Turning Hobby to Business

As makers, there often comes a time when we look at the product of our craft and think, “Could I sell this? Should I sell this?”. A little lightbulb goes off in our heads as we start to think of the possibilities. Maybe there are friends and family that would buy our products. Maybe we pull together some inventory and head to a craft fair. Should we sell online? How do I make this a business that people and potential customers will take seriously? For many, selling your craft, recouping your costs and moving on to the next project brings great joy - and that’s wonderful! Then for many other makers there’s the desire to turn their craft into a business, turn a profit, and make some real income.

For many of us right-brained folks the thought of starting a business is a little daunting. We know how to create! But pricing, and copyright, and websites, and…taxes, yikes! That’s really just the tip of the iceberg. Find some peace in knowing that although the new business to-do list can feel long and overwhelming, you do not need to do everything at once. There are a lot of upfront costs in starting a business and it is truly an investment into your self and growing your craft into something bigger. This willingness and dedication to investing in your growth is the first step to turning your hobby into a growing business.

Here are some basic guidelines to getting your new business off the ground:

Know Your “Why”

Think about why you want to start a business and why you believe in your products or service.

I’ll go first! I started One & Only because I was tired of seeing the same old things given as gifts. After many years of gifting quilts I decided to open up shop and give other people the opportunity to give heirloom quality products to their friends and family, or maybe to keep themselves. The business itself has become fun for me and is something I’ve really enjoyed investing in and watching how it grows.

What is your “why”?

Brand Identity - What is your name?

Although we may be constantly growing and learning, I’m going to assume you have pretty solid understanding of who you are; your identity, what you like, what you don’t like, your vernacular, your style, your personality. Now think about the identity of your business. Is she light and airy, or dark and moody? Dressy or casual? Vintage or modern? Sometimes, figuring out your “why” first can help you name your business or determine your style.

A graphic designer can help you translate your business identity into a logo. You can Google Search for graphic designers that are local to you, or there are numerous website that will allow you to hire a freelance designer and work together virtually. Even Etsy has listings for logo designers and branding packages. If you think logo design is something you want to try to do yourself, free websites like Canva are a great resource.

Whether you hire someone or do it yourself, Pinterest is a great tool to figure out what you want. Not only can you build a mood board of colors, patterns, textures, and styles of how you want your products to look but you can also find a ton of inspiration for logo designs. Your graphic designer will likely breathe a small sigh of relief if you can come to them with some idea of what you like.

Legal Jargon - Part One: Trademarks

Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.

When you’ve settled on a business name the next best move is to get it trademarked. This protects you in a few ways. In simplest terms, you’re protected from copycat businesses trying to sell similar products under the same name, and it protects you from older businesses claiming they had the name first. If you’re the one with the trademark, it doesn’t matter how long they’ve been using it - you own the rights to the name.

Trademarking up front saves you a lot of headache. You can trademark your business name and your logo but the most important is the name because so many other steps revolve around your name. Imagine designing your logos, buying a domain for your website, or ordering your packaging just to find out you have to change your name. Trademarking is going to be one of your larger upfront investments. Budget a minimum of five-hundred dollars for a basic trademark package. I recommend using a website like LegalZoom to help with the process.

Pricing & Sales

Determining what to list your products for can be so tricky, especially in the beginning. The first step to figuring out your pricing is to know your costs. What does it cost to make the product? The next time you make one of your crafted goodies, write down every single thing you use and log how many hours it takes to make it. The supplies will probably be a longer list than you think. For example, as a quilter I use scissors, cutting mats, rulers, an iron, fabric, batting, basting spray, thread, and my sewing machine. Theoretically, the cost of your tools and equipment should be included in your overhead and the cost be passed to the customer or you should be expensing it in your taxes but let’s call that Accounting: Level Two for now and stick to the basics. What supplies will actually end up in your customer’s possession after the sale?

Let’s keep using the quilt example; my basic supplies are fabric and batting.

Here’s a really simple guideline for pricing your products:

Cost of Supplies + $10 per hour spent crafting = Price A

Cost of Supplies x 3 = Price B

(Price A + Price B) divided by 2 = Your Price Average

If you plan on selling online you’ll need to add shipping costs. Your website host may have the capability to calculate shipping per product and sale. If they don’t, you may need to determine your own shipping costs. The easiest way I’ve found to do this is to just go on the website of your preferred shipping carrier and prep a label. My Squarespace E-Commerce website allows me to assign different rates to different products depending on size so I have a flat rate for anything under one pound, and a second flat rate for anything over one pound. Once items are shipped, I log the actual shipping cost so I can track if the rate I’m charging the customer is still in line with what I’m paying as the year goes on. I can definitely say that our shipping costs have increased the most in 2021.

