More people are starting craft businesses to have better control of their income. But before you invest a bunch of time and money, or take the leap and quit your job, you want to know if it’s actually possible to make a living at it.
To make a living selling crafts you’ll need to:
1) Get Set Up Legally
If you plan to build a legitimate business to earn a living from, follow the laws you’re required to from the start (Laws for Selling Handmade will help).
2) Plan for Profits
A business must be profitable to survive. Too many crafters ignore their numbers or skim over them. Profits start with pricing (here’s the right way to price your handmade products) but profits must be thought of for every aspect of your business, from how you spend business hours to which social media channel you put efforts into (The Success Planner will walk you through the steps to run a leaner business).
3) Plan Products Wisely
Too many crafters want to make every type of item they’re capable of making, thinking it will help them sell to more people. But too much variety actually does more harm than good.
Would you trust a one-man operation to fix your toilet, update your electrical, patch your drywall, repair your door, and install wallpaper? Probably not. We hire electricians for electrical work and plumbers for plumbing work because they’re experts in their field and their focus on one trade makes us put more trust in them (it also allows them to charge more).
When consumers come across a small handmade business that makes everything from knitted scarves and jewelry to paintings and pillows, it makes them question the quality of each item. Here’s how to know if you’re offering too many products.
4) Invest in Marketing
One may argue that marketing is more important than creating. It definitely requires as much time (if not more) as you spend on creating products. Many businesses find big success by creating one simple product but pouring all their time into branding and marketing. If people don’t know your products exist, they can’t buy them, so this step requires your attention.
5) Set Up Sales Channels
To make a living selling crafts you need a steady stream of revenue. To consistently make sales, you need a way to constantly sell your products. Most business need a way to sell online (Etsy is most popular but here are several alternatives). However, if you’re willing to sell at craft shows every week or month, you may be able to generate enough revenue to earn a decent income. Make More Money at Craft Fairs will help you increase profits from craft shows.
6) Be Consistent
Tor any business to succeed, it requires consistent effort. So you must be willing to put the time in. You may have profits right away but be prepared to spend 6 – 12 months on your craft business before seeing income you can live off of.
7) Make Adjustments
There isn’t a business out there that can get by without making changes to the way it operates and the products it sells. You must be willing to adapt and make constant adjustments. You won’t know how consumers will receive your products until they hit the market. If they don’t sell, or don’t sell as well as you hoped they would, you need to be willing to make changes to them or change directions.
Can you make a living selling crafts?
Yes, you can make a living selling crafts and you don’t have to go into a lot of debt to start a craft business. Startup costs can be kept low because you don’t need a retail space or loads of inventory, and most crafts don’t require expensive equipment or tools.
That being said, most people do not make a living from their craft business.
The majority of craft businesses in the US, Canada, Europe, and Australia generate less than $1000 in revenue per month (source) while monthly living expenses for a single person are typically over $1000.
It’s not that chances are slim to make a living selling crafts, it’s more likely that the majority of crafters treat their operation as a hobby rather than a business.
There are basic business practices that need to be in place for every business.
Unfortunately, many craft business owners jump right in after loved ones tell them they should start selling the craft they made as a gift.
Because a loan is not typically required, they start the business on a whim (often without acquiring proper licenses and permits) and the viability of success isn’t given much thought.
When the right steps are taken, a craft business can be profitable and one can make a living by it.
Is A Craft Business Profitable?
A craft business is profitable when the right craft is chosen, and the business owner is strategic with their pricing and how they spend money.
Most craft businesses are not profitable because numbers are ignored, and the focus is simply on creating what the crafter feels like making.
Profits must be thought of first and foremost before deciding on what to sell.
Many creations are fun and beautiful, but not all are appropriate to sell.
Being profitable means that when a craft sells, the money received covers:
- the cost of materials to make the item
- wages to make the item (production hours x hourly wage)
- a portion of other business expenses (e.g. wages for hours spent marketing and selling, money spent on Etsy listings, craft show fees, etc.)
Once those expenses are covered, there must be money left, which are your profits.
>> Here’s the right way to price your products for profits (and why the most popular pricing formula doesn’t work)
Profitability also means you’re able to sell enough of your handmade items in a month to cover all your expenses.
Many handmade business owners forget about the hours they spend taking photos of their work, creating Etsy listings, selling at craft shows, etc. and they simply look at how much they spent on materials.
A craft business can be profitable but it requires the business owner to be strategic. Plan products wisely, price products for profits, and think about the return on investment for every task and every dollar spent.
