How to start a craft business

Starting a craft business is the perfect way to make money from your passion, but it’s not all sequins and watercolours. Getting your craft business off the ground requires a few essential steps. 

This guide will tell you all the bases you need to cover when starting a craft business, including:

• Find your niche
• Register your business
• Make a business plan
• Insurance 
• Find suppliers
• Marketing
• Record your business expenses
• Build a tech stack

Most craft businesses start off by specialising in a certain area. You’ll most likely have an idea of the kind of crafts you’d like to create, but in terms of options, you can produce anything you like – that’s the best thing about crafts. 

To get a rough idea of what customers like, here are some of the top-selling craft products:

• Bookmarks
• Keychains
• Magnets
• Jewellery
• Coasters
• Headbands
• Candles

The important point is to sell something that there is a market for. Often you won’t know what will work until you give it a try, so don’t be afraid to keep creating. But always pay attention to your sales figures. They should be the driving force behind the approach to your products. 

In order to pay the right tax for your business, you’ll have to register with HMRC. The process will be slightly different depending on how you decide to set up your business. 

You can register as:

• A sole trader
• Self-employed
• A limited company 

The structure you choose will also affect the amount of tax you pay on the income you earn. If you’re self-employed or a sole trader, you’ll have to pay the standard rates of income tax with a self-assessment tax return. Your tax rate will increase as you get more income, like this:

• Personal Allowance: Up to £12,570 – 0% 
• Basic rate: £12,570 to £50,270 – 20% 
• Higher rate: £50,271 to £150,000 – 40%
• Additional rate: Over £150,000 – 45%

If you decide to set up a limited company, you’ll instead have to pay corporation tax. It’s just a flat rate of 19% for any profits you earn after you’ve deducted business expenses. 

The flat rate is more forgiving when you start to see some serious income, but it’s usually not worth it for new business owners. 

Every business should begin with a detailed business plan. It’ll clearly outline all your main goals while giving you step by step guidance on how to achieve those goals. 

Not only that, your business plan will be useful if you’re trying to secure investors. Whether you’re applying for a bank loan or working with a private individual, a business with a well-made plan is going to be a much safer bet for them.

At the very basic level, every business should be made up of:

• Market research
• A SWOT analysis
• A budget

There’s a lot to unpack in those three steps, so check out our article, How to write a business plan, for a more detailed explanation. 

Most insurance brokers will offer tailored insurance policies depending on your industry, but generally, these are the most common insurance policies you’ll need:

• Public liability insurance – if your business comes into contact with members of the public.
• Employers’ liability insurance – if your business employs staff.
• Business buildings insurance 
• Business contents insurance – protects the contents of your business premises, your business equipment, and tools.
• Stock insurance – if you hold any stock, whether on your premises or in storage.
• Product liability insurance – protects you should a customer of yours suffer damage as a result of a faulty product you provide.
• Personal accident insurance 
• Business interruption insurance – if your business is disrupted by material damage caused by an event such as a flood or fire.
• Business legal protection insurance – covers your commercial legal expenses and protects against the potential costs of legal action brought by or against your business.

Craft businesses rely on the quality of their materials. Working with low-quality supplies will just make your life more difficult and dissuade customers from coming back to you. 

Early on, you might find it difficult to get any discounts when buying supplies in bulk. Also, as a new business, you probably won’t be able to get supplies on credit before you’ve built up your relationship with suppliers. 

Once you’ve built up a good working relationship, suppliers will probably be more open to offering you discounts and deals, as they see you as a valued customer.

To find the best possible prices and service, consider shopping around. Order from a few different suppliers at first to test out their reliability and quality. 

Deciding where to sell your crafts will have a huge impact on sales. The goal is to get your products in front of as many of the right people as possible.

Your best bet is to try a combination of these three:

• Online stores
• Physical shops
• Craft stalls

There are loads of places to sell your crafts online. Etsy is the most popular in the craft world, so it’s a safe bet. But you can also advertise over social media marketplaces or even build your own website – we’ll mention more on this later in the marketing section. 

Actual shops are always a good idea for crafts too. There are some things you can’t tell by seeing pictures online, so letting customers physically browse your products will work in your favour, as long as they’re actually good quality. 

Start with local arts and crafts shops, souvenir shops, or even independent coffee shops. Before you ask, make sure you’re ready for the negotiation. Think about the number of units you have, the prices of each, and the cut you’re willing to give to the business owner. 

Finally, keep an eye out for pop-up craft fairs in your area and set up a stall. They all run a little differently, but usually, it’s just a case of paying a fee then you’re good to go. 

