How To Start a Craft Business (Step-by-Step Guide)

Whether you’re starting a jewelry business, scrunchie business, candle business, or any other type of crafty business, the basic steps are the same. 

This article shares the essential steps to starting a craft business and is a simple quick-start guide. 

Each step shares a brief explanation and then links to articles to help you dive into a subject further, if required.

 

Important Note

Chances are, you already have a good idea of what you’re going to sell. 

However, I’d encourage you to stay flexible as you work through these steps. 

If you want a successful craft business, it’s important to make products people want to buy.

Don’t get stuck in a pattern of doing what you’ve always done, working with what you already have, or making the products you want to make. 

You have to be willing to adapt. Don’t try to mould customers around your business; mould your business around your customers.

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Step 1 – Legal

By the time I got around to registering my handmade business I had already been using a name and printing it on marketing material and labels. At the registries office, I was informed that there was another business with the same name. 

Luckily, the business was also a sole proprietor and in a very different industry, so having the same name wasn’t going to cause brand confusion. I was able to add a noun to my business name (i.e. “accessories”) to register it and continue using my original business name as a DBA (doing business as).

If I hadn’t been so lucky, I would have had to spend money reprinting marketing material and product labels. If I had been further down the road, I may have also had to change my website domain, change my social media handles, redesign a logo, etc.

If you’re going to start a business make sure you run it properly and follow the required laws to avoid costly mistakes.

 

How to get setup legally

What you sell and where you sell it will determine which laws you must follow. 

You may need to:

• Register your business
• Obtain licences and permits
• Follow regulations (e.g. label laws, children’s products have strict safety regulations to follow, etc.)
• Obtain a tax ID
• Etc.

Laws for Selling Handmade will guide you through the steps. 

 

Step 2 – Target market

When I first started my handbag business, I didn’t even think about who my products were for, beyond making them for women. 

I made sales when I was at a craft show and the organizers put shoppers right in front of me, but had a hard time finding customer on my own.

When I started making a weekend bag, I stumbled upon a target market. 

I realized targeting a market based on a common interest, travel, made it much easier to build a product line, find my customers, and sell. 

My booth was busy, I had retailers asking about wholesale orders, sales came in after the event, and my business had a clear path.

You can alter your products and many other business elements; that’s the easy part. 

Finding customers is the hard part.

So start with a customer you know you can find, relate to, and build a business for. 

 

How to choose your target market

A small business will have an easier time finding customers and grabbing their attention when their products relate to a common interest. 

Demographics are important (you need to know if you’re marketing to a 20 year or a 50 year old), but psychographics offer more essential information. 

Consider targeting a market based on a psychographic such as:

• Interests
• Hobbies
• Activities
• Lifestyle

When the only information you know about your target market is their age, gender, location, or other demographics, it’s almost impossible to narrow down which product features they’re interested in. 

On the other hand, if you know your target market is interested in yoga, you know they’ll be interested in yoga-themed or yoga-related products and marketing messages. You also know exactly where you can find those people; yoga studios, reading yoga magazines and blogs, watching yoga videos on YouTube, etc. 

These are all places a yoga-focused business can reach their target market.

Remember, the goal isn’t to find a common interest that aligns with the products you’re already making (or planning to make); that rarely works out. The goal is to find a common interest you can adapt your products to to align with.

Once you choose a target market based on a common interest/psychographic, then you can research and define demographics and how you’ll adapt your business to your target customer.

Here’s more information on how to find your target market: How To Find the Correct Target Market for your Craft Business

 

STEP 3 – USP (unique selling position)

I sold at my first craft show in 2005. There were only a handful of craft shows in my city, so it was almost a guarantee I’d be accepted if I applied. And Etsy had just launched, so competition was low. I also found it quite easy to get featured in local newspapers and even bigger magazines. 

As the years went on, I was no longer just one of a few handmade bag vendors in my city. I was often competing with dozens of bag vendors when applying to craft shows or trying to get shoppers’ attention. 

