Table of Contents
- Are You Ready? Turning Your Hobby into a Business
- Enjoy Your Work
- Understand What Sells
- Find Your Niche
- Set Up Your Shop for Success
- Find a Good Lumber Supplier
- Price Your Products
- Maximize Profits
- How Much Profit Can a Woodworking Business Make?
- Attract and Retain Customers
- Create a Woodworking Business Plan
- Take the Leap
Whether you are a veteran woodworker or someone just getting started in the trade, you most likely have contemplated what it would take to turn your hobby into a full-fledged woodworking business. You have the ideas, the passion, and creativity. What else do you need?
Entrepreneurship provides a lot of attractive opportunities, but success usually doesn’t come easy. Many people underestimate the effort, time, and energy it takes to run a successful business. For those who do it successfully, a dream job doing something they truly love is a beautiful reward.
Starting any type of business takes work. But with the right guidance, planning, and work ethic, you can build a successful business. For woodworkers, there are a lot of variables that must be considered. While everyone has a different way to approach a start-up business, they all circle around basic principles. We’ve pulled together a list of key business considerations we recommend you plan for when thinking about turning your woodworking hobby into a business.
Are You Ready? Turning Your Hobby into a Business?
First, ask yourself this question: is your hobby at a point where turning it into a business makes sense? Whether you like it or not, some hobbyists aren’t at a point where taking that next step to a business is the best move. Perhaps finances aren’t in the right place, machining capabilities aren’t ideal, or time won’t allow for you to scale and grow to make a career out of it. Take an honest look and decide if you can make it work.
Here’s one way to think about this: Let’s say you currently work full-time and only have 15-20 hours a week to work on side woodworking projects. How much can you produce in that time, and can you live on that? How much more do you need to scale until you can? And do you have the proper market available to sell your products? These are all tough questions, but they need to be assessed.
Maybe you aren’t looking at turning your woodworking hobby into a full-time career, and instead, you want to have a successful woodworking side hustle? That’s fine too! All of our recommendations are important for woodworkers interested in building a full or part-time business. And you know what? Maybe you start part-time but find you can build it to full-time.
This is your journey. Make it work for you.
Enjoy Your Work
“To be successful, you have to have your heart in your business, and your business in your heart.”
~ Thomas Watson Sr.
Rule #1 of building a woodworking business from a hobby: make sure you enjoy making all of the pieces you plan to sell. Business is tricky enough, and though you can never take your eye off the business ball, working on your craft should be the most enjoyable part of your day. If someone approaches you to make something you won’t enjoy, you can always pass on that project.
Also, the pride and joy of work is noticed by customers. People know when they are buying quality craftsmanship. This quality begins to identify you with your brand. And your brand is essential to your business.
What do you want people to think of when they see your work? These concepts start to build your brand. You can build a brand on your attention to detail, the type of wood you use, your quality, or artistic flair. Producing projects where you enjoyed the work will help to establish your brand, and a reliable brand raises your product’s value. Stay true to your roots and make sure you enjoy what you’re producing.
Understand What Sells
To make money with your woodworking business, you need to offer a product that has demand. A way to dip your toe into the water is to make some staple products. Merchandise like cutting boards, cribbage boards, beverage coasters, serving trays, and charcuterie boards, with your unique, artistic glow added, are great items to start test marketing and can be good woodworking money makers. Their low material cost and mass-production capabilities offer a chance to sell at lower prices during the product testing phase.
During the testing phase, you will eventually be able to examine your test marketing more thoroughly. Does my product fulfill a practical need (i.e., cutting board)? Does my product satisfy an emotional need (i.e., a custom-designed piece of furniture)? The answers to these questions help identify your target audience.
If you’re brand new to marketing your woodwork, we highly recommend testing products that fill practical needs first. This will get you started running a business, and then you can move on utilizing your artistic talent to sell custom-made woodworking products and grow a thriving business.
