Start a woodworking business by following these 10 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 guide to starting your woodworking business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
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 much can you charge customers?
- 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 woodworking business?
The costs of opening a woodworking business are significant but manageable. Business owners might expect to spend around $6,500 total, which would break down as follows:
- $2,000 for wood and other materials
- $1,500 for woodworking tools and equipment
- $1,000 for a computer
- $1,000 for miscellaneous expenses
- $800 for a website and camera
- $200 for business cards
This example doesn’t include the cost leasing space for a shop or storefront. Many business owners are already woodworking hobbyists and, therefore, have space to work in. They can avoid leasing a store space by selling at festivals or online.
Business owners who already have tools can further keep their costs low by using tools and equipment that they already have. Those that need specific equipment they don’t have might be able to convince a family member or friend to pay for the equipment in exchange for a product that requires that piece.
What are the ongoing expenses for a woodworking business?
The main ongoing expenses for a woodworking business are material costs and overhead. Material costs should be covered by the sale of finished products. Overhead typically includes rent, utilities, and purchasing small supplies (e.g. nails, sandpaper and finishing materials). These expenses are usually equal to 15 percent of materials and labor.
Who is the target market?
A woodworking business’ ideal customer is someone who appreciates wood products and has discretionary income. Such a person is likely to be interested in products and have the money to afford them.
How does a woodworking business make money?
A woodworking business makes money by producing and selling wood products. These products may be furniture (e.g. Adirondack chairs, cabinets or dressers), or smaller items, like jewelry boxes, smartphone holders, manual coffee grinders, cutting boards or wooden beer mugs.
How much can you charge customers?
How much wood products are sold for varies a lot. Even the same types of wood products might be sold for vastly different prices, depending on how they’re made and where they’re sold. For example, Svetulka on Etsy sells kids’ name signs for between $19 and $73 (depending on the number of letters and finish). Kolorize lists similar signs for between $68 and $163 on the same site.
When deciding how to price their wood products, business owners should consider the cost of materials, their desired hourly wage and any selling expenses (e.g. shipping to a store). A simple formula to follow is:
- Material Costs + (Hours of Work x Hourly Wage) + Selling Expenses = Price
Putting this formula in a spreadsheet makes calculating prices simple.
How much profit can a woodworking business make?
The profit potential of a woodworking business depends on what products a business owner makes, where the products are sold and how skilled the business owner is. Some business owners only sell small products locally, and their revenue might be similar to the income supplied by a part-time job. Other business owners are master craftsmen and highly in demand. Their work might produce a comfortable salary, in some cases even breaking six figures.
How can you make your business more profitable?
A woodworking business may be able to add revenue and increase sales by offering classes. Classes will attract people who are interested in the field, and some may decide to purchase finished products in addition to taking a class.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Woodworking Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your woodworking business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
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?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
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.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
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
Your first step is to find out if you need a business license. If you plan on operating a home-based business and live within city limits the best place to check is with your city business license office. Otherwise, check with your county business license office. If you need to get a business license, you also need to check for zoning issues. You will not be able to get a business license if your business address is not zoned for the type of business you want to run.
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 more 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.
Although not required, becoming certified can demonstrate competence and professionalism. It also may help a candidate advance in the profession. The Architectural Woodwork Institute (AWI) offers a national certificate program, which adds a level of credibility to the work of woodworkers. The Woodwork Career Alliance of North America also offers five progressive credentials.
Prepare for potential problems and hazards by making sure you have the right types of small business insurance coverage.
- general liability insurance
- business ownership policy
- commercial auto insurance
- workers compensation insurance
- property coverage
Labor Safety Requirements
It is important that you protect the safety of your employees and adhere to Occupational Safety and Health Administration Requirements.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
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.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a woodworking business
The internet makes it easy to market a woodworking business for little cost. There are several ways to promote a wood shop online:
- classified sites like Craigslist offer a free space to post local advertisements
- kitschy sites like Etsy and Handmade at Amazon provide a low-cost space for listing handmade products
- social media platforms give businesses a method of targeting particular demographics
How to keep customers coming back
A woodworking business can set itself apart from other wood shops by offering high-quality products at reasonable prices, and by educating customers about the crafting process. In-person conversations, pamphlets and even tags can be used to share with customers what work went into making a piece and why that piece is different from ones produced by competitors.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Woodworking Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Anyone who is detail-oriented, decent at math and skilled with their hands may be well-suited for running a woodworking business. These skills are necessary when carving wood and building products.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a woodworking business?
A woodworking business owner spends much of their time making wood products. This work may include designing products, cutting and sanding wood, assembling pieces together, and painting or staining finished pieces.
When not producing products, wood shop owners may spend time sourcing materials, interacting with customers and marketing their business.
What are some skills and experiences that will help you build a successful woodworking business?
Carving products from wood requires skill, which takes time to acquire.
While there are organizations that have certification programs, most wood shop owners learn on the job. Often business owners gain their initial skills as hobbyists, and then refine them by working for another wood shop. In most cases, it takes one year of experience to fully grasp basic machine operations and job tasks, and three or more years to become a skilled woodworker who can read blueprints, plan sequences and set up machines.
For business owners interested in formal programs certification, the Association of Woodworking & Furnishing Suppliers, Architectural Woodwork Institute and Woodwork Career Alliance of North America all offer educational programs.
What is the growth potential for a woodworking business?
A woodworking business may be a small home business that serves customers in the local area, or it can be a regional or national franchise. Stickley is an example of a woodworking business that started out locally in Central New York but has grown to become a nationally recognized furniture brand. Another example of a business that’s grown is National Woodwork, which is based in Pittsburgh but has clients in many states.
TRUiC's YouTube Channel
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Take the Next Step
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a woodworking business?
Business owners should carefully consider what products they want to start making when opening a woodworking business. The perfect products will:
- be small enough to easily fit within a business owner’s shop and vehicle, so they don’t have to pay for a new shop or vehicle when starting the business
- only require skills the business owner has already mastered, so the final product looks like it was made by a skilled woodworker
- have material costs the business owner can afford when starting the business, so they don’t have too much capital tied up in materials
How and when to build a team
A woodworking business can be successfully run as a one-person operation, and some business owners never hire an employee. Those that do hire workers often only bring people on once the business’ sales can support an employee’s salary.