Starting a Handmade Business - Questions to Ask First
If you are a maker, at some point you have probably been tempted to start a business - the dream of making money doing something that you love. I have been down this path twice before and I honestly had no intentions of trying again. Before you get started you really need to stop and think - am I truly ready to start a business? From my experiences (and a bit of research) here are some questions you need to sit down and seriously ask yourself. Download this free PDF of the scoring sheet to fill out as you go through each section.
How I accidentally started a business
When I decided to get into woodworking and purchased a Cricut it was purely for personal reasons. I was actually pretty vocal about how I wasn’t going to start a business. Now here I am a couple of years later … with a business. I joke that I am not sure exactly how it happened. We will go back to 2019 to start the story of - how I accidentally started a business.
2019: Starting to organize my house going room by room – focusing on decluttering. Here are the benefits I experienced from getting organized: The Top 5 Benefits of Getting Organized
2020: Cue Covid and a whole lot of home projects such as staining a desk, building basic tables & shelves, and so forth. I then took on a kitchen remodel that involved refinishing my cabinets. After the kitchen I was working on a project and noticed how little I used my dining room so I turned it into a craft room which included building all the tables. Each project I learned more and more.
Late 2020 / Early 2021: I ordered a Cricut during the Christmas season and experimented with cutting wood shapes. I quickly learned the limitations. One night when I couldn’t sleep I was scrolling on Facebook and saw a post about scroll saws. After a bit of researched I ordered one - by Valentine’s Day I was busy playing with wood … the pine variety. I joke that this is what happens when you put an engineer in quarantine and we get bored.
April – June 2021: I signed up to run for St. Jude - part of which I needed to raise at least $1000. I had made quite a few thing and thought - would anyone buy this? Working with a friend - we posted some things on Facebook, did a garage sale, and signed up for a craft show in early June. During the show people were asking us for our business information which planted the seed to start a business.
August 2021: It is time for our first show. She decided the day before that it was all too much and to not move forward. Cue my first panic attack since we had already committed to several shows - all of which I hadn’t planned on doing alone. That was the official start of “The Creative Engineer”. The image is of my 1st big show, it was mainly my items with a bit of hers mixed in to help me fill up some space.
The last 18 months since that first fundraising show has been one crazy journey. Let’s just say it is a good thing one of my top strengths is determination.
Product
Skill Level
I am honestly shocked by how many posts I see from people who take large orders then don’t know how to make what they sold. Did they not at least build a prototype? I am also curious how they got a large order with no prior experience – but that is a question for another day.
Before you try to add the stress of selling – make sure you have a solid foundation in your craft. I do feel like I started to sell things early then I should have. I started selling before I was comfortable since my goal was to raise money for St. Jude. Because of this, I had to do quite a bit of trouble shooting and scrap some things. I can say that I did not take anything I wasn’t ok with to a show.
1. What is your skill level?
Low: I struggle to make a quality product, you must fix most items
Medium: Generally I do make a quality precut but I have some excess scrap and issues
High: I consistently make a product with a high level of quality
2. How are your troubleshooting skills?
Low: When something goes wrong, I don’t know what to do
Medium: I generally have a good idea how to fix it, but may need to do some research
High: If something goes wrong, I normally know what happened and need to do with minimal research
Product Offerings
Here are some common online posts that I see in my various makers groups: “What is everyone’s best sellers?” or “What can I sell to make money fast”.
The problem with this approach is that it doesn't reflect who you are. Here are a couple of common reasons that handmade businesses fail:
Haphazardly creating products - Not having a cohesive product line
Trying to be everything to everyone - Not having a niche or products with strong Unique Selling Propositions (USPs)
This is still something that I am working through. I don’t think at the beginning you know exactly what you want to make, but you should at least have a generally idea of what types of products.
3. Do you know what types of products you want to make?
No – I haven’t narrowed down a craft type or product
Maybe – I have a general category but not quite sure on what to offer
Yes – I know what product I would like to make & sell
You will increase your changes of success if you create a product that differentiates you from the competitors. If you don’t have anything unique - you are then competing on price which makes it much harder for long term success.
