Start a woodworking business 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 guide to starting your woodworking 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 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 very important. Read our detailed guide on how to name your business. 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.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your woodworking business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also 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.
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.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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.
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.
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 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.
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.
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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.
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.