Starting a craft business
In this harsh economic climate and an oversaturated craft market it is quite a challenge to run a successful craft business. I thought I would share the lessons I have learnt in the 4 years or so that I've been runing my business in the hope that it may help some of you. It has been an extreme learning curve and I have learnt so much I will spread it over 2 articles so as not to overwhelm you! Please bear in mind this is an introductory article, I have covered many of the subjects in much more detail in other articles and in my book.
I’ll start by telling you a little bit about myself and how/why I started my business. I was a stay at home mum after having my son James (pictured right in the first year of my business) and after a year I was getting very bored! Once maternity pay stopped I realised that I needed to earn some money, but I didn’t want to put my son in full time childcare to go back to work so I decided I needed to think of something I could do from home. From what I have observed of the craft industry this seems to be one of the common reasons for women entering the craft industry.
I started out working for my mum designing and running the website for her dressmakng business and then I spotted a gap in the market. There was a growing interest in sewing, yet high street sewing shops were disappearing and people didn’t know where to go to find supplies. That combined with a surge in online stores and increased use of the internet lead to the idea of a sewing directory.
I researched the idea from home for a while and then realised I was going to need funding and business support. I applied to the Prince’s Trust Enterprise Program and fortunately was accepted. This gave me access to a one week intensive training course covering business basics and a start up loan to get the business off the ground. They also provided a business mentor who I could turn to for advice during my first 2 years of business.
The Prince’s Trust taught me one very important thing, that research is critical! I thought I had done plenty of research before I went on the course but I was nowhere near what was actually needed! You need to clearly indentify your target audience – approximately how many of them are there, how will you be able to reach them, what kind of money will they be prepared to spend, what will they expect from you? I've written a more detailed guide to business planning and research here.
You also need to ensure you research your competitors (Please note this does not mean copy! – more on this later). Who are your competitors, what do they do well, what do they do badly, what will differentiate you from them? Learn from their strengths and weaknesses, be inspired by them and try not to duplicate their mistakes.
Thirdly, you need to research your costs: contact suppliers and find out how much your materials will cost you, contact magazines/websites/blogs and find out how much an advert will cost, how much will it cost you to get a website, what are the sales costs for selling through an online market place like Folksy, Etsy, Misi etc? There is a good article on pricing your wares here . Research how you are going to raise the money to start, the best loan rates and terms, grants, savings etc and don’t forget to work out how you will pay it back in the event that the business fails.
Ensure your business idea is financially viable
Once you have researched all your costs you will be in a position to work out whether your business is viable. Calculate the cost to produce each item in materials, factor in any overheads and most importantly factor in your time! This is the one area many crafts tend to forgot. You time has a cost, how much cost is up to you. If you genuinely love what you do and don’t want/need to be paid much more than minimum wage then cost your time out on minimum wage. If you expect to be earning £20 an hour then you need to work out what that will make your final product cost and whether you will be able to sell at that price.
Once you have decided your business idea is viable, and you can find a way to source the initial capital, or if you are going to build up slowly with a low outlay please don’t forget to factor in the fact that you will probably not be making money from the day you start. I’ve seen people struggle because they have forecast that they will be earning x amount per month, but failing to realise that it takes several months to build up a customer base and to establish regular sales. Unfortunately, it is not as easy as making a product, listing it for sale and then waiting for the money to roll in. You need to promote your products/shop/service continually to keep a steady income coming in (more on this later too).
Support & Finance
There are many agencies both local and national who will help you with finance and support for starting a business. I was lucky enough to fall within the criteria for the Prince’s Trust (aged under 30) but most local councils offer help and funding, plus there are local agencies such as Venture Wales who I did some marketing courses. If you search the internet for ‘business support’ followed by your town or area you will find your local one. Most of them offer free training courses, networking events and some offer a mentoring service or the chance to have a one on one meeting with a business advisor. Find local 'starting your own business days' which are run by several of the agencies together here.
There is also a wealth of support online; I’ve listed a few of the sites I’ve found useful below:
A few of the sites are for Welsh based agencies as that is where I am based, but the information is useful wherever you are based.
Most business support agencies or websites will be able to give you advice on raising finance. Many local councils are trying to encourage new business start ups so are a good place to start. They are agencies/charities who will give grants, you can get loans from banks or even from family members. The one thing I would advise is that if you can do it without taking a loan then do, having a loan hanging over your business creates a lot more pressure. It can also be disheartening when every penny you earn for the few months/years goes straight back out onto your loan. However, do bear in mind what I said earlier, that it can be several months before you start making money so you need to make sure you have enough money put aside to survive those first few months/first year.
Firstly I would like to point out that I am not an accountant, my advice is based purely upon what I have learnt in the last year running my own business. I would highly recommend the Inland Revenue courses on starting your own business and submitting your tax return. They are free and are very useful, plus you have the chance to ask questions. Contact the HMRC to find out when your local courses are or do one of their online webinars.
Accounts are one of those things that people dread so they tend to put it off for as long as possible. I really do not see the point in this as it only makes it harder when you finally get to them. How will you remember what the mystery £6 transaction is on your account a year later? I started out with intentions of balancing my accounts every single month, and of course that didn’t happen. However, I do make sure I do it every 3 months, that way when you come to the end of the financial year it isn’t half as daunting.
If you are relatively up to date with your accounts it will be easy to submit them early in the new financial year. There are two benefits to that, firstly you don’t have the worry of having to do them at the back of your mind for months, and secondly it gives you longer to pay your tax bill. Also don’t forget to register as self employed when you start your business, the details of how to do it are here. It’s a quick and easy process and it ensures you pay your national insurance contributions.
If you spend a fair amount of time on your computer, as I do, then I’d highly recommend putting your accounts into a spreadsheet and update it every morning or evening. I tend to update mine both late morning and late evening so it is constantly up to date. Also as a little motivating factor the first sheet of my spread sheet has just 4 figures – total turnover, total outgoings, profit for year to date and current solvency. It’s nice to be able to open the file and see how much you have achieved so far that year. For my receipts have a big box folder that I store physical receipts in and an e-mail folder for online receipts. If my laptop is off I put paper receipts in the laptop (between the keyboard and screen) so I remember to enter them onto my spreadsheet before filing them. You can find various book keeping, cash flow, invoice templates for free download on the Microsoft website here.
I hope you have found all the above useful. Part 2 of this article an be found here