How to Start an Online Craft Business: 9 Easy Steps [2022]

Starting your own craft business is not very complicated. You can turn your craft hobby into a lucrative business. You have the creativity and the likeness to do so. If you have ever thought about selling your crafts to make good money? How to start a successful craft business? This article will answer all your questions.

Many people successfully started a craft business and earned six figures. You have the skills and the style. You can craft like a professional and you want to bring your creations in front of as many eyes as possible.

Building an online craft business allows you to unleash your potential about your passion. The best thing is that you can start on with a part-time business and later, you can decide whether you want to work on it full-time or treat it as a hobby that makes you extra income.

So, how do you begin?

Here is the 9 Step Guide to Help You Set Up Your Own Craft Business.

Step 1: Choose The Craft Niche

Starting a craft business means there is a world of possibilities. There are many different products in the craft niche. Following are some common niches available,

  • Bags
  • Scarves
  • Hair Care & Accessories
  • Jewelry
  • Cards
  • Bath Accessories
  • Children Toys
  • Paintings
  • Shoes
  • Pottery

Check out the 40 Best Innovative DIY Handmade Craft Businesses Ideas which will help you further to choose the niche properly.

Choosing a niche market is important since each market has its competition, specific expenses, and pricing which depends on the success of your business. The industry experts recommend to first focus on a single or few products that you’ve already mastered and develop that product uniquely to attract customers.

As an example, let’s say you have mastered handbag products. There are different styles, colors, of handbags that differ based on the material. But it is still technically one type of product and you can master unique handbag product development.

Product differentiation is a key success factor in competitive niches like craft products. You should think to differentiate your products from the competition to attract a unique audience.

Demand for craft products varies with the season as well. People prefer different products based on the seasonal holidays, like Valentine’s, Easter, Mother’s Day, Halloween, and Christmas. You should create craft products that match these seasons as well.

You have to consider your skills as well as market interest. A combination of both will help you to skyrocket your craft business growth.

Step 2: Brand Creation

Every business needs branding. Your business will have less attraction without branding. Branding represents the credibility of your business, which helps to build a strong relationship with your customers.

A brand is mainly about the business name, slogan, vision, logo, and color theme. These are the things that your customer first see in your online business. Those should be attractive, professional as well as unique.

You can check with your secretary of state’s website to cross-check whether your chosen business name is already in use. After that, you can consider reserving your business domain name and social media page names to establish your brand.

Strong branding helps you to build relationships with your audience to turn them into loyal customers.

You may refer to the below article which published by the United States Small Business Administration (SBA),

How To Choose Your Business Name – Article Published By Sba.gov

Step 3: Select Business Entity Structure, Registration, Licenses, Tax, Insurance

  • Business Entity Structure

Business entity structure is an important decision to make in your craft business journey. This impacts the operational work of the business like tax policies, operation of the business, and also legal terms. There are mainly four types of business structures available as follows,

Business StructureOwnership
Sole ProprietorySingle owner for the business
PartnershipTwo or more people share the ownership
CorporationOne or more people (single owner or ownership share)
Limited Liability Company (LLC)One or more people (single owner or ownership share)
Business entity structures with ownership

Sole proprietary is the most popular business structure because it’s the simplest and easiest to set up the craft business.

Business liability responsibilities vary based on the business structure. As an example in a sole proprietary business structure, there is unlimited personal liability, but in Corporation or LLC, owners are not personally liable. Please note that the liability, ownership rules, and tax policies for each business structure can vary by state and country.

The details mentioned in this article are written as a general guideline. Please refer to the information provided by state authorities, business attorneys, or tax experts for more information to choose the right business structure for your craft business

Explanation About Business Structures – By Internal Revenue Service Official Website of United States Government (irs.gov)

  • Business Registration

You need to register your business name to make it a unique legal entity. There are mainly four ways to business registration, each way serves different purposes,

  1. Business entity name registration in state level
  2. Trademark (federal level protention)
  3. Doing business as (DBA)
  4. Web domain name registration (protects your business website address)
  • License and Permits

Most businesses need a combination of licenses and permits from both federal and state agencies. I may require multiple business licenses at the state, federal, and local levels. Please check with the respective authorities for more information on this.

Below article of US SBA is a great resource to understand about licenses and permits,

Apply for Licenses and Permits – Article Published by US SBA

  • Tax

You will need to obtain a state tax ID and federal tax ID, which is also known as an Employer Identification Number (EIN). This is a unique identifier number for your business to help with your state and federal tax payments.

Please refer to the state and federal respective authorities for more information since this varies from each country/state.

  • Insurance

You may also need good commercial property insurance. When an unforeseen sudden incident happens on damaging your business assets, commercial property insurance helps protect a business by paying for all or part of costs. This will reduce your business risk of sudden incidents. You have to carefully look into the policy requirement mentioned in the insurance to verify whether it is the most appropriate one for your business.

Business lawyers usually provide consultancy on all of these aspects like business structure, registration, licenses, tax, and insurance to ensure you meet all the regulatory requirements to start your craft business legally.

Step 4: Define Supply Chain

Quality sourcing is a key area for the success of your craft business. Generally, you will need to source leather, straw, paint, glue, cotton fabric, paintbrush, appliqué paper, scissors, etc. This varies with the niche that you have chosen.

