Starting Craft Business Online

You might be one of the many people sitting at home, surrounded by countless crochet projects that seem to just take up space. You offer a friend a crochet handbag and, to your surprise, they sheepishly remind you that you’ve already given them two and they really have no need for a third… They suggest to you: “why don’t you sell them?”.

With the growing popularity of “online craft fairs” such as Etsy, it has never been easier for crafters to sell their creations online. It’s a great way to monetise your hobby, making a little extra money on the side to support your craft addiction. There is a growing demand for bespoke, thoughtful gifts designed and/or created exclusively for the recipient. In a world where our lives are becoming increasingly shaped by a need to portray our individuality through social media, this exclusivity is the difference between a mass-produced soft toy, made in China and sold in Poundland, and a similar soft toy made in Britain and sold on Etsy.

Arts and crafts are the front line of Britain’s growing creative industries. Anyone with an artistic or creative flair can cash in; students, full-time professionals, stay at home parents are all becoming “hobbypreneurs”. And with various subcultures, such as “kawaii” (“cute” in Japanese), as well as ranging a number of different types of homemade products from home decor to clothing to toys, it’s easy to find a lucrative niche to build your brand.

Figuring Out Finances

If you’re already at home crafting, chances are that you’re already spending money on craft supplies. Initial investment can start small, using your existing supplies to create your stock in small numbers or creating single items to order once an order has been paid for (depending on the time to produce, or the type of items you’re selling).

Keep all your finances organised, documenting every expense from craft supplies to shipping costs, and keep a record of the details of every sale. Calculate how long each item takes to make, and how much it costs to make. Take into account sales and listing fees. Etsy, for example, takes a 3.5% cut of every sale and this should be considered when pricing your sale items.

Online Marketplaces & Craft Shops

Many UK online marketplaces for makers (such as Etsy, Folksy, and Not On The High Street) allow you to create your own personal storefront. You may also choose to sell in more mainstream, non-craft-specific online marketplaces, such as eBay and Gumtree.

Designing a brand identity that appeals to your target market and tells your story is crucial to any business, but especially within the craft industry where the transaction may feel extra personal. Once you’ve settled on a coherent brand image, logo, and aesthetic, this needs to be consistent across all your online storefronts and social profiles.

The craft world tends to be a place of loyal followings, and promoting your creations, products, and even your lifestyle on social media can help you to build that following of loyal customers and fans. There’s a horde of craft bloggers and influencers who you can collaborate with to feature your creations in the form of reviews, guest appearances, product placement, and giveaways. A friendly community requires you to make friends within that community.

Instagram is a great platform for starting to build your following, and eventually you may decide to incorporate Twitter into your social strategy, as well as YouTube for those longer “craft with me” or craft tutorial videos where you showcase your best work or review your favourite craft products.

Marketing at Craft Fairs

Having a physical presence at local craft fairs can help to establish you as a professional crafter, and hiring a table or a stall at these types of events and festivals can start anywhere from £5-£10 for the day. Not only will this help you in spreading your brand through word-of-mouth, but it can also push people to your online platforms so that they can make repeat purchases online. Make sure that visitors take lots of pictures (maybe even ask them to tag you!), and take a business card with them!

Networking with other local crafters can even create new opportunities for future craft collaborations or just make a new circle of friends with similar interests, to meet for coffee every once in a while for inspiration and to discuss your recent projects.

Understanding Legalities & Taxes

To run your craft business legitimately, you should register (for free) as a sole trader so that you can complete a Self Assessment Tax return each year to declare your profits and income. Later, you may decide that you want to register a company, but there is a lot more paperwork involved and if you’re just starting out, it may not be the worth the effort just yet.

In an effort to clamp down on hobby businesses who are not declaring this additional income, HMRC have over the years been running their “Second Income” campaign. If you voluntarily declare your second income to HMRC, then you will still have to pay any tax owed, but this may be limited to 6 years (rather than 20 years if HMRC were to discover the tax avoidance and investigate your finances further) and any potential files will be reduced.

The government have introduced a number of initiatives to incentivise hobbypreneurs to declare their income, whilst showing support for these types of micro businesses. This includes the “Trading Allowance” that came into effect from April 2017, in which “individuals with property income or trading income below the level of allowance will no longer need to declare or pay tax on that income. Those with relevant incomes above £1,000 can benefit by simply deducting the allowance instead of calculating their exact expenses.”

There will be no forms to fill in, no tax to pay. It is a tax break for the digital age and at least half a million people will benefit.

For those who are just starting up a craft business, and not expecting to generate a substantial income from their first venture, this can take a big worry off and allow you to toy with the new business or test ideas and prices.

The rapid growth of the digital and sharing economy means it is becoming easier for more and more people to become micro-entrepreneurs.

By law, you also have a responsibility to consumers as the producer or seller of the product.

You must ensure product safety by:

  • warning customers about potential risks
  • providing information to help consumers understand the risks
  • monitoring the safety of products
  • taking action if a safety problem is found

Insurance for Crafters

Some who start out as part time hobbyists end up with physical storefronts, offices or workshops! If your business takes off, and you find yourself in a position where you need to hire employees to assist with the admin, marketing, or even product making and design, employers liability insurance is a legal requirement.

In the meantime, other insurance products which could potentially save your business from financial failure include public liability insurance and product liability insurance. Be aware that your home insurance will not cover your online business!

The reasons for needing public liability insurance may not at first seem obvious, as you would typically work from home and have zero day-to-day physical interaction with customers or the public. But the moment you step outside and sell your crafts at a craft fair, a boot sale, a market, or a festival, there is always a risk that a member of the public suffers an injury as a result of your business, or you accidentally damage their personal property. Perhaps they trip over your bag or your floor display or, during a live workshop, you may accidentally spill paint on their nice shoes. Public liability insurance for craft fairs covers those unexpected incidents that you could be liable for. Additionally, many organisers will require you to be covered for these events should you be interested in selling or exhibiting at them.

If you frequently attend events, then insurance may be a worthwhile investment to consider to prevent you from having to shut down your business altogether due to financial difficulties.

Product liability is offered as an add-on to public liability, extending the cover to include protection against claims of personal injury or property damage resulting from use of your product itself. For example, if a soft toy you have designed and created is not suitable for use by young children but there were insufficient warnings in place, and a child were to injure themselves whilst handling the product, then you could be held liable for their injury.

The cottage industry of crafting is an attractive option for many, and presents itself as a low-risk foray into the world of online business and e-commerce. In 2017, online sales accounted for 16.4% of total retail sales in the UK; and this is a worldwide trend!

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