Yes, we know. Before you can even think it you are wondering if you even need a business plan. And that it’s going to be a difficult and tedious affair making one for your business.
The reality is that, most likely, you are already putting one together. Since you are reading this post, have been researching selling platforms and competition online, creating a great craft to sell, exploring resources, you have already taken the first steps towards creating a business plan.
However, a formal business plan is much more than this. It is a detailed document containing vital information about the nature of your business, your sales and marketing strategy, market research, projected goals and expected expense and profit.
It also marks a clear path for growth and periodic milestones that the business is supposed to reach.
“A business plan has all your ideas plugged in with all of the above information, written in a concise and clear manner.”
So back to the primal question.
Do you even need a business plan?
Many people will tell you that you need a formal business plan if you need to raise seed capital to fund your business. For example, if you want to take a loan from a bank, meet an investor etc.
But many small businesses start small, with the entrepreneur’s own money and scale their growth by re-investing the profits. Its more than likely that you are doing the same with your craft business.
So why bother making a business plan, right?
Not quiet. A business plan is not just something you make for the investors. Every possible research shows that making a business plan has a positive impact on any business start up. And like we’ve already mentioned, crucial steps like market analysis and online research are all part of business planning.
Writing a business plan lets you:
- Discover the information you need to succeed.
- Project and anticipate errors and mistakes years before they happen.
- Learn what works and what does not.
- Arrange thoughts and streamline actions.
- Motivate your every step of the way towards your goal.
- Follow a charted path to reach milestones and achieve goals.
- Re-visit and evaluate your progress so you always stay on track.
- Project 3-5 years in the future and know what you have to do to get where you want to go.
I know that a business plan may sound like much ado about nothing. You could well be thinking, “I don’t need a business plan to put a few of my things to sell online. It’s easy to do.”
But the more serious you get about making money with your art and crafts, the more you will appreciate a business plan. Our intention behind this post is to educate you the best we can and why and how to go about making one.
All business plans are designed around the same segments. Make the effort of including as much information as possible in each of these segments. However, you can pay more attention to sections that are more relevant to your business.
For example, omit the “funding request” section if you are not trying to raise any money just yet. Or skimp over the “financial projections” for now if you are just testing a dozen items on Etsy for the moment.
Here are the common parts of a business plan:
- Executive Summary: An “at a glance” synopsis of the entire plan.
- Company Description: What is your business setup and what is your product.
- Market Analysis: Research into your potential customer and competition.
- Management: Who are the people involved with running your business.
- Product: Details about your product, its strong points and comparison to competitors.
- Marketing and Sales Strategy: Exactly what that says.
- Financial Projections: How much money you need to spend and how much you expect to make in return.
- Funding Request: Details of how much money needs to be raised now, in the future and how it is be paid back.
- 12 Monthly Landmarks: Set a goal to achieve every month for the next one year.
Making A Start
A business plan is not made in a day. It starts the day that you start researching and collecting information about starting your business, and carries on till the day you make the formal draft.
So here’s how to get started.
- Start taking down notes. Keep a diary or use your computer. Either way create different sections for different parts of the business plan. If keeping a diary, use the kind that’s divided into sections. If using a computer, create separate documents for each section.
- At this point, simply write down the information you collect in the right section. You are not formatting or filtering the content at this point. Just take time to research comprehensively and keep writing in the respective section.
- Set some sort of a time schedule to finish the note taking. This can easily be a few weeks.
- At the end of your research period sit down to compile the information in a concise and readable manner.
- Take a couple more days to do this.
- You can see a few examples of real business plans. Just go to your favorite search engine and search for “sample business plans.”
- Try and do the compilation seriously with ample information.
Sections of a traditional business plan in more detail.
The Executive Summary
Think of this section like the cover page of your business plan. It is a snap shot of your entire business plan and contains your business information along with your business mission statement. It is only meant to be one page long and yet encapsulate all the information in your entire business plan.
For this reason it is actually created after all the other sections are done. Anyone reading only the executive summary of your business plan should still get a clear idea about your business, your product and how you intend to make money.
The Company Description
This is where you start describing your business, the product and the customers you are selling to. Remember that you have a separate section for product description. So save the detailed product information for that.
Why is your business and craft unique, and why you will be successful. Being able to answer these questions speaks about the soundness of your business idea.
Who you are selling to? How will cater to that customer? How will you make better products, include features and design to cater to these customers?
Feedback from existing customers can give helpful information to include in your business plan in the future when you revise it. They can tell you what makes your art and craft special, why they bough it and how it stands out from the competition, all of which are great facts to know.
Market Analysis
This is a very interesting section to make. In order to write here, you have to start doing your research into what’s going on in your line of work.
Who else is making similar crafts, where are the shops, how is the market online, what is the price range, all of it is important information. Here are some pointers you want to cover in this section.
– Describe your industry. What is the history of your craft. Is it a popular item? How is it doing online? How many sales is this category generating in Etsy, eBay and other sites. Is your craft catching and growing in popularity? How is the sales pattern over the last coupe of years?
You can find a lot of this information online and if possible by talking to other crafters. Believe it or not, many crafters say that they like selling on Etsy because of the tremendous support they get from the crafter’s community there.
– Describe your target market. Here are areas of your business plan that will overlap with one another. You have spoken about the target customer in your company description. Here you define them in greater detail.
“Remember being able to identify and target a small segment that has little competition is almost always more profitable than looking at a larger more popular niche that already has many sellers.”
Get specific about who you are selling to and notice trends, behavior and patterns with their buying e.g. seasonal spending.