Where to Test Market
There are many platforms to test market your woodworking creations. Etsy is fantastic for uniquely designed pieces. Facebook Marketplace and eBay are handy for low price products. All three of these mediums have significant market potential. The downside is there is a lot of competition. However, competition helps establish a market price.
A smaller market, but one with higher price potential, is “locally made” stores. These are shops in your community that highlight the work of a local craftsman. People shop these stores in your local marketplace every day, and they are willing to pay a premium for high-quality merchandise while supporting local artisans. If your work sells quickly at these boutiques, you have a potential high-selling product.
Price Point During Test Marketing
A tricky exercise in test marketing products is what price you should put on your pieces. Research is required. Determine what other craftsmen are selling similar products for on Etsy, eBay, Facebook Marketplace, and trade shows. Typically, straightforward projects that are more practical to the customer are easier to find. The internet is saturated with woodworking products, so take the time to dig around.
Unique projects or those that fill the emotional needs of customers take more time to price. You need to know what the cost is to produce unique or custom-made pieces, and then add a margin to the cost to make a profit.
If you error on price, in either case, you will know in due time. If the price is too high, customers will let you know either verbally or by not buying your work. If the price is too low, customers will buy them faster than you can make them. Making an error when pricing your products is expected. Eventually, the price will hit the perfect spot that customers are willing to pay and a price level that you can make money.
Find Your Niche
Before we jump into finding your niche, we want to clarify the difference between brand and niche. Your woodworking shop’s brand is what customers first think about when they think about you, your business, and your product. A niche is different. A niche is a segment of a market that only you can provide and is isolated from competition.
5 examples of niches are:
- Unique designs on products.
- Quality only you can provide.
- Customer service that only you can provide
- Delivery or installation service only you can provide.
- Hardware you invented.
The most crucial aspect of having a niche in your business is that you can charge more for your products. There is no need to reinvent the wheel here. This is particularly true when it comes to your competition. Identify what the competition does and do it better. Having a niche for your products puts you on top of the competition.
Set Up Your Shop for Success
As you continue to plan your successful woodworking business, the next consideration needs to be your workspace. What are the limitations of your shop, if any? Might lack certain tools lead to inefficiencies? Is your shop too small to take on large projects? You want your shop to be big enough to hold some lumber inventory, multiple customer projects, all of your tooling, and be a safe working environment. The need for space will ultimately depend on the types of products you intend to make and sell. Are you planning a cribbage board business? Then shop size isn’t as imperative. Are you creating large-scale, custom cabinet projects? You’ll need more room.
Investing in quality tools is also helpful. They might cost a little more upfront, but the quality of the cut and the equipment’s durability will help your business in the long run. Note: we’re not suggesting that you run out and buy all new tools. You know which tools currently in your shop will one day need to be upgraded. Forums are a great place to get people’s opinions on tools. Woodweb and Lumber Jocks have a lot of helpful reviews from other woodworkers.
Also, keep in mind that with equipment, there is cost. Tools aren’t cheap, and quality tools cost more. But tools are also an investment. If you have high-quality tools but have a ton of debt on them, that won’t help get your business off its feet. Buy the tools that you need to get the job done right and efficiently. That means you might want to spend a little more on your table saw and less on your drill press or chop saw. Be smart with your money and spend it where you need to, and save when you can.
Find a Good Lumber Supplier
A challenge that most woodworkers face is the ability to find a good lumber supplier. A good lumber supplier is one that can provide the same quality of lumber time and time again. This lumber supplier should sell lumber dried to the proper moisture content, properly conditioned to relieve drying stress, and be easy to work.
It’s also helpful if your supplier has a variety of species, thicknesses, and grades. This simply makes your life easier. When you choose a lumber supplier that stocks a number of species, it becomes your one-stop-shop and you don’t have to continue sourcing different types of lumber through different suppliers for your products.
Another benefit of finding a good lumber supplier is that they can offer different milling options. Straight line ripping one edge of the lumber can save you a tremendous amount of time. Sanding a board to thickness is another great attribute that a good lumber supplier can provide. This reduces your finish sanding time. Some suppliers might also be able to rip your lumber to a specific width. You might need to ask them to do it, and they may charge you a bit more, but it can save you a lot of time and hassle.