I was forced to differentiate myself from the competition, which came when I refined my target market and developed my signature style.

There are millions of handmade businesses today, so if you don’t have a way to stand out, your products will get lost in the crowd and you’ll have a hard time attracting shoppers, let alone making sales. 

A USP (unique selling position) answers the consumer question “why should I buy from you?”.

If you can’t figure out how your business and its products benefit your target market more than your competitors, consumers won’t be able to either. 

 

How to find your USP

There are many ways a business can stand out. For a truly unique angle, you’ll likely find you need to combine several of the elements listed below.

 

Market research

Before you can determine how you’ll stand out, you need to know what you must stand out from. Conduct market research to get a better understanding of who your competitors are, what they’re selling, areas of the market they’re missing, what they do well, and what you can do better. 

 

Target market

Sometimes choosing the right target market is enough to make your entire business stand out. For example, while most candle makers are targeting “women” or “home owners”, a candle business that targets people interested in astrology with their zodiac-themed candles will have an easy time standing out. 

Consider if you can choose a unique target market for your industry/product, or perhaps there’s a segment of your target market you can build your business for.

Signature Style

A signature style is a style/look/aesthetic that’s repeated throughout your products. When you focus all of your products on a specific color palette, material, design, or other defining element, your business becomes known for that style. Your products become recognizable wihtout your logo or name attached to them and consumers know to come to you for that specific style.

Check out: How to Develop a Signature Style for your Handmade Business

Niche

Finding a niche is about focusing your business on something specific. There are a few ways you can do that. 

• • Target market segment – there may be an opportunity for you to find a niche within your target market. For example, a business targeting moms can find a segment based on different demographics, such as: moms of twins, moms of newborns, moms to daughters, etc.
  • Product subcategory – focusing on a specific type of product within your product category can help your business become the go-to for consumers. For example, a candle business may pivot into diffuser blends, incense, or simmering pot potpourris.
  • Product feature – repeating a specific product feature throughout your product line can also help a business find a niche and stand out. For example, a jewelry business may exclusively create pieces using turquoise stones. They would become knows as THE vendor for turquoise jewelry.

Brand

Sometimes the product itself isn’t that different from a competitors, but the branding is what positions it as different. 

Take Pepsi and Coke. They’re very similar products but Pepsi’s brand evokes a young, hip vibe (often hiring young celebrities for their commercials) while Coke is more classic and family-focused.

A soap business may be selling regular bars of soap but its colourful and humorous branding can make it stand out from bars of soap with basic and predictable branding.

Benefit

There may be a benefit your products or business provide that most of your competitors don’t. It doesn’t have to be “unique”, as in no one else is doing it, but rather “different” from the norm. 

For example, a soap business may focus on using the best moisturizing ingredients to offer the benefit of moisturizing soaps. Jewelry may have the added benefit of reminding people of a place they’ve travelled (e.g. travel-themed charms and pendants). A business may set up a “one for one” program by donating donate a winter hat to a local charity every time they sell a winter hat.

STEP 4 – Product Line

At my first craft show I made flannel pajama bottoms with matching rice heating bags, which were packaged in a matching drawstring bag. My business partner also thought it would be fun to create pillows out of vintage t-shirts, so we had a few of those, as well as his photography prints. 

We thought the product variety would help draw more shoppers to our table. We did attract a wide range of shoppers but it didn’t necesarily help sales. It also made it impossible to pin down who our typical customer was and what we should make more of for them. 

We never sold more than one item at a time. Someone buying photography for their home wasn’t also shopping for pajamas and heating bags.

Our selection eventually morphed into handbags, but in the beginning, no two items were the same. Nothing matched or worked together, they were just a bunch of bags showing off how creative we could be with designs and fabric combinations. 

Once we focused on the weekend bag and created other items that worked with that weekend bag, our units per transaction increased, as did our repeat customers.

You need a cohesive product line to build a professional business, increase sales, and boost profits.

