If your hobby is making products that are regulated, such as food or cosmetics, you’ll also need to understand U.S. Food and Drug Administration guidelines, as well as state and local regulations. You should also understand your state and municipal requirements for business licensing and operations to ensure you’re in compliance.
4. Write a business plan
Williams admits to being a “huge business plan proponent.” The plan doesn’t need to be long. She has a one-page version from SCORE that she gives to her clients to get started. But the plan can help the aspiring entrepreneur answer key questions about the business, its financials and its operations, she says. “We start with that, and then we have them come back in. Then we start to step into those specific areas that they may see as a weakness,” she says. Working out the specifics of their business on paper allows potential business owners to identify and address issues before launch, which heads off potentially expensive missteps, Williams says.
“Make sure it’s an endeavor that can eventually provide financial rewards,” Castrillon adds. “If you can’t make a business plan work, then it’s probably not worth the risk.”
5. Get your pricing right
Your product pricing will have an impact on everything from your business’s profitability to how your products are perceived in the market. To get pricing right, Castrillon recommends doing some competitive analysis. For market-oriented pricing, look at who is selling items similar to yours, and how much they are charging. Alternatively, cost-based pricing is when you calculate your total costs and add a percentage markup. Either way, be sure you understand how much you need to charge to recoup expenses like labor, supplies, insurance and other costs you’ll have as your business grows.
6. Find the right channels
There are a variety of options when it comes to selling your products, as well, so finding the right channels is also important. “If you’re selling jewelry or crafts, you might want to consider Etsy, eBay or Amazon as a sales channel. No matter what, I recommend creating your own website where you can also sell your items,” Castrillon recommends.
You may also choose to sell directly at events, such as festivals and fairs, or even sell your creations wholesale to retailers, catalog marketers or other e-commerce sellers for resale. The right choice depends on a variety of factors ranging from demand for your product to your own production capabilities.