Finding a reliable supplier takes time. Try different suppliers until you find the right fit for your operation. If you don’t like one, try someone else. It’s always useful to look at reviews and ask other woodworkers where they get their lumber from.
Online lumber suppliers are often a great option for woodworkers. They generally sell exceptional quality lumber and do so with competitive pricing. Most online suppliers don’t have a minimum size order either. You can buy as little, or as much as you need. Online suppliers usually ship their lumber through UPS, FedEx, or on a freight truck for larger orders. Although there can be limitations, having quality lumber shipped to your doorstep can save you a lot of time. It’s a great option for those that want access to high quality lumber, want to save time picking up lumber, or have struggled to find the perfect supplier.
Need more help purchasing lumber? Check out our list of questions you should ask when buying lumber.
Price Your Products
“Price is what you pay. Value is what you get.”
– Warren Buffett
Pricing a product, especially in the woodworking business, can be a challenging task. It takes a delicate balance between charging enough to cover all your expenses and not charging too much, resulting in fewer customers. To figure out how to price a product, we like to start with all the costs.
Here’s an example of a possible cost breakdown. The percentages used are a percentage of sales. The finished product cost is: materials 50%, labor 20%, manufacturing overhead 23%, sales/advertising 4%, leaving a 3% profit margin. This isn’t an exact formula to calculate the cost and ultimately a selling price, but we need to dive deeper into the expenses used to price the product eventually.
No matter what business you’re in, having a quality product is always a great attribute. In woodworking, quality raw materials are super important, and they can be difficult to monitor at times. Having a baseline understanding of lumber grades comes in handy when tracking this quality.
Hardwood and softwood lumber have different grades. The main principle behind grades is the higher the grade, the higher the board’s yield. In other words, the higher the grade, the more usable the board is. This also means that with a higher grade, comes a larger investment in the board.
The key to success in selecting a grade of lumber is finding the balance between the yield that needs to be made and the lumber’s price. It is essential to determine whether to pay more for high-grade lumber with less waste, therefore, less time manufacturing, or pay less for lower grade lumber with more waste and more time manufacturing. If the highest grade of lumber isn’t needed, don’t use it! Typically, more profits are made by using the grade required.
The different hardwood lumber grades are Firsts and Seconds (FAS), FAS One Face (F1F), Select, #1 Common, #2A Common, #2B Common, #3A Common, and #3B Common. Each grade has different specifications on what makes that grade. These characteristics include wane, split, and knot limitations along with the clear cuts of wood on the board. These grades and what is required within the grades are published and monitored by the National Hardwood Lumber Association (NHLA.)
The most common grades to use for woodworkers and furniture makers are FAS, F1F, and Select, which is better known as Select & Better. These grades will offer the highest yield, which is what is usually needed for furniture projects. Occasionally #1 Common can be used for smaller parts.
Need help selecting a grade for your business? Check out this blog, “Quality vs. Grade.” Also, simply call a lumber supplier and ask to talk to a sales representative. They can answer your questions and should put you on the right track.
Fasteners, hardware, finish, and sandpaper are also classified as raw materials. The cost of these expenses must also be accounted for in the cost of the product.
One part of raw material cost is shipping. Regardless of how the lumber got to your shop, it took some cost to get there. What we mean by this is whether the lumber is shipped through UPS, a freight truck, or if you pick it up yourself, transportation costs should always be factored into the cost of materials.
You’ll often hear of woodworkers picking up their lumber, so they don’t have to pay for shipping. Although it may be cheaper at times, often they aren’t saving any money, and possibly even spending more.
Shipping Cost Considerations
First, consider, if you drive to a lumber yard, how far away is it? Let’s assume it is (at least) an hour away. That is two hours of driving, plus money spent on fuel for your vehicle, wear and tear, and less time spent making products in the shop.
You’ll be there for at least another hour for pickup and payment. Total, you were out of your shop for three hours. That’s three hours you were not making money on products because you were “saving” money on shipping.
