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 laser cutting business. 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 startup and ongoing 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.
What are the costs involved in opening a laser cutting business?
Laser cutters can get started with a laser system, computer, and accompanying software. You don't necessarily need a formal space to work — especially if you already have a garage or studio that you're currently using. The prices will vary based on the quality and the scope of each item, but can potentially be as low as $10,000 to get started. (If working with employees, owners will also need to budget for commercial insurance.)
What are the ongoing expenses for a laser cutting business?
Once people have all the equipment they need, the ongoing expenses tend to be on the low side. The machinery will need regular maintenance and updates, but should last for many years to come. Owners should also account for standard marketing fees plus staff salaries and ongoing insurance payments (if hiring employees.)
Who is the target market?
The target market can be anyone who enjoys quality products or artistic expression in either a professional or personal capacity. Because a laser cutter can be used to make anything from trophies to wedding invitations, laser cutters can decide their demographics based on the materials, prices, and time commitment it takes to make each object.
How does a laser cutting business make money?
Laser cutting businesses will typically set their prices to give themselves a healthy profit margin. For example, if a custom necklace cost $50 in raw materials to make and an hour to produce, the owner may charge $125 for the finished product.
How much can you charge customers?
Laser cutters may find they can charge their customers quite a lot for relatively simple pieces. Before getting started, make sure to check the going rates for similar items in your area. If you’re creating something different from anything else on the market, base your price on the hourly rate you wish to make and then adjust based on the response you receive.
How much profit can a laser cutting business make?
In the first few months, profits may be limited as owners struggle to find the right audience. However, there's little doubt that people are willing to pay for these services. Owners can charge up to $200 for a set of just 12 laser-engraved invitations. Organizations especially (e.g., government services, businesses, etc.) may offer tens of thousands of dollars for only a few weeks worth of work.
How can you make your business more profitable?
Owners should explore as many business opportunities as possible to enhance their skills and make themselves more marketable. So if an owner starts off making fun and fashionable pieces, they can also consider branching out into engraving company logos on their machinery or providing signage for other small businesses in the area.
What will you name your business?
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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your laser cutting business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
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.
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.
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.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a laser cutting business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
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.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A laser cutting business is generally run out of a workshop. 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 laser cutting business.
- 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 your business’ location to ensure your laser cutting business will be in compliance and able to obtain a CO.
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.
How to promote & market a laser cutting business
Besides in-person networking, laser cutters should become active online by creating a professional website. Because laser cutters may have wildly different demographics, they’ll need to change their advertising according to where their customers happen to be.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Customers want to see long-lasting, quality items (even potentially throwaway items like invitations.) Orders need to be delivered on-time and in full. You’ll also need some type of communication strategy to keep customers in the loop should something go wrong.
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.
Start A Laser Cutting Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Owners should have the technical skills to work with the laser cutter, but they’ll also need to be creative. Even if you’re making relatively straightforward objects, it helps to have the element of imagination when it comes to improving upon or customizing your selection.
What happens during a typical day at a laser cutting business?
Most of the day will usually be spent designing, cutting, and engraving. Owners may also need to manage staff, decide on an advertising strategy, or perform general administrative tasks.
What are some skills and experiences that will help you build a successful laser cutting business?
This business is excellent for someone who has prior experience with laser cutting, either from professional or personal experience. Many hobbyists will experiment with making different household objects (e.g., dollhouses, Christmas decorations, etc.) before realizing there’s a real demand for their services. You’ll also need a certain amount of customer service skills to handle potential conflicts over your services.
What is the growth potential for a laser cutting business?
Laser cutters have a high growth potential because they’re versatile enough to work within a variety of industries. They can also work with different materials to fit a wide range of customer requests. A laser cutter makes it easier to personalize or brand items without pricing the majority of people out of the market. This perk plus the quality and the longevity of laser-cut objects have been the driving forces behind the rise in the popularity of laser cutting.
TRUiC's YouTube Channel
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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.
What are some insider tips for jump starting a laser cutting business?
Laser cutting businesses are still somewhat new, so owners will be facing a new frontier when it comes to finding their audience and discovering why certain products sell. Artistic owners should start on websites like Etsy to learn more about what’s in demand.
This isn’t to say that owners can’t create their own demand based on the quality and innovation of their items, only that it helps to have a baseline before moving forward. Those who enter this business may not need a formal background in sales, but they should also be prepared to highlight what makes their business different from traditional methods.
Owners who want to add more functionality to their customers’ lives may want to contact local schools and businesses to learn more about their needs. Developing relationships with different decision-makers allows owners to see how they can cater their skills to fit their potential client’s needs. This can lead to the signing of different contracts to provide a constant supply of items. For example, a school may choose you to create the trophies for their sports teams, or a business may want you to engrave their name on a new product they're debuting to the public.
Finally, if you're buying a new laser or using your current laser to try something new, make sure that your original laser dealer can answer your questions. They should be able to tell you more about how to adapt your laser to each new task.
How and when to build a team
Unless you’re starting with a substantial amount of orders, it may make more sense to operate alone until the demand reaches a tipping point. If you don’t feel as though you’ll be efficient at administrative tasks, you can consider hiring a part-time secretary to provide general organization and customer service to clients.