by Starting your Business | Woodworking Hobby to Business
Starting your Business Part II: Getting your Business Organized
By the time you decide to take your woodworking business from a hobby to a business, there is a good chance you already have a pipeline of orders and build requests (probably a lot of family and friends). That is ok, but before you get too overloaded with requests, you need to get ORGANIZED and focus on actually starting your business….
Starting your Business Step I: How to Structure your Business
Before getting too far into it, you want to decide on how to structure your woodworking business. We will dive into more details on this later, but please consult an attorney and/or CPA with your questions to weigh the pros and cons of your different options here. The majority of woodworkers and makers I know are either set-up as a sole proprietorship or LLC. The key is to make this decision sooner rather than later so you can move forward with receiving a tax EIN, bank account, insurance, etc, etc…
Starting your Business Step II: Bookkeeping for your Business
Again, before being bogged down with orders and buying a bunch of tools, materials, and supplies, nail down a system for tracking all of this! If you are officially launching your business mid-year, be sure to go back to the beginning of the year to capture any costs associated with starting your business for tax purposes. I use a simple spreadsheet based system that I will link to below. Others use Quickbooks or similar software, I’ve just never seen the real need for that expense and feel like they over-complicate the entire process. If you aren’t ready for one of these solutions, at least start saving all of your receipts, writing them down, anything just to keep track of everything to make your tax filing go that much smoother.
You can click here to download my Workbook for REVENUE AND EXPENSE TRACKING FOR MAKERS. It is a very minimum investment that will help tremendously in your bookkeeping and organization. Even if you use Quickbooks, this workbook may give you some additional ideas on how you should be looking at your business.
Starting your Business Step III: Deciding What to Sell?
So you now know how you want to organize your woodworking business, you are tracking your start-up expenses, and have the systems in place to move forward. Now it’s time to decide what you want to sell.
Do you want to focus on what specific product that you designed?
How about a line of products like small kitchen wares?
Maybe you just want to take custom orders for any woodworking project imaginable?
You could also decide just to make random projects for yourself, neighbors, etc and focus on the content-creation end of the spectrum where you aren’t selling a physical product at all.
All of these options are perfectly acceptable, however I would urge you not to take on too much at once. It’s hard to gain much efficiency if you are building custom dining chairs and painted pallet wood signs.
Starting your Business Step IV: Defining your Sales Pipeline
Awesome job, you now know exactly what products you want to sell!
But…..where to sell them?
An obvious starting place would be established market places with customers already in-place. These could be physical marketplaces such as craft fairs or retail shops and also online marketplaces such as Etsy, Amazon, or Ebay. The one thing these all of in common is that it costs money to sell there. This will cut into your profits but it is the price you pay for their customer base.
Once you are a little more established, my advice would be to branch out and start your own marketplace via your own website, social media, etc. Obviously you need a following or source of customers for this to work, so this should be a more long term goal. Going this route you can increase your margins while maintaining more control of the entire sales funnel.
Starting your Business Step V: Budget
You are now selling your products or content, let’s make a budget!
A budget helps you figure out what you need to sell in a given period to reach your income goals and cover your fixed expenses. Budgeting can take a variety of different forms; I prefer to have a detailed budget completed before the start of each month and an overall summary-type budget that I put together at the beginning of the year and track against throughout the year.
Budgets can be a very powerful tool if used properly. You can see where you need focus your time and effort to improve your bottom-line. Maybe you have high supply costs that you need to find a new source for or maybe all of those Etsy commissions are wiping out any chance you had at turning a profit.
You should also be creating a budget for each project. This is basically adding up your project expenses, valuing your time, including your desired profit margin, and coming up with a price to charge for a given project or product.
Starting your Business Step VI: Implement you Business Plan
So now you are organized, have a solid bookkeeping system, know what you want to sell and where to sell it, and have a financial plan in place to move forward with. Now comes the easy part, implementing all of these systems and getting to work! With Steps 1-5 you just created a detailed and executable business plan that is ready to go. Thinking through all of this and having everything in place prior to ramping up your business will help things go smoothly and allow you to focus more on building and selling your products or content.
Starting your Business: READING HOMEWORK
I will end this with a book recommendation that every entrepreneur needs to read before jumping into starting their own business, the Founders Dilemma. You will thank me later!
