The handicraft industry has seen an increase in demand in the past few years. More and more people are seeking out original handmade items that are functional and eye-catching, yet more affordable relative to artworks such as paintings. Areas that have experienced a surge in tourism also saw a heightened demand for craft items as tourists purchase unique cultural items as souvenirs for family and friends, as well as for their own personal use.

However, you may have the skills for creating beautiful handiwork, but starting a successful crafts business demands a whole different set of expertise.

If you are planning to turn your love for crafts into a business, there are a number of factors that you need to consider:

Decide why you're really starting this business. Your goals for converting your hobby into a business can spell the difference in the level of success that it can generate. If you want your craft business to generate or supplement your family's income, then you have to get serious and start treating it as a business.

Verify the demand for your products. You need to know with certainty that people will want and buy your handicrafts. There are crafts that cater only to a very small market and cannot profitably support the operation of a business. 

One way to find out if your particular craft has a sizeable audience is by checking eBay. Do a search on eBay about your craft (e.g. bead art) and look at the auctions listed as "ending today." If most auctions ending that day have no bid, it may indicate that there is a lackluster demand for the product. Also do a search on Google to check how many e-commerce sites are selling your products. This approach can help you gauge your competitors, find out what they offer, and identify your possible niche or selling point.

Understand the business basics. Creating crafts is one thing; knowing how to turn a profit from it is another. Understand all the requirements and have reserve capital to meet expenses before you are able to produce sales and earn a profit.

Do your homework. If you have no previous background in business, now is the time to begin learning about the basics of managing and running a small business. You will not only produce the products, but you will handle its marketing, selling, bookkeeping, purchasing and a thousand other things. If you will hire other people to help you produce your products, you will need to learn about managing and keeping personnel. Buy or borrow books from your local library on how to run a small business. If you feel that you are weak in bookkeeping, you may want to take a crash course on the topic from your community college.

Find out about local regulations. As a business owner, you should familiarize yourself with local regulations, including licenses and permits that you need to operate your business. Even if you intend to sell only at the local flea market, you will be asked for your permit and will need to collect sales tax.

Separate your business from your personal account. While this is not essential to your start-up phase, having a separate business account from your personal account can make life easier for you especially at tax time. You need to prove that your craft business is not a hobby - and that it is indeed a business - before you can be allowed to deduct your business expenses from your income. Getting a separate bank account under your business name is the first step.

Know where you will work. Find an area where you can work, giving consideration to efficiency and the eventual expansion of your business. Whether you will be working in a spare room or rent a workshop area, your studio must fit your needs in terms of size, services, security and safety. You may want to work from home during the startup phase to help you operate with lower overhead and start with a smaller amount of capital. Make sure that your workplace has an adequate electrical service and ventilation system, particularly if you are using chemical dyes.

Craft items can be sold in a variety of outlets. Here are a few of them:

Retail stores. The most popular way of selling craft items is through specialty craft or gift stores. You can also try selling your items to department stores. Approach the owners or the merchandisers about carrying your products. You can first start-off with the smaller boutique stores, offering them discounts for wholesale purchase of 12 or more. Find out the stores' requirements - some will require UPC codes insurance on your product while others will lock you into purchasing contracts.

Consignment stores. Consignment stores are another excellent venue for selling your products. They will pay you only after they sell your work, keeping 20 percent to as much as 60 percent of the sales amount. Read carefully the consignment agreement. Some will require you 1-year booth contract and a monthly fee, in addition to the commission they get from the sales of your products.

Craft and flea markets. Craft shows, flea markets and local fairs are a great way to sell your merchandise. People who visit these markets are on the lookout for unique pieces not commonly found in department stores. Check professional craft associations and your county's business information center about schedules of craft shows and markets. If there's a regular flea market in your area, get in touch with the person in charge. You can set up a small booth, which can cost you anywhere from $20 to over a thousand dollars for a 10x10 space. Depending on whether the craft market is held indoors or outdoors, set-up can be as simple as putting a couple of tables to display your products and having a canopy to protect your merchandise from the elements. Craft markets can offer you the chance to get to know buyers and what they are looking for, as well as check out your competitors.

Internet. The Internet has become an important distribution channel for crafts. You can create your own e-commerce site, join virtual craft malls, or sell your products at online auctions. Evaluate the costs of utilizing each online channel, and which one could bring the most customers for your business. Know the various marketing tools that are peculiar to the web. Learn how to take good quality pictures: your sales depend on it. Note, however, that successful online marketing takes time, patience, persistence and knowledge of marketing principles.

The most effective form of marketing a craft business is your reputation for high quality work. By consistently producing fine craft products that are exciting and innovative, your reputation can serve as your word-of-mouth advertising. Word-of-mouth, especially if given by an opinion leader (e.g. newspaper columnist), is a powerful tool that can build the inertia for your business.

Other marketing ideas that work well for craft business owners include:

• Business cards and pamphlets illustrating and describing your work. Choose your best product to showcase and ensure that its photograph is first-rate. 
  
• An interesting story about your craft business. It could be the unique way with which you produce your crafts, the indigenous materials that you use, or how you started doing what you love. You can put your story in your web site, pitch the story idea to a newspaper editor, or include it in your brochure. 
  
• Portfolio of your works. Create a portfolio of your best works using quality photography. Creating a binder-full of your finest pieces can be expensive, but essential when presenting your business to galleries, boutiques and other retailers, interior designers, even architects. 
  
• Direct mail. Ensure that you get targeted mailing list. Use a printed postcard, instead of flyers or brochures to cut costs. 
  
• Online advertising. There are many forms of advertising on the Web that you can try: buying targeted banner ads, Google ad words for your keywords, or even donating a craft item for web site contests.

Marketing your business will take up a significant amount of your time. Make sure that you develop a plan on how you can effectively get the word out about your business and move your craft items.

Hobby Industry Association http://www.hobby.org/
National Craft Association http://www.craftassoc.com 
 

-- Jenny Fulbright is a staff writer of PowerHomeBiz.com.