The Business Side of a Successful Online Craft Start Up

Considering your own online craft “start up” is exhilarating, isn't it? After all, if you are like most crafters, you've been giving away your tangible creativity in one form or another for years. At this point, you're convinced you can craft all the way to the bank. Most online or brick-and-mortar craft business owners will readily admit that it takes a lot more than just a great idea and endless energy to have a successful online business.

This article will help you work through some immediate considerations as you prepare to enter the world of online retailing. As with any large project, you'll also need to determine your mid-term and long-term objectives and plan for future growth. But first, let's get this crash course started!

Startup Costs

An online craft business venture can be surprisingly affordable, depending on the business model you choose. Commit to using your money wisely from the very start. Most people simply incorporate the costs of crafting into their personal budget by using some (or, let's face it, all) of their discretionary income. Once you decide to move to an online business format, you'll need to keep good records and carefully separate your business money from all your other money.

An integral part of any craft business is “inventory” which is simply the term for parts and products used to create the items offered for sale. Make a list of every item you'll need to have on hand. Factor in delivery time if you purchase online and how much space you'll need for storage. Organization will be key or you'll find yourself using valuable minutes searching for materials. Devise a streamlined system for re-ordering by noting vendors, contact information, SKU numbers, quantity, color, size. These details will save you time and frustration when it's time to re-order.

Volume discounts can be attractive when starting a business but you'll want to avoid having too much stored inventory, even after your business has become successful. Picture that static inventory as stacks of twenty dollar bills and you'll see why you need to balance inventory as you strive to keep your business viable. Keeping just enough inventory on hand, along with that handy reference guide for re-ordering, will ensure that you can fill orders efficiently. Otherwise, you risk losing customers to a competitor.

Plan the Work, Work the Plan

Consider your business “footprint” and keep it as large as possible.

Is it your dream to become a major craft business? If so, adding employees is in your future. Where will you find employees? Will you teach them your particular craft form or will they need a background similar to yours? Can you contract with others or outsource some of the work? You don't need the answers to all of these questions immediately, but you do need an outline for the future.

Map out your time frame for building a brand, growing a customer base, and having regular sales coming in. Be realistic and remember, you'll be busy in your workroom while all of this is going on, too. You should calculate your operating expenses and try to have several months of funding before you even get started.

Selling Your Crafts Online

Figure out how much you need in sales to cover overhead. Online retailers don't pay rent and utilities the same way brick-and-mortar places do but there are details to consider all the same.

An attractive, user-friendly brochure-style website is vital to the success of an online business. A website that displays your products will cost you a few hundred dollars, depending on what you need. Domain names are critical, but registration can be as low as $2 or so a month from a reputable provider. You will also need a place to host your website which starts around $5 per month. Start with the most affordable plan that provides what you need until you have the traffic and sales to justify an upgrade. Many hosts offer a website package that works well for start up companies. Keep in mind that an eCommerce store featuring a shopping cart and checkout will be several thousand dollars. You'll need much more start up money for this type of website so factor that in, too!

The most expensive option is to hire someone to create your website for you. If you find a website you admire, perhaps you can discover who built it by scrolling to the bottom of the homepage where credits are usually placed. It never hurts to compliment the online business on their website and ask if they will share the web designer's contact information with you. Don't overlook your personal network -- if you are lucky, you may find a high school or college kid who needs something to list on a resume. A web design instructor at a local community college might be eager to pick up some extra money, too. Here's a tip from our very own IT guru Troy Corbin: check out Freelancer.com listings for a web designer who has spare time and ability.

You can test the market by joining a well-established online marketplace like Etsy which will allow you to showcase your business without a huge outlay of money. Many crafters who don't feel ready for their own website find success on social media marketplaces so be sure to read these great tips before you market your craft business on social media.

Membership costs can vary. Some websites want a portion of your sales while others charge a flat rate. Some sites may even do both. For example, as of this writing,Etsy charges a 20-cent listing fee plus a 3.5% transaction fee on items sold. Make sure you carefully read the documentation of any site you consider and build the costs you'll incur into the pricing of your goods. Your ultimate goal is to make money and you won't be doing that if overhead costs are higher than your profit margin.

Branding Your Business

Trademarks are also important, especially if you're branding yourself and believe you have the potential to go big. Do some online research and make an appointment to talk to a qualified business lawyer about this early in the process. They can help you avoid costly mistakes. If you have a slogan in mind, do an online search to make sure your idea is truly original.

The Costs of Running a Business

The costs of materials you'll need from day one are a serious consideration, and as mentioned above, you do not want the money invested in inventory to sit idle. While it can be economical to buy supplies in bulk, avoid overbuying specialized materials until an order is actually placed. A good accountant can be your best friend when taxes come into play so get references from friends or small business owners in your area. You should gather all the information you can about taxes when you first apply for a business license; the attorney helping you with trademarks can likely help you here.

With an online store, you'll no longer be delivering only to locals. Shipping costs are almost always absorbed by the customer. Many times this is an add-on to the purchase total. Customers do appreciate the simplified checkout process where shipping prices are factored into each item. If you decide to handle shipping that way, let your customers know by advertising "free shipping."

Handmade items can be very delicate and shippers move huge quantities as fast as possible. Customers who choose your online business will be disappointed to receive a broken or damaged item. The additional costs to ensure the safety of your items while shipping are worth it. Extra effort on the front end will reflect well on your business, encourage repeat customers, and result in positive reviews and comments. The reverse is also true -- damaged goods will increase the potential for negative reviews. Savvy online purchasers check the reviews for customer feedback!

Expect the Unexpected

Finally, unexpected costs can and will happen. Anticipate by putting money in an interest-bearing account, no matter how small the amount at first. You may need to access it quickly and easily so keep that in mind. One helpful way to build a safety net is to put a pre-determined percentage of sales in this account or carve some from your start up funds.

As with your personal finances, having a cashback or rewards business credit card will help your cash flow as long as you don't incur interest or late fees. Consider a membership at a wholesale club if you will purchase paper goods, packing supplies, etc. in bulk. Perhaps you can split bulk supplies with a fellow crafting friend. Look for vendors who offer a business account for repeat customers. Keep your fellow online business colleagues in mind, too. Country Brook Design® is a great online resource for the high-quality nylon, polypro or cotton webbing and strapping material, sew-on hook-and-loop tape, plastic buckles, metal hardware, and ribbon that many craft artisans incorporate in projects.

According to feedback from our customers, the entrepreneurial spirit is alive and well at kitchen tables around the world. Most successful online retailers were start ups that began with a great idea, endless energy, and a solid business plan. Jim Witt has encouraging words for anyone starting an online craft business, ”Find out the rules but don't follow everyone else -- find your own angle. Be flexible and keep your eyes open at all times.”