Craft fairs are a great way to introduce your business to smaller communities while meeting new industry contacts along the way. 

The first port of call for any marketing strategy should be building a strong online presence.

Your website is the face of your business. Most people will find you online, so it’s crucial that it makes a good first impression. At the very least, your website should include contact information, products, prices, and location. 

As a rule of thumb, ask yourself how quickly and easily a new visitor could figure out what your business is all about, what they can buy, and how they can buy it. 

Building a website isn’t as difficult as it used to be. You can ask a professional service to do it for you, but a cheaper option would be to use a website builder (CMS software). There are loads on the market that are beginner-friendly and can guide you through the whole process to help you make a professional website. 

A good website will make sure you appear when people search for craft stores on search engines like Google. You can improve your search engines rankings by:

• Paying for Google ads.
• Making your site SEO (search engine optimisation) friendly.
• Asking your customers to leave a Google review.

Sites like Facebook and Instagram put a real emphasis on images, so it’s the perfect place to show off all the beautiful things you have on offer. 

Sites like Youtube, on the other hand, are great places to post more engaging, long-form content. Tutorial videos are always popular forms of social media content – they’ll attract followers and add a familiar, personal touch to your business. 

Youtube is also the world’s seconds largest search engine, so it’ll have a positive impact on your Google search rankings, and you might end up making some extra money just from monetising your channel.

As we mentioned above, paying for Google ads is a great way to get your website at the top of search engine results. 

But you should also register on Google maps. It’s easy to do and will make it much easier for people to find you. To register, just go to Google My Business and follow the instructions. 

Alongside digital marketing, some more traditional forms of marketing can also be effective. 

You should consider:

• Making business cards to hand out.
• Printing flyers and posting them locally.
• Teaming up with other local businesses to refer each other’s businesses.
• Encouraging customers to spread the word.
• Encouraging friends and family to recommend your business.

Finally, you’ll want to think about the name and logo of your craft business. 

Both should be unique to help you stand out from the competition. You’ll need to register your logo as a trademark with HMRC to prevent others from using it and to make sure you’re not using one that already exists. 

You don’t have to register your name unless you’re a limited company, but it’s a good idea to check it’s not already being used to prevent confusion. 

Trademarking can be an expensive process and involves a few steps, so read our guide for more information. 

Business expenses are defined as any money you’ve spent that’s “wholly and exclusively” for the purpose of running your business.

When the time comes to pay income tax, you can deduct any business expenses you’ve made throughout the year from your total to decrease your taxable income. 

Some common business expenses include:

• office costs: for example, stationery, or phone bills.
• travel costs: for example fuel, parking, train, or bus fares.
• clothing expenses: for example uniforms.
• staff costs: for example salaries or subcontractor costs.
• things you buy to sell on: for example, stock, or raw materials.
• financial costs: for example, insurance, or bank charges.
• costs of your business premises: for example, heating, lighting, business rates.
• advertising or marketing: for example, website costs.
• training courses related to your business.

Alongside business expenses, you can claim capital allowances too. They work in pretty much the same way but they’re for one-off expenses like:

• equipment
• machinery
• business vehicles

It sounds simple enough, the tricky part is keeping a detailed note of all your business expenses throughout the year. You should consider downloading accounting software like Countingup. It’ll automatically save and categorise all your transactions so you’ll never miss a beat. 

A tech stack is a collective term we use to talk about a bunch of different apps used together. Any kind of software or application your business uses on a daily basis is all part of your tech stack.

Things like accounting software, customer management software, or group chat platforms would be part of your tech stack. They’re often called software solutions or platforms but it really just means any fancy technology you use to run your business.

The best way to decide on the things to include in your tech stack is by thinking about these key ideas:

• Your business needs
• Integration and scaling
• Building your stack slowly

You may not think you need all that much tech as a sweet business, but there’s plenty of software out there that’s useful for any business. You might want to consider:

• CRM (customer relationship management) software 
• Accounting Software
• Collaboration Platforms
• Automation Software
• Integration Software

There are loads of software solutions so it can be quite confusing. Just take your time and eventually you’ll have the perfect tech stack for your small business. 

When you’re starting your own business, it’s important to keep your personal and business finances separate from day one – to save yourself from time-consuming admin headaches further down the line. 

When you sign up for a Countingup business current account, you’ll receive free accounting software with a range of time-saving tools. 

Simply log into the app to create and send invoices, get financial insights, and confidently manage your new business finances. Find out more here.