In a world where we're swamped with the mass-produced, there's a unique charm that comes with handmade goodies. They're a delightful cocktail of creativity, individuality, and a splash of human touch that machines just can't mimic. If you've been mastering a craft and want to convert your passion into a rewarding venture, let's walk through some key steps to kick-start your handmade business.
Ever wondered why I refer to it as a Micro Business instead of a Small Business? Funny enough, a small business is officially described as an independently operated enterprise with a workforce that usually does not exceed a whopping 500 employees. Now, for most of us, 500 employees are hardly 'small', right? That's precisely why I prefer the term Micro Business, signifying a business employing fewer than 10 people, which feels more relatable to most "small businesses" out there.
So, where do you start? The truth is, starting a business feels like trying to unlock a secret door where no one gives you the full code. There's always an extra step or task that pops up unexpectedly.
Step 1: Identify Your Niche
Launching your business needs clarity about where your products fit in the grand market puzzle. What sets them apart? Who would be captivated by them? This is your niche - that particular market segment your products cater to. Let's say you're a home fragrance company, with candles as your primary product, standing out can be tough. But don't sweat it. If the market of your choice seems crowded, remember there's no one else who can bring your unique creative touch to the market. Other makers might exist, but remember, there's only one of you, and that's your USP.
Step 2: Build Your Brand
Your brand isn't just a fancy name and a pretty logo. It's the emotion people experience when they engage with your business. It should strike a chord with your target audience and reflect your business's personality and values. It's a good idea to check if the name you love is available for a website domain. You don't want to be smitten by a name and later discover the website domain is already in use, and you're left with a .net. Also, ensure your name isn't trademarked. You don't want to be slapped with a lawsuit!
Step 3: Pen a Business Plan
Your business plan is like a treasure map. It outlines your business's objectives, target audience, operational structure, financial forecasts, and marketing tactics. It provides your business with a clear direction and could be crucial if you're looking for external investments. This step often gets brushed under the rug because, let's face it, we're creatives, and planning isn't really our favorite pastime. But trust me, sit down, and ponder over your business. Do you aspire for it to be your full-time job eventually or just a side hustle? Do you wish to offer wholesale? Participate in pop-up markets? Where do you envision yourself and your business in a year, two, five? Ask these essential questions. When I began Ghost Poppy, it was just a creative outlet. However, after 3 years, my husband and I sat down, crafted a business plan, and realized I wanted it to be our full-time job. If I had done this at the onset, I would be further down my path than I currently am.
Step 4: Choose Your Business Type
There are three types of businesses:
- Sole Proprietorship: This is a business owned and operated by a single individual. The sole proprietor bears personal responsibility for all business debts and liabilities.
- Limited Liability Company: This structure combines elements of both corporations and partnerships. It limits the personal liability of the owners and offers pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by shareholders. This type of business structure offers limited liability for its owners, but is subject to double taxation.
Oh boy, do I wish someone had sat me down and given me a comprehensive crash course on the different types of micro businesses before I started. I mean, in my head, I was a one-woman show, so logically, I assumed I had to opt for a Sole Proprietorship. But here's a surprising revelation: you can actually be a single-member Limited Liability Company (LLC) - and that's what I wholeheartedly recommend.
Why, you ask? If you're dreaming of turning your passion project into a full-time gig, like I did, going the LLC route can offer you significant advantages, like paying less in taxes and having the ability to write off more items than a Sole Proprietor would.
Here's the rub: as a Sole Proprietor, you're liable to pay self-employment taxes on all the profit your business makes in a year. This holds true even if you don't break even or pay yourself a dime - you still owe taxes on all the income generated. But as an LLC, you're only taxed on the amount you've paid yourself from the business' profits. Trust me, that's a game-changer. Check out this chart for a detailed breakdown of different types.