What is your strengths? What makes you unique? What can you offer that your competition doesn’t?
Each product you offer should have an USP.
4. Do each of these products have an USP?
No – You can’t think of anything that differentiates your product
Some – You have some advantages, but need more
Yes – Your product ideas all have solid USPs
Growth
Learning new skills and techniques to expand and grow your business is important. These new techniques can help you to differentiate your product from others. For example, since starting I have gotten a router that I am learning how to use which is allowing me to add more details to my work. Part of growing is stepping out of your comfort zone.
5. Are you willing to learn new skills and techniques?
No - I am find with what I know, I don’t want to try anything new
Some - Maybe, if it isn’t too hard or much
Yes - I enjoy learning new skills and taking on challenges
Place
You have a product – so where are you going to sell it? There are a lot of different options all with different pros/cons.
I would start with 1-2 options then go from there, if you try and take on too much it will be overwhelming. I started with focusing on craft shows which gave me the opportunity to talk to customers and see how they interacted with my products.
Online
Amazon Handmade or Etsy
Your own website
Social Media Sites
Physical Location
Craft Fairs & Markets
Wholesale – Shops & Boutiques
Renting Space at and Existing Shop
Opening up your own store
6. Do you know where you are going to sell your products?
No - I have no clue how to even start
Maybe - Have some idea how to handle it
Yes - I have a plan
I will admit I am more of an introvert, so the selling portion of the business is harder for me. I do struggle with how to interact with customers and not feel awkward. I did try and make boundaries for myself - I try and greet each customer, use my phone only as needed related to the show or replying to a direct question, and sit as little as possible. I set these for myself to make sure that I am focused on the customers and selling. You also need to reply to email, return phone calls, and provide customer service. I will say that if you have a lot of social anxiety, then this probably isn’t the business for you. You must put yourself out there, be vulnerable, and risk failure.
7. Do you enjoy talking to and communication with people?
No - Talking to or handling customers causes me a lot of anxiety
Maybe - I can do it, but have to work at it
Yes - I love interacting with people
Time
When I started down this road, I can say I didn’t quite calculate how much time I truly needed. I wasn’t clueless, I knew it would take a lot of work and wouldn’t be easy, but I also thought there were two of us to handle the load. That was short lived then the burden was all on me.
For the product portion alone, you need to design your line, create prototypes then build actual inventory. That is just the half of it. As a rough estimate about 50% of your time is building product then 50% should be spent on marketing, sales, and administration tasks. I would say for the first 1-2 years figure about how much time you need to build product then take that x3 since you have all the start-up activities. For example it takes longer to build a website from scratch than maintaining one.
Here is an example I put together of the tasks I need to do based on the 7Ps of marketing. As you can see making product is just a small portion of the overall business. If you build it … they will not come, you need to market and sell it.
For example: When I signed up for my first show I had to build all the inventory, build or purchase show displays such as tables/shelves, order business cards, and create signage. It was outdoors so I also needed to purchase a tent and then figure out weights to secure it. All of this takes time.
when building inventory for a show I generally aim to have about 20x what the booth fee is. For example – if a show fee is $100, I try and have at least $2000 in inventory. I generally try and keep a minimum of $2000 in inventory regardless of the show size so that my booth doesn’t feel empty. Bigger shows require more inventory.
The question to ask: How much spare time do you have to invest in this business? If you have just a few hours a week – that is probably not enough. For examples in 2022 I spent about 120 weeks traveling to and participating in craft shows and about 450 hours building products. This does not count other business-related work I have done throughout the year. I would guess about 20 hours a week is need for a part-time business.
8. How much time do you have to dedicate to your business?
Limited - Less than 10 hours a week, if I am lucky.
Moderate - Part time won’t be an issue, I have 10 - 20ish hours a week.
High - I have the time to spend on building my business
Financial
Ever heard the phrase – it takes money to make money? Well, there is a reason they say that. Remember all the places that you need to spend your times… well a lot of this also takes money. Most start-ups lose money the first year. From a quick google search, the average time to turn a profit is 3-4 years give or take. Since I am doing this part time, I am estimating that it will take me 6-8 years to break even.
