Thursday, July 21, 2011

Starting Your Own Home Based Craft Business

Should You Start Your Own Business?
No one but you can determine whether or not to start your own craft business but certain indicators can lead you to the right choice.  Below are 10 questions you need to answer in detail before you start your business.  So sit down with a pen and paper and answer as many of them as you can. You probably won't be able to respond to all of them in one sitting. Those left unanswered will guide you to your weaknesses or areas where you simply need to do some work or research or seek help. Answer the questions as completely and honestly as possible to do less is to fool yourself and court disaster.

1) Why do you want to start a home- based business? Provide as many reasons as you can for instance being your own boss, having more time to spend with family, gaining control of your career, getting out of a dead-end job, avoid the hassles of commuting, or anything else you can think of.

2) What craft experience and management skills can you bring to your new business?  List craft-related jobs and management positions you've held, courses you've taken, books you've read, and how you plan to overcome them.  If you've never held a management position, perhaps your plan to gain the necessary skills is to launch a research effort at your local library and bookstore, totake business courses at a local community college, to sign up for seminars offered by small business organizations or cooperatives, or a combination of these.

3) How much space will you need for your new business?

first determine what kind of space you will need: office, workshop, studio, warehouse, storage room, sales area or display room.  Every home-based business must have an office.  You'll need some kind of workroom, workshop, studio or a combination of these.  Nobody ever has enough storage space.  Some businesses might get by with a storage cabinet, most craft businesses require more, some far more.  After determining your space requirements, estimate size in square feet.  Sit down with a paper and pencil, ruler and lay out your work area.  Allow for furniture and equipment so that you'll get an idea of how much space this business is going to take up.

4) How do you plan to accommodate the space demands of your new business?

Will you temporarily set up a home office at one end of the dining room table or put a desk in your bedroom and work there?  There is nothing wrong with that: many home-based entrepreneurs start out this way.  Will you set up a permanent office in an unused room?  Can your office double as a studio or workroom, or do you need a separate room? Do you have a garage, basement, or attic space to convert?  Can you build on?  Everyone will have a different answer.  Renters are more restricted than owners, and persons who live in small dwellings are more restricted than those who have plenty of space.  If you plan to move within the next 5 years, you would do well to list short term and long term space considerations.

5) What are your immediate and future equipment needs and how will you meet them?

List all the arts-and-crafts equipment you will need to start to operate your business for one year.  Depending on the nature of your craft that can include a wide assortment of hand tools, power tools, and other instruments.  List all the office and other equipment you will need for that period: computer, calculator, telephones, office furniture, filing cabinets, vehicle.
Now list your equipment for the next 5 years.  In each category list equipment you already own and note how you expect to acquire what you don't have.  Remember you will need to update and upgrade within five years.

6) What licenses, permits and laws do you need to know about to operate a business from home?

Laws vary from state to state, county to county, city to city. Your state may require you to file your business name with a state agency or apply for a business/vendor license.  You might have to obtain a permit from your county government.  There may be city ordinances regulating the operation of home businesses even from one neighborhood to the next.   You need to know about all obstacles and determine how to overcome them.

7) How much cash will you need to run your business for one year and where will it come from?

This is no place to fudge the figures.  Be as honest and accurate as possible even though you're making an estimate, and possibly not a very educated one at that.  Remember, if you must err on money matters, it always best to err on the side of fiscal conservatism: overestimating the payables and underestimating the receivables-any outcome to the contrary will be a pleasant surprise.  Estimate what it will cost to run your business for a year and don't forget your salary.  Now determine where the operating capital will come from: savings, spouse's income, pension or retirement income, the business itself or elsewhere.

8) Who are your competitors, how are they doing, and how do you expect to overtake them in the marketplace?

The way you deal with this question depends on the kinds of craft work you plan on doing and how many other local artisans work in the same area.  If certain kinds of crafts are popular in your community or region, and you plan to work with those same crafts, you'll be in competition with many local artisans.  If they are all driving fancy vehicles and living in expensive houses, there's obviously plenty of room for competition. If they're bare scratching out an existence, however, that could mean the supply is outstripping the demand, and you might need to look for another niche. Chances are, reality lies somewhere between the 2 extremes.  If you have a particular area of expertise say clock making, in a small community, you could be the only artisan so skilled and may well fill the niche.  Spend some time with this question and answer it carefully.  This is your first step into the realm of market analysis.

9) What are your short-term financial and personal goals for your new business?

What do you expect to earn and accomplish during your first year of operation?  Here you need to focus and get more specific. You should lay out objectives that go beyond mere subsistence or just getting by.  What are your goals?  What do you expect your income to be by the end of the first year?  Will you have others working for you? What sort of hourly or daily rates or commission fees will you be demanding by then?  How will you have improved or branched out?  What will you have learned?

10) What are your long term financial and personal goals?

Now discuss everything that you covered in question 9 in terms of a five-year plan.  How big do you expect your business to be in five years?  How skilled an artisan do you hope to be?  What sort of customers do you expect to have by then?  Will your business continue to grow or will you want it to level off at some point?  Do you plan to hire help?  Will you branch out into other crafts, arts, or allied fields?  Will you  get rich?

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