How to Start a Handmade Business

Starting a Handmade Business
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Lesson 1: How to Start a Handmade Business
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Introduction: How to Start a Handmade Business

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In this first lesson, we're going to cover some of the biggest questions new business owners have, including naming your business, registering your business, and even taxes.


You Have a Product, Now What?

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I often see people asking "What sells well on Etsy?" (or any of the other handmade marketplaces out there). In my opinion, this is the wrong way to go about it! You want to stand out and make quality products you love, instead of copying what's popular and cranking out items in the hope that they'll sell.

Plus, if you try to jump on the "popular" train, chances are you'll end up in a sea of reseller listings - meaning you have less chance to be seen or sell your items.

The best case scenario when starting a handmade business is to have a product (or a few!) that you're passionate about. Focus on finding out what you love to make and work from there!

Once you're settled on a product, it's time to do a little market research.


Market Research

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One of the major steps to opening a store is having a look at your competition and asking yourself some hard questions. Etsy is one of the best places to look, as well as Handmade at Amazon!

How is the market for your product?

Try searching around and having a look at other shops that sell products similar to yours. Try to find shops with a good amount of sales and reviews (100+ at least!) so you can focus on what other sellers are doing right. Important things to focus on include:

  • Pricing - How are they pricing their products? Compare a few shops to get a better idea - some sellers tend to price low in an effort to sell more, while others price to make a profit.
  • Photos - How are they photographing their products? Is there a theme to their shop? Do they have a defined "brand"?
  • Listing descriptions - How thorough are their descriptions? Are the products sold as-is or are they customizable?
  • Reviews - These will help you see what a seller is ACTUALLY selling, and how those products are being received by the customers. A seller may have hundreds of items in their store, but only consistently sell a few of them. Those few items are GOLDEN - they'll give you an idea what customers are really looking for.
  • Product variety - Does the seller offer a large variety of products? Is there something missing that you could easily produce?

While market research can be a little tedious, it is SO important to learn more about your competition. Seeing what works well for other sellers will make setting up your own shop much easier and allow you to avoid issues you may run into if you try to wing the whole thing. :)


Naming Your Business

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Once you've done a bit of market research and confirmed the products you'd like to sell, it's time to pick out a name for your business!

There are really no hard and set rules for naming, but here are a few tips:

  1. Make sure the name is easy to spell AND say. You want customers to be able to find you easily online!
  2. Google and make sure the name isn't taken by someone else.
  3. Once you've picked a name you love, make sure to register it on social media and the marketplaces you would like to sell on. You want your business name to be the same on every platform so customers can easily find you.

#2 is honestly one of the most important things to do if you think you've settled on a name. It would be a shame to choose a name already taken and run into legal trouble down the road if your shop takes off!


Registering Your Business

Depending on where you're located, this process can change drastically! Your best bet is to look for your country's small business association or government website to find out the details.

Here are a few of the major ones:

My personal recommendation as a small business owner is to first set up as a sole proprietorship (also known as sole trader in the UK & in Australia) in your state or province. This is the easiest type of business to set up and gives you total control over every aspect of the business.

In most cases, all you need to do is register your "trade name" - also known as your business name - in your local state or province. This links your legal name to your business name. Sometimes this is free, but usually there is a small fee. For example, it cost me $20 USD to set up a sole proprietorship in Colorado, USA.


Paying Taxes

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Once you've got yourself set up as a sole proprietorship/trader, you'll need to figure out how to pay taxes where you are. There are many resources available online to figure this out, and you may even be able to meet with someone at a local small business association to get help!

P.S. Please note that this is not official legal advice! Make sure to consult your local laws and regulations to make sure you're covering all the bases.


Federal/Government Taxes

Every year when tax times comes around, you have to declare the entire amount of money you've made through your business. Even if you've made very little, or your deductions are more than your profit, you should still declare.


Deductions

While filing your federal taxes, you are also able to add any business related deductions. Business related deductions include:

  • Shipping costs (packaging, envelopes, etc.)
  • Advertising costs (business cards, flyers, etc.)
  • Travel expenses
  • Tools, equipment, product supplies

However: be careful when deciding what to deduct! You need to have receipts and well organized paperwork for everything you deduct.


State/Province Taxes

Depending on where you live, you may also be subject to state or province taxes. This sometimes requires signing up for a sales tax license. Check with you local government to find out more.

As an example: in Colorado, if I make under $1,000 a year and sell online, I don't need to sign up for a sales tax license. However, I would still need to declare my sales to those customers living in Colorado so I can pay the appropriate sales tax.

Payment on state/province taxes varies - you may pay once a year, twice a year, or quarterly. This often depends on how much money you make.


Special Sales Tax Licenses

If you find yourself selling in person at craft fairs, flea markets, farmer's markets, etc. chances are you will need a sales tax license if you don't have one already. However, in many places you can register for a one-time-use sales tax license just for the event you're selling at.

Again, make sure to check with your local state/province and the event you're selling at! The event coordinators will let you know what you need.


Creating Your "Brand"

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Now you have a business name and a product or two figured out - it's time to figure out your brand. Another good way to think about branding is to call it your aesthetic or "look".

Chances are your brand will morph and change over the years, and that's okay! My Etsy shop has undergone a ridiculous number of makeovers through the years.

Things to consider when branding your shop:

Your logo:

This doesn't have to be professionally made - my first logo was a hand drawn cat head outline with the words "making jiggy" inside it. My current logo is a "making jiggy" hoop that is embroidered with flowers, vines and leaves, which is much more in-line with my current products.

Brand colors:

If you have favorite colors, or even colors that show up quite frequently in your products, try to use them across all your products, logos, packaging, etc.

Fonts:

Find a couple fonts you love and use them throughout your shop and social media. Because all of my products are hand drawn and hand lettered, I like to use Amatica for headings and any graphics I make. For my PDF patterns, I combine Amatica with Abel (a nice san serif font) for easy readability.

My favorite sites for free fonts are dafont.com and 1001freefonts.com.

The language you use:

Be consistent in your writing - keep it casual, all business, or something else entirely! I tend to write like I talk, which seems to be the easiest way to stay nice and steady in tone.

Images:

Try to have a theme that runs through all your images, or even a color scheme that ties them together. This can be really simple or more complicated - it's all up to you! For me, I tend to keep my backgrounds nice and light colored (marble contact paper, white or lacy fabric) and my photos fairly bright.

I went through my favorites on Etsy and found some great examples of cohesive, well-branded shops! Have a look:

  • CraftyWoolFelt: I love the overlays on their photos and the descriptive text.
  • cozyblue: This shop has the CUTEST packaging.
  • IdolLeisure: A great example of using simple bright colored backgrounds to make the product really pop!
  • MinimalVS: This shop has a great mix of macro and modeled images to showcase their jewelry.
  • IRISMINT: Gorgeous, hand knitted goods! Their photos are so clear and the colors are gorgeous.
  • PegandAwl: One of the best examples of having great branding while having multiple product types - all of their photos have the same look and feel.

Marketing Yourself

It may seem a little early to be doing this, but I have found that it's really important for your buyers to get to know you and your process. Many online shops allow you to write a short biography or link to other social media.

The essential question you want to answer: Why should someone buy from YOU?

In a sea of other sellers, it is SO important to stand out for one reason or another.

In my case, I lean very hard on my online portfolios on Instructables and Instagram. They show that I am able to complete projects and meet deadlines, and that I have years of experience with embroidery.

In the next lesson, we’ll dive deeper into the true costs of running a handmade business.

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