Sometimes that trip to the lumber yard is worth it and truly does save on cost. How do you know if it’s worth it? Do some quick math. Add the price of fuel, vehicle maintenance, and what you pay yourself. If it’s cheaper to go to the lumber yard, make the trip and save some money.
But if it’s the same or more expensive, find a lumber supplier that can deliver the lumber to your door. Your time and money is much better spent staying at your shop and making more products.
The more finished products you have, the more potential profits there are to be made.
This leads us to the next expense category, labor. Labor is the second biggest expense of most products. Calculating labor is simple. It’s the hours spent on a particular product multiplied by the hourly rate of the laborer.
Where this line typically gets blurred is when the small business owner is also the primary laborer. In these cases, the owner forgets their worth. You cannot forget to pay yourself.
If you value your work and your skills at $20/hour, then charge $20/hour for your time. That means you charge $20/hour when you are manufacturing the product. But also remember to charge your $20/hour rate when you are doing other tasks like bookwork, customer service, product design, marketing, materials pick up, or final product delivery.
Going back to the shipping cost discussion, you can see how this labor cost affects a business’s bottom line. The same applies to bookwork or any other duties needed to run the business. Three hours will cost $60 in labor if you value your time at $20/hour. Again, it’s three hours that aren’t spent manufacturing a product in the shop.
As with most products, other expenses need to be accounted for in the final cost of a product. Employment taxes, workman’s compensation, health insurance, utilities, maintenance, inventory tracking, packaging, and marketing all fall into this bucket.
Most companies refer to these expenses as overhead. Overhead can be broken down into an hourly cost and applied to the cost of the finished product. Some cost items may be small, but they still need to be worked into a product’s cost.
All these things can be challenging for one person to juggle, especially if they are selling products, performing customer service, designing products, and manufacturing the product. In certain situations, you may want to consult with an accountant. They can help to make sure your business is profitable.
Two Methods of Pricing
With all the possible expenses considered, you can move on to pricing your items.
There are two standard calculations for pricing: desired profit margin and mark-up. Regardless of which one you use, it’s important to know what each one is and how to calculate it.
Using Profit Margin as a Pricing Strategy
Profit margin is calculated by taking (selling price – all costs) / selling price. For example, if you sold a product for $1.00 and the product’s cost is $0.75, the profit margin is 25. (1.00 – 0.75 is .25. 0.25 / 1.00 equals 0.25. That 0.25 is then converted into a percentage by multiplying by 100 = a profit margin of 25%.)
But what if you want to calculate the selling price based on all of your costs? This can be done by taking the total cost / (1 – targeted profit margin in decimal form.) Here’s an example: the cost to make a cutting board is $75, and a target profit margin is 15%. (1-.15 is .85. Divide $75 by .85, and this equals a selling price of $88.24.)
Using Mark-up as a Pricing Strategy
Markup is the other common way to price products. Retailers extensively use mark-up. Here’s how to calculate the selling price using markup: the cost of goods sold x (1 + markup in decimal form.) Here’s an example: an end table is made for $200, and the target markup is 25%, the selling price for that end table is $250. (1 + 0.25 is 1.25. 1.25 multiplied by 200 is $250.)
Once a price point is determined, compare that price with similar products. If the price is within reason for what other people are selling similar products, then that price is likely a good selling price.
Suppose your price is lower than the competitors. In that case, you can use that to your advantage by either making a higher profit selling at the price of your competitors or sell your product at a lower cost to attract more customers and sell more volume.
Should your price be higher than the competition, try to determine if your product has a unique feature that would make customers willing to pay more. Customers generally are willing to pay more for considerations such as unparalleled quality, exceptional customer service, and quick delivery time.
Collecting payment is probably the most underrated part of running a business. If a payment isn’t collected or payment isn’t made in full, your business will lose money.
The safest way to run a business is to collect full payment when the order is placed. If you don’t receive full payment, another option is to accept 50% down when the order is placed and the remaining 50% payment when the order is complete.