Step 4: Make It Official
Next on the agenda is making your business official. Register it with the relevant local or national authorities. Depending on where you're based, you might need to secure certain licenses or permits. A pro tip here is to set up a separate bank account for your business - it keeps your finances tidy and organized. Also, get your hands on that Sellers Permit ASAP! It's a lifesaver that'll exempt you from paying sales tax on supply purchases. To open a bank account for your business, you'll need to register for a Federal Tax ID number and a DBA. The DBA, or "doing business as," allows you to conduct business under a different identity from your personal name or your official business entity name. I can't stress enough how beneficial it can be to check out your local city or county's micro business resources - they're packed with helpful information.
Register for California Seller Permit here
Register for EIN/DBA here
Step 5: Get a Bank Account
Choosing the right bank to safeguard your hard-earned money can be another stressful decision to make. Here's something you should know: bank accounts tailored for micro businesses tend to have quite different terms and features than personal bank accounts. For a small business without much starting capital, you might find yourself grappling with hefty fees for a business bank account. Many banks demand a specific amount to be maintained in the account at all times, or they'll hit you with fees. Plus, some even limit the number of transactions you can make in a month.
Speaking from my own experience, I opened an account with Chase simply because my husband had been a longtime customer there. But hindsight is always 20/20, and now I wish I had opened a business account with my Credit Union instead. Given their not-for-profit nature, Credit Unions usually charge fewer (and lower) fees for business accounts.
Here is a list from Keeper Tax that gives insight to the Major banks business accounts
Here is a pros list to why a Credit Union might be better for your Micro Business
Step 6: Craft Your Products
Once your business infrastructure is set up, you'll be itching to get your hands dirty and start creating. That's the fun part of a handmade business, right? Whatever your craft might be - from knitting scarves to fashioning jewelry - your products should ooze your unique style and vision while living up to your target market's expectations. But before you dive into creation mode and start ordering supplies, ensure you've done thorough research to get the best supplies at the best price.
As a handmade business, your products are your brand. They should be of high quality and consistent. Whether you're knitting scarves or crafting jewelry, your products should reflect your unique artistic vision while meeting the expectations of your target market. Before you place your first order for supplies make sure to research for the best supplies for the best price. As a Micro Business you can't afford to order 10,000 candle jars at 10 cents a piece, your lucky if you can order 100, which is going to cost you 1.10 each. As you grow you'll be able to bring your cost down by ordering in bulk, but when you're first starting these large quantities are just no feasible. Therefore you need to make sure you are able to order smaller quantities, but be able to order in bulk in the future. Once you have your suppliers figured out, find the FAQ page, there will be a section about sales tax. It will look like this:
Are your products tax exempt?
Many states are now requiring taxes for online purchases. If you are tax exempt and have a valid state permit, please send that to email@example.com so that we can notate your account.
This is when getting for sellers permit saves you money! Send your sellers permit and a filled out BOE. They will apply it to our account and you will not have to pay sales tax on supplies. Do it for every single site you order supplies from, sometimes they have a form they want you to fill out, other times just a simple email to their customer service department is enough.
Step 7: Price Appropriately
Pricing your products is another key step that can make or break your business. Remember, you're not just covering your costs - materials, labor, overhead - but also aiming for a profit. Handmade goods are unique and require time and effort, so they often command higher prices.
So a candle costs me $2 to make, I need to sell my candle for at least $8 because it covers the candle that just sold, but also so I can make a new one, plus I get an extra $4 that is profit. But, I also wholesale, wholesale is typically sold at 50% of the sale price. So a wholesaler pays me $4 for a candle. Now I'm not making an money, just coving costs. So If I raise my price to $25 and Wholesale to $12.5, I am now making enough to cover expense, make a new candle and have a larger profit to sustain the business.
Step 8: Establish an Online Presence
In the digital age, an online presence is crucial. Facebook, Goggle, Instagram, Website are a must. Other social media platforms are an extra bonus and more customers reached. We will only recommended Shopify as a website host.
