom embroidery not only lies in its durability but also in its elegance, which the corporate sector finds especially useful. It’s used as a branding and advertising tool by many organizations, while the fashion industry uses embroidery as ornate decorations for garments.
This increasing adoption of embroidery among consumers and the corporate sector presents ripe opportunities for entrepreneurs looking to start a new embroidery company.
The secret sauce to your success will be largely based on the level of creativity and innovation. You can leverage the technique you’re most skilled at or combine several styles to boost demand within your target market.
There are a handful of embroidery techniques you can choose from, so in case you don’t know where to start we’ve listed the most important ones below:
Here’s a list of the most popular downstream fields of embroidery that you should also consider:
When deciding on a competitive price for your products and services, there are a few things to consider, including overhead costs and order complexity.
If you’re a new, small-scale business owner operating from home, your overhead expenses will be minimal. You might change $0.50-$1.50 per 1,000 stitches, depending on your experience, quality, and job complexity. This gives your rate a competitive edge over shop-based embroiderers.
On the other hand, if you’re looking at a shop-based embroidery business, you’ll have to charge a higher rate to compensate for labor and overhead expenses. Your price range might be between $1.50-$4.00 for 1,000 stitches depending on your costs, knowing you can deliver a higher volume of orders.
The price of hand-embroidered hats averages $5 to $10, while t-shirts range between $20 and $30.
For orders that need precision embroidery, using a computerized machine will increase the cost. The average cost of digital embroider items runs from $10 to $60 depending on stitch count and complexity.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
To establish a successful embroidery company, you should understand the local market dynamics, demand drivers, and how well you’re connected with your target market to sell your products.
You could specialize in a particular type of embroidery for a specific target market niche or offer a wide range of services to a wide target market. Your final target market segments should be influenced by market-related factors rather than your personal choice.
The following are potential target market segments for an embroidery business:
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:
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 below. 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 set 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, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch 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 are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to embroidery.
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 embroidery 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 are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding an embroidery business. You might also try crowdfunding if you have an innovative concept.
Starting an embroidery 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 (DBA), health licenses and permits 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 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 embroidery 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.
If you want to be competitive, you’ll probably need good embroidery design software such as Hatch Embroidery, Stitch Era, and EmbroideryStudio to create designs from scratch or by scanning images.
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 services like WordPress, Wix, or Squarespace. 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 set 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 embroidery 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 embroidery 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 an embroidery business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in embroidery 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 embroidery. 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.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an embroidery business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
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.
Now that you have an in-depth understanding of the embroidery market, it’s time to roll up your sleeves and put your plans into action. The hardest part will be the first 100 days of business development, when you’re still trying to find clients.
But you can make this work if you put in a lot of hard work and use the marketing strategies we’ve outlined above. You can also do affiliate marketing, where you compensate third parties in order to generate traffic to your website. You can develop long-term relationships with these affiliates and generate traffic for each other.
You’re now ready to start embroidering and making good money!
There are a variety of products that you can embroider, but the five most common products are apparel, aprons, headwear, bedding, and towels.
The main characteristics of the best embroidery machines are remote computer screen, software compatibility, memory size, stitch count per minute, and overall value for the money. The top picks are Horizon Memory Craft 12000, Brother SE600 Sewing and Embroidery Machine, and Brother Serger, 1034D.
Learning embroidery is not difficult at all, rather it is enjoyable which can quickly become your favorite pastime. Best of all, it’s not expensive.
Hand embroidery is suitable for a solopreneur starting a new company from home. It can be extremely profitable with the potential to generate an 80% net margin.
Absolutely! There are multiple platforms available that will help you sell your embroidery designs including EmbroideryDesigns.com and EmbDesignShop.com.
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