The other way to collect payment is through credit. Credit is risky for a business, so make sure the customer can pay you before offering credit terms. In large woodworking businesses, customers undergo a credit check and have to be approved by the company to receive credit.
Processing payments also gets overlooked by start-up woodworking businesses. There’s always the classic standby of cash or check. But cash can get tricky because change has to be on hand. Checks are usually pretty safe but time-consuming to process compared to other technology-driven collection methods.
Collecting card payments is safe and easy. PayPal and Stripe are the most common companies to work with for collecting payments electronically. Keep in mind, they will charge a small percentage of the sale for processing the card. Most choose to work this expense into the cost of the product.
Everyone likes to save money when they can, right? Businesses shouldn’t be any different. As a business owner, it’s important to find ways to save money when you can. This could include switching insurance companies, trying a different lumber supplier, experimenting with off-brand hardware companies, and possibly investing in new, more efficient equipment. Remember, the more ways you save, the more profitable your business can become.
How Much Profit Can a Woodworking Business Make?
Naturally, when pricing products and thinking through your profitability, the next logical question that generally comes to mind is how much profit can I make with my woodworking business? This is a very open ended question that doesn’t have one solid answer. The profitability of your business will ultimately depend on your expenses and the price at which your product sells. But let’s rephrase the question: “Will I be able to live comfortably while running a woodworking business?” The answer is yes. Certainly, it takes time and a lot of work to get any business running. But once you are there, and you’ve successfully checked all the starting a woodworking business boxes, you can expect continued success. Depending on your skill level, the types of products you make, and the clientele you have, woodworking can be a very lucrative profession.
Attract and Retain Customers
When it comes to marketing, most people think of it as promoting a product to the world. Indeed, that is part of the big picture, but there are many moving pieces that need to be included. As you set out to plan how you will market your products, be sure to work these key marketing concepts into your overall plan:
Identify the Customer
Not all products fit all customers. We have a friend that still tries to sell us cleaning products for our business. His offerings are of the highest quality and sold in bulk. The best fit for his products are in schools, restaurants, and medical facilities; not an online lumber retailer. Although he is persistent and sometimes angry, we do not buy his product. We do not fit his target market.
Determining your target audience and customer is putting yourself in the consumer’s shoes. What would you like to purchase if you were them? How would you like it presented to you? What quality do you require? How would you like it to be transported to you? These questions help identify your target audience and ideal customer.
Develop a Presence on Social Media
Content marketing is essential to engage customers, but where can you share this content so that your target audience sees it? Start with platforms like Facebook, Instagram, Pinterest, and Etsy. They can serve as important channels that help you connect with customers and promote your products to your target audiences.
Another plus: these platforms have no or minimal initial cost. But note, as you get more established, you may find that you want to upgrade your listings with paid placements or advertisements. The best book available that talks about using social media and content marketing is 10X Marketing Formula by Garrett Moon.
Develop a Website
In conjunction with developing a presence on social media, a website is critical to validate your business. These days, building a website can be a do-it-yourself activity. Programs such as WordPress or Shopify make it reasonably straightforward to get started.
A website gives your customers more information about you, your business, and your brand. It can serve as a simple brochure or be an all-inclusive place where people can interact with your brand and buy your product.
While website content can be all across the board, we suggest including the following content at a minimum: information about yourself, information about your business, all contact information, address of your company, list of products/projects for sale, all the services you provide, customer testimonials, and a photo gallery with high-quality pictures.
Once your website is running and fully functional, list yourself as a business on Google. After you have registered, ask previous customers for a review. A high number of reviews will move your company up in the search engine results, which is a great way to help new customers find you.
Consider Other Marketing Channels
Outside of these must-haves already mentioned, there are other marketing mix options for woodworkers to consider. While this list is not all-inclusive, it provides a few different channels you may want to explore.
The first is woodworking trade shows. If furniture is your forte, there are trade shows for this genre. A Google search for ‘furniture trade shows’ will get you started. We suggest researching furniture trade shows that feature other high-end styles like yours for fine craftsmen like you. These attract good-paying customers.