User-Friendly: Shopify is known for its easy-to-use interface. Even if you're not tech-savvy, you can set up and manage your online store without much difficulty. This platform is designed to take the guesswork out of the technical aspects of setting up an online store, making it suitable for beginners.
Versatile Design Options: Shopify provides a range of professional, customizable themes - both free and premium. This versatility allows you to create a storefront that matches your brand's aesthetics and appeal.
Reliable and Secure: Trust is essential in eCommerce, and Shopify provides robust security measures to protect your site and customers' information. Additionally, Shopify's hosting is reliable, ensuring your website remains accessible with minimal downtime.
Integrated Payment Gateway: Shopify includes a built-in payment gateway, Shopify Payments, and also supports a multitude of third-party payment processors. This flexibility makes it easier for your customers to make purchases in the way that is most convenient for them.
SEO and Marketing Tools: Shopify supports SEO best practices like customizable H1, title, and meta tags to help your store rank better in search engine results. It also includes marketing tools like product reviews, email marketing, and social media integration.
Inventory Management: Shopify provides effective inventory management tools that can help you track stock counts, automatically stop selling products when inventory runs out, and even alert you when it's time to order or manufacture more products.
Excellent Customer Support: Shopify offers 24/7 customer support, meaning you can get help when you need it via phone, email, or live chat.
Scalability: Shopify can handle the growth of your business, from your first sale to thousands of orders a day. As your business grows, Shopify can accommodate your needs with various plans and app integrations.
Mobile Responsive: Shopify themes are mobile responsive, which means your store will look and work great on any device, a crucial factor considering the growing trend of shopping on mobile devices.
App Integrations: The Shopify App Store has thousands of apps that you can integrate into your store to automate tasks, add new features, and improve your sales process.
Step 9: Market Your Business
Marketing is the lifeblood of your business. Whether it's social media advertising, email marketing, content marketing, or even making appearances at craft fairs, you need to get your products noticed and convince potential customers they're worth buying. It might seem daunting, but honestly, as a Micro business, you'll have to wear all these hats.
- Social Media- Instagram, Facebook(yes, Boomers have money and use Facebook) TikTok, and any other platform you can find
- Email Marketing- We use Mailchimp, to me email marketing doesn't require a whole lot of depth, but as your business grows, you might want to use a platform that can give you better data and target your customer better. Here is a Forbes article about the different platforms
- Content Marketing- Blogs, Podcast, Video's, I know this seems like a lot, and it is. I'm sure you just want to make your wares and call it a day. Which I totally support, but if you want to make it your career, you'll need to do more than make your sellable items. Luckily there are tools to make it easier and save you your very precious time. Chat GPT is a great way to create blogs, podcast episodes and video content ideas in minutes. I know there is a lot of push back on AI, but as a Micro Business owner you simply can not just open a store on the corner and expect to get any sales. You have to do it all, and AI can assist. We use Chat GPT to help write emails to prospective wholesalers, write blog posts, write social media post captions, help with podcast episodes and help generate new ideas for our business.
- Pop Up Events- The bread and butter of a micro business. Once you start doing markets, you'll soon be invited to more! Look for local craft markets, farmers markets, makers events, store openings, etc. Talk to other makers and they will let you in on all the other markets in the area.
Step 10: Be Adaptive and Resilient
Be ready to adapt and stay resilient - running a handmade business can be a roller coaster ride of ups and downs, but it can also be incredibly fulfilling. Turning your passion into a profession may require blood, sweat, and tears, but the joy of creating something with your own hands and sharing it with the world makes it all worthwhile. So, go ahead, let your creativity blossom, and take the first step on your entrepreneurial journey. Trust me, it's worth every step.
Please note that the information contained within this blog is intended for general informational purposes only. It does not constitute legal advice, nor is it intended to replace professional counsel. We encourage readers to consult with a qualified professional or legal advisor for specific advice tailored to their unique circumstances. Ghost Poppy assumes no responsibility for any actions taken based on the content of this blog.