How to Start a Craft Store

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Our guide on starting a craft store covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of a craft store owner, the typical target market, growth potential, startup costs, legal considerations, and more!

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Start a craft store by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your craft store. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Luckily we have done a lot of this research for you. Skip on ahead to the Business Overview for more detailed answers to all your questions.

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your craft store is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4: Open a business bank account

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

STEP 8: Define your brand.

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Business Overview

Craft store businesses provide the necessary supplies for creating unique handmade items for shoppers who prefer originality over mass production. A craft store business can exist online, in a physical location, or both. Some craft store businesses sell a wide range of various types of arts and crafts supplies, while others cater to specialized niche markets.

Who is this business right for?

This type of business is ideal for people who enjoy providing supplies for people to participate in creating various types of arts and crafts.

What happens during a typical day at a craft store?

Here are some of the typical activities a craft store business owner might engage in on a daily basis:

  • Pricing craft supplies based on market research and customer feedback
  • Writing product descriptions
  • Photographing sale items and updating website content
  • Conducting inventory, negotiating prices with vendors, and ordering supplies
  • Filling and shipping orders
  • Attending craft workshops to get ideas for new classes and activities to provide for customers

What is the target market?

Preferred clients are those who enjoy participating in arts and crafts projects for gift-giving and home decoration or those who appreciate products that demonstrate the artistic and creative talents of others.

How does a craft store make money?

One way a craft store business makes money is by buying craft supplies in bulk at wholesale prices and reselling them at a profit. Another, less common way this type of business makes money is by designing and creating original arts and crafts products. Some craft stores sell those products directly to other craft stores, while others charge a royalty fee for the use of their original designs.

What is the growth potential for a craft store?

Some craft stores, such as Michaels, have expanded nationwide. The nation’s largest craft store business, Michaels has 1,262 stores, each of which sell an average of 40,000 different items. produces 10 exclusive private brands. As of June, 2014, the company, which also produces 10 exclusive private brands, was valued at $3.86 billion dollars.

What are some skills and experiences that will help you build a successful craft store?

Some of the skills necessary to succeed in this type of business include:

  • A good eye for spotting popular trends in fashion and home décor
  • The ability to manifest your creative vision into physical reality using craft supplies
  • Negotiating skills for obtaining the best prices from vendors
  • Accounting skills for calculating the cost of supplies, production, shipping and determining accurate profit margins
  • Writing skills to describe your products accurately yet invitingly
  • Marketing skills to enable you to create email offers, loyalty rewards programs, and special sales promotions

There are a number of resources that provide education and additional information about how to succeed with a craft store business.

What are the costs involved in opening a craft store?

For tax purposes, you’ll need a tax ID number for your small business. The cost of opening a craft store business varies widely depending upon whether it is an online operation or a physical location. Online businesses can be started with very little initial cost other than the supplies. The costs of opening a physical location would include the cost of renting and outfitting a building as well as a more substantial initial inventory of craft supplies and items for sale.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

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Growing Your Business

How to promote & market a craft store

Business cards with your website address and contact information are as important as creating a brochure or catalogue of all the craft supplies your store will carry. Good photos and product descriptions help your customers find exactly what they are looking for, as well as introducing them to new products. Another good way to promote your business is to offer classes in specific types of arts and crafts that utilize your supplies.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

Attending craft fairs and community events is a good way to introduce your business to those who already have an interest in your products. Creating a website and keeping it updated with fresh new items on a regular basis is another. Loyalty programs that offer money-saving coupons after a certain number of purchases are also popular. Offering discounts on classes for those who bring a friend is a great way to expand the local creative community as well as your customer base.

How and when to build a team

In this business, any time is a good time to build a team. The more different types of products your store offers; the more people will be attracted to shop there. A good team consists of people whose talents and abilities complement one another. Those who enjoy teaching others can provide classes, while those who prefer staying behind the scenes can focus on creation and production. Participation in arts and crafts can be a group activity as well as a solitary occupation, which is one reason it is so popular.

Legal Considerations

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate craft supply business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

In particular, Most states require retail businesses to obtain a seller’s permit. A seller’s permit allows states to record and collect taxes from goods (and sometimes service) sales.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Craft supply businesses may also wish to look into applying for a resale certificates, which allows retailers to purchase goods intended for resale without paying sales tax.

In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Certificate of Occupancy

A craft supply business is generally run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.

If you plan to lease a location:

  • It is generally the landlord’s responsibility to obtain a CO.
  • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a craft store.
  • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

If you plan to purchase or build a location:

  • You will be responsible for obtaining a valid CO from a local government authority.
  • Review all building codes and zoning requirements for you business’ location to ensure your craft store business will be in compliance and able to obtain a CO.

Earning Potential

How much can you charge customers?

Costs for craft supplies vary according to demand and manufacturing costs. Buying popular items in bulk at wholesale prices allows you to increase your profit margin. Pricing handmade items can be challenging. This article offers some tips for finding the right price for your products.

Pricing finished products is more difficult than pricing the supplies to make them because one-of-a-kind items are valued and priced, differently. To price according to similar items can result in undervaluation and lost profits.

What are the ongoing expenses for a craft store?

Ongoing expenses for a craft store business can include:

  • Real estate rental
  • Utilities
  • Maintenance of office equipment
  • POS/ inventory software service
  • Cost of wholesale supplies
  • Shipping costs

How much profit can a craft store make?

The profits from online craft store businesses vary widely, depending on the cost of materials and pricing.

Jo-Ann Stores, a leading craft store in the U.S., reported profits of $2.4 billion in 2015. This is a very large chain, so expect to make significantly less than this. However, this number does indicate that there is a very profitable market for craft supplies.

How can you make your business more profitable?

Creating a number of finished products and offering your customers the option to purchase a kit containing all the necessary supplies to make those products themselves can be a very effective sales strategy. It’s important to offer something unique to compete successfully with larger, more established businesses like Jo-Ann Fabrics. Some craft store businesses offer classes for specific crafts such as felting, quilting or creating jewelry. There is nothing more unique than a specific group of people coming together in the same place at the same time to participate in a creative activity. Attending craft fairs is another way that craft store business owners can increase public awareness of their products as well as their profits. Many craft store businesses expand their businesses to sell finished craft products on sales platforms such as Etsy, which charge a percentage of sales.

Next Steps

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