Starting a craft business will cost you more than you probably think, and this is NOT a quick and easy way to make money. My focus thus far has been on craft shows and my spring shows were a lot slower than fall shows resulting in 90% of my revenue being earned in the fall. You will need to invest money earlier in the year to build inventory months before you start to produce revenue. For online shopping it also takes months to get your first sale and longer yet to build a consistent cash flow. I am just now starting to venture into the online world so I will be seeing how long it takes to build a store and get sales.
For expenses – I am embarrassed to admit that I spent most of 2021 just putting all my receipts in a box then at tax time I finally put them into a spreadsheet. Talk about sticker shock – it is surprising how fast everything adds up. I wouldn’t recommend this approach and I am proud to say I did way better in 2022.
There are also the bigger costs that you will incur – such as after a few shows I knew I needed to get a trailer which I hadn’t initially planned on. Then this year due to building more, I needed to upgrade my dust collection system which was an additional expense.
I would highly recommend not ignoring the numbers and doing an honest account of what all you spend for your business. My expenses are lower while sales higher in 2022 but I am still operating at a loss. As I continue to improve sales and most of my major purchases have been completed - I may even turn a profit in 2023.
So, the question to ask yourself: Do you have the startup money to invest? Can you financially handle a delayed cash flow as you work to build up?
9. Do you have the needed start-up money?
No - I am broke and have nothing to spend
Some - I have some money to invest, but not as much as I probably need.
Yes - I can invest the start-up costs needed to build my business.
You also need to ask - is it feasible to turn a profit in the future? The key here is “profit” and not just revenue. You need to take into consideration all the cost involved from materials, supplies, tools & equipment, marketing, administrative cost, and taxes.
Look at the product you want to make - how much do you plan on selling it for, what the cost and labor time require to produce it, then an estimate of what your other costs will be. Can you produce and sell enough to turn a profit? At this phase you can just do a quick look at the numbers to see if it is worth moving forward.
10. Is the business financially viable?
No - my material and labor costs are higher then my selling price
Maybe - The gross profit on the product is positive, but not sure I can cover my overhead costs
Yes - The gross profit on my product covers should cover my overhead costs
Production Space
I was surprised how fast my house got taken over by this business. The amount of space you need will vary by your craft … but you will need more than you think. I had turned my dining room into a craft room before I started a business which was a huge help. I am also fortunate enough to have a large garage which was built deeper than a standard garage which allowed me to have a workshop. My poor cars still get kicked out of the garage half the year so I have more area to work. Then the work migrated into the kitchen/living room, storage spaces for off-season inventory, and now I have a trailer in my driveway half the year.
I do live on a farm, so once harvest and show season is over I can store the trailer in a machine shed - It is now hanging out with the combine. This clears up space in the garage for one car then the other also is stored in a shed for the winter. I am writing this in late November and I am just now starting to get my house back.
I will say that I need to be better in 2023 I need to do a better job at keeping the business separated from my personal space.
Here are some examples of what you may need space for - it is a long list and remember, you will be building far more then you did when it was just for personal use.
Other:
Trailer & Craft Shows Displays & Figure
Marketing Materials
Administrative: Computer, Printer & Office Supplies
Audio-Video Supplies: Camera, Tripod, Lighting Equipment, Sound Equipment, and Backdrops/Props
Workspace:
Equipment & Tools
Supplies
Raw Materials
Work Surfaces - Production
Drying/Work In Process Areas
Inventory:
Current
Off-Season
11. Do you have extra spaces in your home?
No – I am not sure where I can fit anything extra
Some – I would have to be a bit creative
Yes – I have work and storage spaces available
Business Skills
Congratulations, you are now the president, chief financial officer, head of operations, engineering, marketing, sales, and human resources. Your goals are to develop a business plan, create a budget, handle tracking revenue, expense, and completing your taxes, designing and building your product line, and only then can you market and sell it … your like Dick Van Dyke in Mary Poppins and a one-man band.