>> The Success Planner for your Handmade Business is a guide to help you improve profits in each aspect of your handmade business and plan out each day, week, and month.
What is a good profit margin for a craft business?
A 20% profit margin is considered good for a craft business, while a 10% profit margin is average and 5% is low. Profit margins vary based on the type of product you’re making, the overhead costs of your business, and how much product you can sell in a month.
The following factors can impact a craft business’s profit margins:
Crafts that are quicker to make can have higher profit margins. When an element of a craft isn’t handmade or multiple products can be made in one step (e.g. pouring wax for multiple candles at once or making a big block of soap that can be cut into multiple bars) it can speed up production and lower production costs.
When you’re able to buy materials in bulk, or at wholesale prices, it can also help you lower production costs.
If you can keep prices the same but lower costs, it increases your profit margins. Alternatively, you can keep production costs the same while increasing prices.
Profit margins for a product such a quilts may be lower because the market creates a cap on how much you can charge for a quilt. Production costs also tend to be high due to the hours required to make one.
Profit margins for jewelry may be higher because there isn’t a cap on how much a business can charge for a piece of jewelry.
Some consumers are willing to pay hundreds of dollars for a pair of earrings, whereas not many people are willing to pay hundreds of dollars for a quilted blanket.
How much you must spend on your handmade business will also impact whether your profit margins are good or bad. If you spend a lot of money outside of production costs it will lower the profit margins of your business.
The sales channels through which you sell your products will have an impact on how high or low your profit margins are.
- Wholesale – if a business sells most of their products through retail shops, it means they sell their products to retailers at wholesale prices. This significantly reduces profit margins because wholesale prices are typically 50% of the retail price. Learn more about selling wholesale and/or consignment here.
- Craft Shows – selling your crafts at events such as craft shows, festivals, farmers’ markets, etc. will lower your profit margins. Each event will charge a vendor fee to participate and you’ll spend several hours setting up, selling at the event, and packing up. You may also have fees for parking, craft show props, food and travel, etc. These costs eat into your profits, however, event organizers take care of most of the marketing to bring shoppers to you, and you can sell more inventory in a short time when compared to selling on Etsy.
- Online – selling crafts online through a marketplace like Etsy, or even your own website can leave you with more profits. But you’re required to spend more time and money marketing and selling. You’ll have to factor in shipping supplies, time spent driving to and from the post office, and shipping fees. Customers do pay for shipping fees, but many businesses absorb shipping fees into their prices (partially or fully) to reduce shipping costs or offer free shipping. If prices aren’t raised, it will reduce profit margins.
The profit margins for a product can be lower but the business’s overall profit margins can be high based on sales volume.
For example, let’s say two businesses have a product they sell for $100.
Business #1: product profit margins are 25%
Business #2: product profit margins are 5%
Business #1: sells 5 units/month
- Revenue = $500
- Gross Profit = $125
Business #2: sells 50 units/month
- Revenue = $5000
- Gross Profit = $250
As long as business #2 can keep their overhead costs low, they can have higher profit margins than business #1, even though their product’s profit margins are lower.
What if My Crafts Don’t Sell?
Every crafter believes the products they make are great, which is why they’re selling them. But ultimately, consumers decide whether they’re actually worth spending money on or not.
If your crafts aren’t selling, you first must determine whether it’s a product issue, a marketing issue, or a sales issue.
- Product Issue – if you’re getting your crafts in front of lots of people but your conversion rates are low, it’s likely there’s a flaw in your products. It may be what you sell or the quality of your products.
- Marketing Issue – if no one is seeing your products, your marketing needs improvement. Online, the average conversion rate is 1 – 2%. That means you need at least 100 people seeing your products to make 1 sale. Conversion rates can be higher or lower, depending on how you market and sell your products, but to rule out marketing as the reason your crafts aren’t selling, you need to get your products in front of approximately 100 people for every sale you hope to make.
- Sales Issue – if you’re attracting lots of people to your products and they’re showing interest in them, it may be your sales technique or your sales channel is losing people. For example, shoppers may need to hear more about the details of your product before they’re ready to buy at a craft show. Or, online, shoppers may be ready to buy but then get to the high shipping costs at the end of the shopping cart sequence and back out.
Once you determine why your crafts aren’t selling, you can take the proper steps to correct the issue.
>> You may find How to Sell Handmade Beyond Friends & Family helpful.
I hope this article has helped you determine how you’ll make a living selling your crafts 🙂