There are also studies that tell us, a lot of variation can help attract shoppers, but it harms sales (you can read more about one study here).

 

How to plan a product line

Always keep your shoppers top of mind when making decisions about what to create. 

• Limit options – try following this 3 – 5 technique when building out your product line.
• Ladder system – consider following this ladder technique when planning your product line to ensure every piece works together.
• Add-ons – consumers tend to shop in one product category at a time (e.g. shop for home decor or fashion accessories, but not both). So consider items your customers might want to add to an order. For example, someone buy pajama bottoms might also want a matching top, a sleep mask, slippers, etc. They’re unlikely to be shopping for pajamas and photography at the same time. Take your main items and consider add-on items that work with them. Read more about add-on items here: How to Use Add-Ons to Sell More Handmade
• Up-sells – offering bigger, better versions of your products is another good way to appeal to different segments of your target market and different budgets. For example, silk pajamas would be a better version of flannel pajamas. Read more about up-sell items here: How to Use Up-Selling to Sell More Handmade
• Down-sells – a down-sell item may be beneficial if you sell higher-priced items. It acts as an introductory item that requires less risk for new customers. Read more about down-selling here: How & Why a Craft Business Should Down-Sell

 

STEP 5 – Brand

My handmade business didn’t start with a lot of branding…it didn’t even start with a logo. It was simply my business name in a script font. But that font fit the feeling I was going for with my bags.

Branding can get as complicated and as expensive as you like. But in my opinion, it’s often not worth it to spend a lot of money on it to start because a brand will develop as your business does.

However, you should have a clear idea of what you want your brand to be so you start to build cohesion throughout your business.

 

How to develop your brand

Think about the way you might label someone based on the way they dress, talk, and act. Someone doesn’t need to walk around saying “I’m sporty” to give off the vibe of being sporty. They might dress in a sporty way, play sports, watch sports, talk about sports, use sports jargon, etc.

A brand works in a similar way. It’s the way someone might describe your business based on the way it consistenly looks/talks/acts.

Start with the information you’ve defined in the previous steps and who you want to serve, what you plan to sell them, and why (what makes your business unique?). Keep that in mind as you choose one or two words to describe the feeling you want your business and products to evoke, the vibe you want to create, or the style you want to exude. For example, beachy & casual.

Once you have your brand word(s), consider the ways you can communicate it through:

• Visuals – colors, icons, fonts, photography style, logo, etc.
• Voice – what’s the style of writing or speaking, tone of voice, keywords, etc. that will help communicate your brand’s vibe or feeling?
• Behaviour – the way you act at a craft show, communicate with customers, process orders, etc. will also give off a vibe or feeling. Will you act formal and professional at craft shows or be more laidback and casual based on your brand?

 

STEP 6 – Pricing

In the beginning, I followed the popular pricing formula:

Production Costs x 2 = Wholesale Price

Wholesale Price x 2 = Retail Price

I didn’t track my expenses outside of materials…I didn’t even track my hours. 

When I finally took the time to calculate profits after a big craft show (which I thought I had done really well at, based on how many sales I made), I realized I was barely profiting.

If you’re not profiting, you won’t have a business for long. 

You’re simply spending money to earn it back when you make a sale. 

You need to earn more money back than you spend on materials, packaging, marketing, craft show and Etsy fees, etc. so you have money to put back into your business to grow sales above and beyond what they were last month. 

Profits also ensure you’re getting paid for more than just the hours you work and you get to be a business owner, not an employee.

 

How to set your prices and profit

It can be hard to set prices when you don’t know what all your expenses are and how many hours you’ll work. These two guides will help.

You can:

• Use this pricing formula and estimate your costs: The Right Way to Price a Handmade Product (Step-by-Step Formula)
• Reverse engineer your prices by working with your competitor’s prices: How To Keep your Product’s Price Competitive

If you set a price and then realize, after a few months of operation, you’re not covering all your costs or profiting as much as you’d like, don’t be afraid to adjust your prices. 

