A woman works on her laptop at a large wooden table scattered with pottery. Behind her are shelves of handmade bowls, pots, buckets, and other pieces of pottery.
The initial steps to starting a handmade business can be tricky, but your business plan should be as carefully crafted as your products are. — Getty Images/PIKSEL

For some, getting paid to create is a dream come true and about as rewarding as a business can get. To ensure the rewards are financial as well as emotional, take things a step at a time. Here are some important details to consider as you begin making and selling.

Consider your choice of products

  • Makers turning a hobby into a business often know exactly what to create. For others, choosing the right products can be challenging and the possibilities seem limitless. Deciding on your product mix now will be helpful in choosing the correct business structure, the business name and where and how you ultimately sell.
  • The right products will be those you can create to a uniform standard with the equipment you own (or can practically purchase) and sell for a profit. Consider storage, packaging and shipping requirements. For online selling, consider the product’s visual appeal.
  • Determine demand. Take a deep dive into potential products. Search them on Etsy, eBay, Amazon and locally. Hundreds of sellers indicate both demand and competition. Conversely, no competition may indicate a lack of demand. If your product is truly unique, you may have no competition, but you will have to be a trailblazer when it comes to marketing.
  • When researching, note not only the sell price but how products are marketed. What features are the sellers touting and what companion products do they offer? How do they handle shipping charges and lead times? What about returns? Make a spreadsheet and record this information for future reference.

Choose a business name

Even the best mousetrap is not going to sell if new customers can’t find you and returning customers can’t remember your name. GoDaddy advises considering searchability and growth potential when choosing a name and avoiding ties to specific geographic areas and products.

If it sounds tricky, it is. For help, check out some of the name generators online, like the one offered by Shopify. Once you’ve chosen a name, protect it.

Consider the business details

These are the steps that turn your idea or hobby in to a legitimate business.

  • Choose a structure. Sole proprietor, partnership, LLC? Research the pros and cons of each. Advice from an accountant, attorney or both may be helpful in deciding which works for your business plan and product.

[Read more: How to Choose the Right Business Structure]

  • Get federal and state tax ID numbers. You will need them to open a bank account and file taxes.
  • Register your business. This process varies from state to state and according to the business structure you have chosen. Generally a simple and inexpensive process, it is often done at the county level.
  • Open a business bank account.
  • Set up bookkeeping. According to SCORE, many new business owners are unfamiliar with basic bookkeeping. While you are learning, record every purchase and save every receipt.

Even the best mousetrap is not going to sell if new customers can’t find you and returning customers can’t remember your name.

Build inventory

Inventory needs will vary with your product, where you intend to sell and how long it takes to manufacture (lead time). If you’re selling exclusively online and your product can be made quickly, limiting your initial production will save on material costs and allow you to tweak your offerings as you determine your best sellers.

If you are selling in person, a display area full of product will lend your business credibility and you will be prepared for a large, on-the-spot order.

Set your pricing

Putting a price on your handiwork should be more about math than emotion. Pricing formulas abound, but all require hard cost data. This is where your record-keeping pays off.

Product-specific costs include raw material, hourly labor, packaging, shipping and selling fees. Overhead covers everything from workspace rent to printer ink to advertising.

While it’s important to know your costs, you must also consider the competition. Where do you want to be in relation? Be flexible. The goal is a profitable product mix; not every item will contribute equally.

Market your products

Remember those other makers you researched back in step one? It’s time to differentiate yourself by building your brand. Get a logo and choose a color scheme and a font.

Be consistent across all platforms. Whether you open a physical location, sell through your own website or list on sites like Etsy or Amazon Handmade, your advertising and posts should have a consistent look.

[Read more: A Quick Guide to Social Media Branding]

Stand out after the sale. Buying handmade is often a conscious decision on the customer’s part. Whether it’s carrying an item to their vehicle, tucking a thank you note in a carefully packed carton or sending a follow-up email, take one final step that makes your customers feel good about making that choice.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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