Another marketing channel is email. Building a healthy list isn’t always easy, but it often pays dividends. Collect email addresses whenever the opportunity presents itself: on your website, at trade shows, when talking with customers. Provide valuable content to your customers and prospective customers with information that will drive them to your website to engage with your content and products.
Mailchimp is an online email service that allows you to send emails to your entire mailing list at the click of the button. In the woodworking business, customers give you their email addresses because they want to hear from you. Give them regular, quality communication in their inboxes, and you will get many repeat customers.
The final marketing channel we’ll mention is paid advertising. Social media advertising on Facebook and Instagram are the big advertising giants these days. These services let you manage all of your advertisements on their platforms and give you access to the data to determine if your ads are effective. Other platforms like Google and YouTube can also be useful for paid-advertising, but they can be much more costly. We suggest starting with low-cost advertising and working your way up to more expensive strategies that fit within your overall strategy and budget.
In addition to social media, Etsy serves as the global online marketplace for unique and creative goods. If you have something handmade to sell, Etsy is an excellent place to do it. The platform is certainly worth exploring.
Create a Woodworking Business Plan
“Everything is based on a simple rule: Quality is the best business plan, period.”
~ Steve Jobs
You have your ideas. You’ve thought through a lot of the details. It’s now time to put everything on paper and create your woodworking business plan. A business plan allows you to think through any scenarios that might come up and gives you the time to prepare how you’ll respond. It also lays out logistics about what your business needs to look like to be profitable. Key considerations to include in your plan are a lot of the details we’ve already mentioned earlier in this article: What kind of revenue do you need to be profitable, what kind of projects do you want to make, and how much time do you have to commit to all of this? Map all of these details out in a plan to increase your likelihood of being able to meet your goals.
If you’re like most entrepreneurs, writing a business plan might feel like a burden; however, a written business plan serves two important purposes. First, it gets all of your important business ideas organized in one document. Second, if you ever intend to take out a bank loan, your bank will request a business plan before lending you money.
Legal Name of Business
The first thing you want to include in a business plan is your business’s legal name and where it is located.
Your business needs to be legal. To make it a legal firm, you can hire an attorney or an accountant to file the necessary paperwork in the state that your business will operate. All government entities have online applications available. A Google search of, “How to make my business legal in Name of State” can point you in the right direction.
There are many types of legal business forms. The first is a sole proprietor, where all your business affairs are tied to you personally. This includes all liabilities, such as if your company fails or if someone is injured on your property. If any of this happens, you are personally liable to cover what is owed to injured parties.
Another form of business is a partnership. A partnership is two or more people that jointly own the company. This form of ownership splits the trade into parts equal to the partners predetermined contribution amounts that were agreed on. All partners are legally liable for the business up to the percentage they own in the company.
If the liability of sole proprietorships and partnerships scares you, there are other ways to protect you and your business. This is done by forming a corporation, a limited liability corporation, or a limited liability partnership. Each of these legal structures provides a layer of insurance between your personal assets and your business.
After you have the business’s legal structure established, open a bank account in the legal name of your business. Carefully consider the bank you choose to open this account. Select one that has a friendly reputation with small businesses. These banks generally have support staff that will help guide you through your small business responsibilities. The best bank partners generally are community banks and credit unions. Each of them has a reputation for helping small businesses succeed.
Finally, once your business has been filed as a legal business, you will receive tax identification numbers from the government. You and your accountant will use these to pay social security tax, state and federal unemployment tax, and state and federal income tax. Tax planning is an essential aspect of choosing the legal entity. There are separate tax rules and advantages depending on the legal structure of your woodworking business.
If it all seems overwhelming, find yourself a good accountant or attorney you can trust. They can be instrumental in helping you sort through all of these options and make the correct decision for your woodworking business.