 

STEP 7 – Sales channel(s)

I started selling handmade through craft shows. The problem with craft shows being my only sales channel was I couldn’t make sales outside of event hours. 

I eventually set up an online shop, and started selling my products wholesale to retailers and through consignment stores. 

Every month I had revenue flowing in, whether I was selling at a craft show or not. 

When you’re running a business, you need to be prepared for ebbs and flows.

A craft show may have low attendance, Google or Etsy may change their algorithm, causing your shop’s traffic to drop in half, a retailer may decide not to re-order, etc.

When sales from one channel dip, the other channels/platforms can help keep you afloat. 

 

How to choose your sales channels

The most popular ways to sell handmade are:

• Craft shows & markets
• Online marketplaces such as Etsy or Amazon Handmade
• Website
• Wholesale to retailers
• Consignment through retailers

>> Here are several places to sell your products online: Where to Sell Handmade Online (Besides Etsy)

>> Here are ways to sell your products locally: Where to Sell Handmade Crafts Locally (Top 20 Places; Ones you Haven’t Thought of)

Weigh the pros and cons of each and consider what’s right for your business.

Not every business has the profit margins to sell wholesale and not every product is right for craft shows. Some people aren’t tech savvy and prefer to interact with people face to face while others prefer to keep their business online.

You can start with one sales channel to ensure you don’t get overwhelmed, but it will be important to add one or two more so you have multiple ways for money to flow to you.

For each sales channel you choose, there will be subsequent steps to take. 

For example, if you decide to build a website, you’ll need to:

• Register a domain name
• Set up hosting
• Choose a web builder
• Build the website
• Etc.

Once you choose your sales channel(s), research the steps you’ll need to take to get set up on each.

 

STEP 8 – Marketing Plan

If I could, I would create all day, every day. But I learned quickly; if you build it, they will not come. You can’t ignore marketing.

If you don’t time to market the products you make, you’ll never get them in front of enough people to make a sale. 

Just as you need multiple sales channels to ensure a steady flow of sales, you need to use multiple marketing channels to send a steady flow of shoppers to those sales channels. 

You also have to consider how many marketing messages your potential customers are exposed to each day; a lot. So simply posting a picture of your latest product isn’t enough to grab attention. 

You’ll end up wasting a lot of time and money if you simply wing it when it comes to marketing. You need a plan for the different ways you’ll reach your target market and how you’ll grab their attention.

 

How to plan marketing

Which sales channels you use will dictate your marketing methods. 

For example, if you mainly sell online, focusing on SEO, building your newsletter list, blogging, paid ads, etc. will be appropriate marketing channels/methods.

When selling at craft shows, you’ll want to focus on reaching your target market locally. Sending press releases to local newspapers, handing out marketing material at each event, attending networking events, etc. can drive more people to your craft show booth.

Below are some of the common ways to market a craft business:

• SEO (search engine optimization)
• Press releases
• Social media
• Email marketing (i.e. newsletter)
• Blogging
• Paid ads
• Craft shows
• Marketing materials
• Guerilla marketing
• Cold emailing
• Networking events
• Etc.

Determine which channels and methods will work best for your business based on the sales channels you plan to use and your skills/strengths.

It will also be important to create strong marketing messages. 

“Here’s a link to my latest Etsy listing” isn’t enough to capture someone’s attention on social media. 

Think about your target customer and the types of images they’re attracted to and the key messages that will get their attention. 

The goal isn’t to make a sale with your marketing. It’s to leave a breadcrumb that piques your target market’s attention and leads them to a sales channel.

 

STEP 9 – Presentation

I studied visual communication in college and worked as a visual merchandiser for multi-million dollar retailers. 

So you would think I would have known better than to show up to my first craft show with a wrinkly tablecloth and no plan for how to display my products. And to put more thought into the background and lighting when taking photos for online (they were taken in my kitchen with overhead florescent lighting and with my brown speckled laminate countertop as the background).