Overwhelmed? You’re not alone – it is a lot. When just starting out the ability to hire a team isn’t really an option. As you grow you can start to outsource areas that aren’t a strength, but this takes a while. Having some basic business knowledge is extremely helpful. I joked with a co-worker today that I learned more trying to start my small handmade business than I did when I got my MBA.
12. Do you have the basic business knowledge?
No - I have not clue what any of this means
Maybe - I have some pretty basic knowledge, but it is not a strength
Yes - I have a good foundation
13. Are you able to learn new skills?
No - This is overwhelming and I have not interest in learning more
Maybe - I can probably learn some of the basic skills
Yes - I enjoy learning new skills and knowlege about running a business
Relationships
No one can do this alone. I have some support, but I wish I had someone that I truly could rely on.
My parents have helped some, particularly early on with staining products once I got to that point. My Mom has come to part of my shows to help. In 2021 my boyfriend at the time did help me some, but I am single now so I don’t have that support.
In 2022 almost all the of the production has been on me with little outside help. There have been quite a few shows where I was 100% on my own and some my mom was able to help some. I wish I had more help, but I don’t want people to think I am just using them and I don’t want to be a burden.
I wish that I had someone to really sit down and brainstorm ideas, discuss the direction to go in, and was there for me.
Depending on your situation - you will also need to acknowledged if you have a spouse/partner or family members who are actively against you having a business. That would make this an even harder journey.
14. Do the key people in your life support you? (spouse/partner, family, or close friends)
No - They are against this
Maybe - They aren’t against it, but won’t offer any meaningful support
Yes - They are excited and supportive
15. Do you have people in your life you can help you?
No - I am alone, it is 100% on me
Maybe - I can get some support, but it is limited
Yes - I have people who supportive, willing and able to help and be a partner
Emotional Health
This is the most important section of all. Starting and running a business is not easy. It is way harder and more of an emotional journey than you can probably imagine. It is like a roller coaster ride of highs and lows - and sometime feels like you are just along for the ride.
There are the highs - when you feel like you are top of the world. Like when I have a good show, made something I am truly excited about, or overcoming a hurdle (like the courage to post my 1st YouTube Video).
Then there are days that I ask myself - why am I doing this since it feels like I am destroying my life. I don’t want to admit how many times I have cried over the last 18 months. I was also broken up in early 2022 - as much as it pains me to admit I know that the stress and anxiety played a factor in his decision. The never ending to do list that keeps growing and weight of it all makes me feel like I am drowning. I definitely spiraled downward mentally and came close to complete burnout. I am doing a better now and being honest about this is part of my healing. I am working toward better balance in my life with my therapist.
Part of the anxiety comes from the feeling that you must do it all now. It is hard to not compare to other business that have built out websites, online stores with magazine quality images, blogs, YouTube channels that look professionally edited, and full boutique type displays. You feel the pressure to play catch up because from the customer perspective, they expect the same from a business that has been around 6 months vs 6 years.
After this you are probably thinking – wow – why is she still doing this? For all the shed tears there are also moments of joy. When you finish a project and feel a sense of accomplishment and knowing that you are investing in yourself. To truly experience happiness and joy you also need to feel pain. The disappointment of the bad shows makes the good shows feel even better.
The question you need to ask - can you handle the emotional roller coaster?
16. Do you understand your “why”?
No - I am not sure why I want to do this
Maybe - I think a business is a good idea, but is it for me or for others?
Yes - I have a mission and vision for my business
17. Do you have the emotional energy to take on more?
No - I am already overwhelmed and exhausted
Maybe - I have a lot, but I think I can handle it
Yes - I am excited and look forward to the challenge
18. Is determination a strength of yours?
No – When the going gets tough, I tend to give up
Maybe –Sometimes I can pick myself up, sometimes I give up
Yes – I pick myself up and keep pushing through
Summary
Deciding to take on business shouldn’t be taken lightly. It starts by accident for me, but I am invested in making this work for me.
Go through the quiz and score yourself - make sure that you are honest with where you are now. Do you think now is the right time? If your only reason is I need money quick - I can tell you that is not enough. You need to have the passion, drive, and be doing this for yourself.
“A dream doesn’t become reality through magic; it takes sweat, determination and hard work”