Legal Structure of Business
In the business plan, record the reason you chose this legal structure of the business. This will provide a reference for you over time and is excellent documentation if you need to provide your business plan to anyone else. Others that may become engaged with your business plan and need to know your legal structure are lenders or a government entity like the IRS.
The business overview is often referred to as the Executive Summary. The overview is a two-paragraph highlight of what your business does, how it will do business, and why it will be successful. The business overview is short and sweet, with as much good news about your business as you can provide. Once again, if you ever plan to apply for a loan from your bank, a good business summary is necessary.
This section of the business plan is another formality if you are the sole person in your business. However, if you have a partnership or employees, this becomes an important section. People want to know who is in charge and the chain of command in your company.
If you have gotten this far in your business planning, you most likely know what will be included in your initial product line. List your products in the business plan, the unique features you provide, and the price you plan to charge.
Additionally, in this section, state the brand you’re creating. The brand is what customers think of when they think about your products and your business. It is the first image that pops into a customer’s mind. An established brand includes an overall design and is known for its quality, price, professional image, and service. Your brand determines how you compete in the marketplace. For woodworkers, it’s an important piece of the puzzle as you work to differentiate yourself from the competition.
A market analysis begins with an overview of how you believe you can compete in the marketplace. It’s your starting place. You will document who the competition is, how they market their products, and how your marketing plan will help you succeed in this market.
In a competitive analysis, include how your product is superior to the competition. Compare your price to the competitions. State how your products will be delivered and how you’ll do it better than your competition. And finally, mention how you will create product market awareness that is better than the competition.
Don’t reinvent the wheel. Find out what the competition is doing and do it better. In our experience, we’ve found that focusing on how to be better than the competition is more effective than just marketing your product.
Financial projections should also be provided in your business plan. An Income Statement is the most critical financial projection. A Statement of Cash Flow is the next most important consideration because most businesses fail due to a lack of cash.
Projections are useful for thinking through the volume of sales needed to make money and all of the expenses you will incur in your business. Most of the time, you will think in terms of one year. But if you ask someone to fund your business, they will most likely want to know monthly financials.
When you’re performing financial projections, consider reality. How many pieces can you manufacture? How many can you sell? And if you are projecting cash flow, are you going to hold finished products in inventory? Unsold inventory can drain cash.
Equally important in your financial projections are the expenses you will pay to operate your business. These include the cost of lumber, fasteners, hardware, and finish. Your shop costs include tools, electricity, heat and supplies, insurance on your shop, and inventory. Consider marketing costs of travel, advertising, booth space, and fees. Finally, you will incur administration expenses including office supplies, accounting, and legal costs.
We discussed this earlier, but how much are you going to pay yourself? All of the external stakeholders want to know this, and so do you. You want to make your time worthwhile.
If you are not familiar with financial statements, we highly recommend hiring an accounting firm to help you through the projections. This will save you money in the long run.
A good business plan has an appendix. You will include copies of required licenses, patents, and certificates of insurance.
Insurance is a must in your shop’s business operation. The essential business coverages are property, auto, liability, and worker’s compensation. Even if you are the only employee, most states require you to have worker’s compensation insurance on yourself. Contact an experienced business insurance agent. They know precisely the type of coverages you need for your business.
Also, in the appendix, include copies of the certifications you have. A very credible certification in the woodworking industry is the Architectural Woodworking Institute’s Quality Certification. Having certificates of quality portray a professional image.
Take the Leap
“Everyone can tell you the risk. An entrepreneur can see the reward.”
~ Robert Kiyosaki
If the idea of making money using your woodworking skills excites you, starting a woodworking business should be considered. While the amount of work needed to get your business started can seem daunting, it’s important to remember that all successful businesses, at one point, started as just an idea.
Remember: you can start as big, or as small, as you want. There is no one-size-fits-all when starting a woodworking business. While the tips and considerations we shared will help you begin building out your plan, there will undoubtedly be bumps along the road. No matter how much planning you do, inevitably, surprises will come up. When they do, do your best to adapt and keep moving forward towards your goals. For those who take the leap, having your own woodworking business can be challenging and extremely rewarding.