What surrounds your products is just as important as the products themselves. 

That’s why different retailers can charge different prices for the same item. Higher-end fixtures, props, store finishes, and even the part of town a store is in can make an item seem more expensive to the shopper.

How you photograph and/or display your products will determine how much shoppers think your products should cost and whether or not they’re willing to pay their price.

 

How to present your products 

The sales and marketing channels you plan to use will determine which visual elements you’ll need. 

When selling and marketing online, you’ll need:

• Product photography
• Logos
• Banner images (e.g. website home page image, Etsy banner, Facebook or YouTube banner, etc.)
• Social media images
• Etc.

When selling at craft shows you’ll need to plan your craft show display, which will require items such as:

• Tablecloth
• Display fixtures
• Props
• Signage
• Attire
• Etc.

Consider how you’ll present your products based on the marketing and sales channels you’ll plan to use. Keep their presentation on-brand and in line with the prices you’ll charge.

 

STEP 10 – Goal Setting & Tracking

When I worked for major retailers each store had a sales goal to hit each month. That goal was then broken down by weeks, days, and even how much they expected each sales associate to sell per shift. 

Every morning, before a store would open, there would be a sales goal meeting so everyone knew the number they wanted to hit. As the visual merchandiser I was responsible for moving products around to ensure the items that were selling best, company wide, were in the most dominant spots so shoppers wouldn’t miss them.

If you want a business (and not a hobby), you should set goals, plan the projects that will help you reach those goals, track important numbers, and analyze your numbers at the end of each month to see where you can make improvements. 

 

How to set goals and track numbers

There are so many goals you can set and numbers you can track, but most of them end up being distractions. 

Here are the numbers I suggest you set, track, and calculate each month:

 

Revenue

How much money do you want to make each month? Once you know that, plan the projects that will help get you there. For example, if you want to sell $500 worth of product in July, you may need to sell at a craft show to help you reach that goal. “Sell at a craft show in July” is a project. Researching craft shows, applying, creating inventory, etc. are the tasks that will help you complete the project. 

 

Conversion rates

Conversion rate is calculated by taking the number of people who take a desired action by the number of people who do and don’t take that action (the turn that number into a percentage).

A desired action may be:

• Buying an item
• Clicking on a link in a social media post
• Opening your newsletter
• Completing an order once an item is in their cart
• Etc. 

For example, if 200 people visit my online shop and 5 of those people buy, I would divide 5 by 200 to get more online shop’s conversion rate. 

5 divided by 200 = 0.025 x 100 = 2.5% conversion rate

Calculating conversion rates will help you determine how well your marketing and sales tactics are working. They can point out leaks in your funnel and where you’re losing people. 

For example, if you send out a newsletter and very few people open it, that tells you you need to write better subject lines. On the other hand, if you have a good open rate but a low click-through rate, you need to work on your call to action. If your newsletter has a high unsubscribe rate, that tells you you need to work on the content of your newsletter and provide more value. 

Calculating the conversion rate of each step you want subscribers to take helps you find where you need to make improvements.

Keep track of numbers that allow you to calculate conversion rates for your marketing and sales channels. 

Read more here: How To Use Conversion Rates to Increase Sales

 

Return on investment (ROI)

ROI is measured by dividing the profits an investment produced, by the cost of the investment.

For example, if you spend $20 on an ad and only sell one $20 item because of that ad, you did not make a return on your investment; you lost money. 

Track how much time and money you spend on the tasks that should help you make sales. Then track how many sales you make because of that task and the profits from those sales. 

If you’re constantly spending time on Facebook to promote your products, you want to be sure that time is helping you produce sales. Then you want to be sure it’s producing enough sales to cover the time and money you spend on Facebook.

Return on investment will show you where to spend more of your time and money and where to spend less of it. 

>> Download the free printable checklist here <<

 

As you complete the steps outlined in this article, you’re creating a detailed plan for your business. Use this information as you make decisions to ensure you stay on the right track.