5 Things You Need To Start A Craft Business

Do you want to start a craft business? Make sure you have these five things in place first. Based on a recent Mentor Session with an HBIC HQ member who shared her journey and the lessons she learned along the way, here are the top 5 things you need to start a craft business.

1. Keep & Organize ALL Receipts

When she first started her craft business, she didn’t really think of it as a business but more like a hobby. As she grew she realized how hard it was to go back and create a budget or profit/loss reports. As an effect, she never had a clear idea of what she was spending versus what she was making. She admits there was a part of her that didn’t want to know. Again, at first it didn’t matter as much, but after a few months and a bit of growth, she found out that she really needed to keep track of all of this. As sales grew, the time spent making the product grew as well, so she had to make sure it was actually worth the time. I suggest using a receipt organizer app to keep track of your spending; just scan the receipt as soon as you make a purchase, it couldn’t be easier. Did you know you can write off the supplies you buy for your business on your taxes? You can only do this if you have accurate records of what you spent. Some receipt organizer programs will integrate with tax preparation programs such as Quicken, so keep that in mind when choosing an app. I recommend Neat Receipt.

2. Keep Finances Separate

Speaking of taxes, it is important to keep your business finances and expenses separate from your personal finances. You can open a separate bank account, or even a business account, and get a new debit/credit card just for your craft business purchases. When you get a payment for your products, it should go into this account as well. This keeps it very easy to only use business money for business needs, so you aren’t as tempted to dip into your personal account. It also makes it easy to see buying trends throughout the year based on spikes in sales. As I mentioned before, when she first got started it was more of a hobby so she was just using what she already had and was replacing things haphazardly as she went along. This made it impossible to tell what the true cost of making a product was, which made it hard to budget. Now that all the finances are separate, she says it’s less scary than she thought it would be and she wishes she had done it sooner.

3. Keep Supply & Materials Records

When she started out she was using materials she already had on hand and when it was time to replenish her stock she realized she had no idea where she got many things from in the first place. Keep organized records of vendors, materials/stock, craft fair contacts, shipping and packaging supplies, basically everything you need to run your business. Keep this in mind too, as your craft business grows, your branding has to be on point, and many folk choose the DIY approach to things like logos, website/blog, promo graphics, etc. Keeping records of where you find assets such as stockphotos, audio, video elements, etc will help you to find similar assets in the future and will save a lot of time and frustration.

4. Define & Track Your Metrics

When you first set out on the journey of a creative craft business, the last thing you want to think about is boring numbers and metrics. However, if you start out with a clear plan of how you will track your progress and define success you will have a smoother path. First you need to figure out what “success” means to you. For most, it means making enough profit so they can quit their job. If that’s the case, figure out how much you need to earn each month in order to reach that amount. Then figure out how many items/units you need to sell in order to make this profit (minus expenses). Is this a realistic number? If so, awesome, you’ve got a measurable metric. If not, you will need to evaluate whether to raise your price, cut expenses, lower your income goal, or think about adding other income streams into the mix (but that’s a different post). Some also track metrics based on the time it takes to make a product, which helps you know how much per hour it is worth. Tracking the total sales of each item helps you figure out what sells the most and what might not be worth the time it takes to make.

5. Planning & Milestone Setting

Using a planner, either paper or digital, is the key to success for many top CEOs and entrepreneurs. Using a planner is like mapping out your road trip. By listing out measurable goals and milestones you have a visual cue to make sure you are on track. Your future self will thank you as they go back through to see spikes in production/sales, the time it took to go from one milestone to the next, etc. This helps you to plan for the year ahead. This also gives you a visual of what you are actually doing in a day. Some use one planner for both their business and personal life, while some have separate planners for these. Some people do a weekly pre-plan and fill out their planner on Sundays or Mondays, others fill out their planner each morning. Either way, you should make this part of your daily morning ritual so you can meet the day head on and know exactly what you need to do in order to succeed. You need to understand how much time you spend on your craft business versus how much you are making, minus the expenses you are tracking with your receipt organizer of course. Schedule a Productivity Session to learn how to get the most out of this. 

Keep This In Mind

Knowledge is power. As you get started your numbers will be low, but you can leverage this knowledge and apply it sooner. As an example, during our coaching session, my client pulled up the planner I had her start last March in one of our early sessions together. By being able to see changes over time in things like time-to-make and sales, you can prioritize goals so that you are more productive and you aren’t spinning your wheels. At this point we have nearly reached her goal of being able to quit her job, who knows where she would be now if she had put these elements in place from the beginning. 

Nichol Lachen, our certified Business Coach, is a Founding Board Member of HBIC HQ, a women-owned start-up incubator. She is offering a complementary initial consultation session to help you get started. Reach out now and get one step closer to your goals.

Start a craft business