You need to consider cost, quality, and time factors. You need to identify the suppliers in your area and understand how to get your supplies, how much do those items cost, what is the expected quality, and how long they take to deliver.

You can always try to negotiate with the suppliers based on a long-term business plan. It will be a win-win situation for both parties. It will be easy for you to work with a few supplies that you trust, which does not compromise the quality of materials.

Keeping an inventory is a good idea, which should be based on the market demand that you forecasted. As an example, most craft niche sales increase during the special seasons. So you need to identify the forecasted sales and get the supplies to be ready with the demand.

Step 5: Decide Sales Strategy

The biggest question in sales strategy is where to sell. There are two ways to online sell your craft products to customers,

  1. Register with an eCommerce online platform and create a shop/store to sell – You can register with leading online platforms like Etsy, eBay, Aftcra, Storenvy, and Zibbet.
  2. Create your eCommerce platform – You can create your eCommerce Platform using Shopify, Magento, Wix, and PinnacleCart.

The best approach is to register with an eCommerce online platform to gain a customer base, establish the brand, gather certain profits, and then you can consider creating your eCommerce platform. You can do both in parallel too.

Alternatively, you can also consider opening a physical store once your brand is established well. This will help to further boost your sales and revenue.

You should also check about how you can ship/deliver products to your customers. USPS and FedEx are the main services available in the United States. The shipping charges may vary with the country, state, and weight of your delivery. You need to check these as well.

Also, you should do a competitor product pricing analysis to benchmark your pricing. You have to compromise a bit on your profit to make your product pricing less than the competitors to attract initial sales. Providing spontaneous discounts is the best way to attract customers to proceed with the sales.

Platforms like Etsy have a method to provide a discount for abandoned shopping carts. Want to know more details on this? Then please refer to the below article for 15 unique ways and tips to boost Etsy sales,

15 Unique Ways and Tips to Boost Etsy Sales – By LearnBusinessConcepts.com

Step 6: Funding Method

There is an upfront cost required when starting a business. For an online craft business, the Initial investment required is low and only related to the cost required to purchase raw materials, rent, and other minor expenses.

You are fortunate if you have some money saved in your account to put those into this investment. But if not, you can consider the below funding methods,

1. SBA Loan

SBA loans are guaranteed by the U.S. Small Business Administration and issued by participating banks. These SBA-backed loans have flexible terms, low-interest rates, and it is easier for small businesses to get the funding they require.

2. Term Loan

You can get a term loan with a lump sum of cash upfront in exchange for specific borrowing terms with interest rates. You have to agree to pay a fixed amount over a certain repayment period with a fixed or floating interest rate.

3. Microloans

Microfinance provides loans to small businesses or individuals, who traditionally lack access to banking and related services. This is a less difficult route to access startup business loans. Microfinance institutions offer loans with little to no assets.

4. Credit Cards

Certain banks allow you to borrow against your credit card limit and then pay back monthly over a set repayment term. This is one of the easiest ways to obtain a small loan.

Step 7: Create Consolidated Business Plan

A business plan consists of many things related to your business. It includes a mission statement, what types of craft products offering, competitive advantages of your products, your industry outlook, target market, and competitive position. These are the sections of a strong business plan that will help you to keep your craft business growing.

You don’t want to create a formal business plan to start your business unless regulators require it. But you need to understand the above-mentioned aspects of your business to make this a successful one.

As an example, competitive research will show you what other businesses are doing and what their strengths are. Why your competitors are successful? How you can make your craft company successful? What are your complete marketing strategies? Analyzing these questions will help you to be more successful than your competition.

You can visit craft shows, or browse craft marketplace websites like Etsy and Amazon. See what are the craft products offered in your niche. See the best-selling items. See the customer review comments for those products. You can understand more about your customer expectation and competition by doing these things.

Also, you can consider creating your financial statements like income statements, balance sheets, and cash flow statements. This will help you to view different financial aspects of your company.

Also, you can think about your strategic partners like suppliers and subcontractors. You should have a good strategic partnership with your partners to be successful.

Step 8: Start Selling Products

You now know your craft niche, created your brand, created the business entity, know well about the supply strategy, decided the sales strategy, fund your business, and have an idea about your business plan. Now you have left only to create craft products and sell.

Step 9: Learn From Your Failures and Grow

Success is never guaranteed the first time you are doing any work. It may be facing an exam, playing a game, or starting your online craft business, there is no assurance that you will succeed in your first attempt.

But experience in failures pushes you to go after your target. You will keep trying until you get it right.

You need to carefully look back on your failures. You have to analyze in-depth what you did wrong, what causes the failure, and then decide what changes you should do to be successful on the next attempt. This is an iterative process. The wisdom of learning from failure is incontrovertible.

When a baby is first learning to walk, he/she is going to fall many times. This is a failure, but one day the baby will walk. He/she might fall many times, but he/she will surely walk. We all know that failing while learning to walk is just a part of everybody’s life. So, why isn’t a failure at other things treated this way? Baby is learning from his/her mistakes and trying to walk somehow, you should also learn from your mistakes while facing the failures to be successful.

“Failure is success if we learn from it.”

Malcolm Forbes

We wish you all the very best in starting your online craft business. You can surely be successful on this.

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