– Discover trends. This area of your business will always be in flux. Certain themes and colors and designs follow trends that change and become popular every now and then.
This doesn’t apply to all forms of art and craft but if you are into a field like home décor and apparel, following the season’s colors and other trends can make a distinct impact on your sales. Writing a business plan forces you to discover information that will improve its chances of being successful.
– Pricing structure. This is not easy to decide and there are actually different strategies you can follow. Go with “good quality and good price” principle or go with “exclusive and highly priced” way of doing things.
It all depends on what you are selling. But you definitely want to join the exclusivity parade eventually. Trust me when I say that.
– Product Testing. You have a great opportunity to test crafts before you start a business in earnest. It’s easy these days to list a few items online on Etsy and Ebay and see what reaction you get from people.
The drawback is that its easy for new shops to get lost among the sea of sellers on a large and popular platform like Etsy. Selling successfully on Etsy needs due effort. So you can try other small or unique platforms, where you are more likely to stand out, to test your product.
We have covered many of these websites in our post 31 Places to Sell Online.
Better still, there are some great product testing opportunities for artists and crafters such as art and craft and local fairs, as well as selling from home to family, friends and acquaintances. You can test different designs, pricing and get some honest feedback as well.
Organization and Management
Most crafters will find this an easy section to make since they will be the sole proprietor of their business and its management incharge.
However, you do have the duty to fill in details about yourself. What are your qualifications, experience and skills that make you a good candidate for starting this business. Think about your qualities and strengths that you will utilize for the success of your business.
This section will also make you realize the areas that you need additional help with either by training yourself or through external resources. These days help is readily found in many areas of business, and for a reasonable cost, thanks to various online resources, Fiverr.com being a popular choice amongst them.
Product Description
The creative process of an artist or a crafter is not the same thing as the creation of a money making product. This section is an attempt to blend both. It’s about how you can create an art or a craft through your creative process, that people will also buy.
Therefore, in this section you describe your product in detail. You speak of its distinguishing and sellable qualities, and describe the customer profile you intend to sell to. Work on being as unique as possible when it comes to product creation.
Writing down this section will give you a great opportunity to improve on an existing craft as well as come up with new ideas for expansion of the product line in the near future.
Distinguish the needs of your target customer that you are fulfilling with your product, and identify other related requirements as well. An art and craft business needs you to make items that make money. This section is meant to help you do that every time you are creating in your studio.
Marketing Plan
Yup, it all boils down to this. The piece of art/craft is ready, boxed and ready to be sold. How’s that happening? You need a plan for that too!
It’s exciting really once you’ve got it figured out. And writing it all down takes the mystery out of it once and for all. You do the research, you do the math, and you know that you have to do promote your work and generate sales.
At this point you are only listing the methods of marketing that you are going to try. You will update this section once you know which ones are successful. Read our post on “How and Where To Sell Your Crafts.”
Also, “branding” is a huge part of marketing. Read, “7 Steps To Easy Branding!” Here are just some pointers to consider when making a marketing plan for your craft business.
– How will you begin selling? Are you going to start by introducing your art and craft to your family and friends? Or are you going to setup a few items online on Etsy and other websites (Read the post 31 Places To Sell Your Crafts Online.)
– Do you plan to setup your own blog to promote your products. (We highly recommend that you do).
– Are you going to use paid advertising, offline and online by purchasing ads in local publications and search engine results? (Read our post on “Free Ways to Advertise Your Business”)
– What role are social media websites like Pinterest and Facebook going to play in your marketing and promotional efforts? (We highly recommend using Pinterest, at least).
Financial Plan
To state simply a financial plan is about 2 things:
– How much money you want to be making, and by when.
– Knowing at all times how much you are spending and how much you are walking.
When you are first starting your business, this section is going to be a lot about projections. If you have any existing information about revenue through an existing business, or prior sales, plug that information in.
– Figure out how much you will spend to get the business going. Include any loans you are taking.
– Project the number of sales you expect to be making, as well as the projected earning 3 months, 6 months or a year from now.
– Your financial plan is fluid. It will evolve as more numbers start coming in from your business transactions.
– In the meantime, its helpful to look at existing businesses and base your projections on their numbers. For example, on Etsy, you can easily see the number of times an item has sold, its reviews etc.
– You will also have to project some expenses along with expected revenue. A handy tip here is that you should double the estimated amount you state for marketing expense, as well as for license, legal and insurance expense. That’s just how it rolls most of time. People end up having to spend more on these things than they initially surmise.
Creating 12 Monthly Goals
This is optional, but great for motivation and systematic progress on a monthly basis for the next 12 months. You have to decide what these monthly goals are according to what you are doing and where you are starting from.
For example, first month can be all about branding, creating logos, making packaging and opening a shop on Etsy. 2nd month can be about generating at least 20 sales and adding 20 more items to your Etsy shop.
Month 3 can be about creating 30 more items and starting your own blog. So on and so forth.
This section is also fluid. Visit it every month and at the end of the 12 month period, make a fresh set of twelve monthly goals.
Your business plan is a document that’s meant to be used by you. Visit it frequently to see where you are at. It will help you stay on track. Pin some relevant stages on your office board so you are always reminded and motivated. By the time you have finished making the business plan you will have gained some amazing insights into your work.
You will be many times more prepared to succeed in your business than you were before. You will realize this every time you refer to it. Revisit your business plan after a year with the intention of editing, revising, changing and adding to it. As business grows and changes, so will your business plan.