Legal Jargon - Part Two: Entities & Taxes

Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal or financial advice on any subject matter.

This part is going to be short and sweet as I leave most of it up to the experts.

In simplest terms, the United States says any sales made for profit should have sales tax paid by the consumer, and that the profit be subject to income tax as well. Check with your state to see what they may require in order to file or ask a tax expert.

Here are some instructions from the IRS on filing profit and losses from a business. IRS.GOV

And here is a great article from Credit Karma about hobby income. CreditKarma.com

In order to file taxes and claim business expenses you will likely need to establish a business entity or acquire a license. You should check with your local county government for their guidance on new business start-up procedures.

Many handmade businesses can get started with a simple DBA (Doing-Business-As) or Sole Proprietorship. Applying for mine was a quick and painless transaction at the county clerk’s office. If you share ownership with one or more partners you should consider an LLC (Limited Liability Company) with an operating agreement between partners. These are typically drafted by an attorney and is again, something that can be found on LegalZoom. LegalZoom - LLC

Websites
After securing a trademark, this was my second largest business start-up cost. But! I scored a great deal with a 20% off sale through Squarespace divinely timed right at the end of my free trial period. They run these frequently, you should definitely watch out for them!

A lot of makers tend to lean towards Etsy for getting their products out there, and there’s certainly some benefits to doing that. There’s low or no upfront costs, your products are exposed to millions of people, and you can utilize their customer service for sales-gone-wrong but they take a huge cut of your profits for those services; 5% to be exact and an additional 3% if you use their payment processing system. Like many, my initial thought was to use Etsy when I was first starting One & Only but I ran into a few issues. First, someone else was using my business name so I’d have to start my shop under something other than my already trademarked name. Second, there are so many people selling similar products at what I call “hobby rates” or basically just trying to recoup material costs without any real sense of trying to make a business of it. It wasn’t a competitive market for me to try and sell my products for any sort of profit. I didn’t want my products to be grouped with the masses - I wanted to do my own thing.

That said, I will give Etsy some tremendous credit. They created a platform for millions of makers and small business owners to bring their crafts to the big market and I feel that there’s a global movement, greater than ever, to buy handmade and support small businesses. So kudos to Etsy, but we have more options now.

I went with a Basic Commerce Plan by Squarespace. All of their plans offer a custom domain, free for the first year, as well as a professional email by Google, also free for the first year. With this plan I have NO transaction fees on my sales and my checkout process is all direct through my own website. The Basic Commerce Plan also allows you to connect to a point of sale such as a Square Card Reader and sell in person at markets or pop-up shops while staying integrated with your website’s inventory and sale tracking.

I chose Squarespace because it allowed me room to grow. I have the capability to list physical and downloadable products as well as gift cards and services as part of my plan now, and I can add on a subscription sale plan in the future. This year I added their Campaigns Core email marketing feature. The best part is that all of these features and available add-ons are all done through the one host. One login. One page to manage all avenues of my business.

So how much does all of this cost?

My first year:

Basic Commerce Plan at 20% Off: $249.60

Google Workspace Email: Free

Domain: Free

Total First Year Investment: $249.00

Every Year After:

Basic Commerce Plan: $312, Billed Yearly

Google Workspace Email: $6.49, Per Month

Domain: $20.00, Billed Yearly

Campaigns Core: $15.14, Per Month

Total Investment Per Year: $591.56

Is it a big investment for a new business? Yes. Do you need to do it right now? No. But will it be worth it when you do? Absolutely YES.

Your website is the home of your business. It is where you get to make the rules of how you and your products are presented to the world. No social media site or big market hosts can do that for you.

Enjoy Your First Year

The first year of business is hard and sometimes investing in your self is new and different and scary. But I can tell you every ounce of time and money I’ve put into this has been worth it and I’ve seen it all pay off, little by little. Please remember that these are steps, not an elevator. Everything takes time and they don’t need to be done all at once. This is YOUR business. YOU set the pace. YOU get to determine how much you can or want to take on. Last but not least, celebrate every milestone no matter how small they may feel! Finally figured out your business name - celebrate! Website launch - celebrate! First sale - celebrate! First sale that isn’t a family member or friend - celebrate again!

Feel free to share your milestones in the comments!

All links and companies listed in this blog post are not paid sponsors, they are just my recommendations and additional sites I’ve found helpful.