Business - Woodworking Talk

AZ Termite · 01-05-2009, 08:16 PM

Here lately I have been considering going from just hobby woodworking to making a business out of it. At this point I only sell a handful of things each year. Most of the stuff I do is for us, and alot is gifts. I have been thinking about making an assortment of things, bowls, pens, cutting boards, rolling pins, and setting up a booth at local crafts fairs and such. I guess I'm thinking that by making a business out of this I can make a little money and be able to right off all my expenses, like materials, tools, my shop. What are your thoughts? Anyone that does this as a business I would like to get some input. Anything you have on your experiences would be great. Thanks in advance.

joesdad · 01-05-2009, 08:44 PM

I worked for ten years in publishing, then ten years till now as a carpenter/woodworker. Hmm...I really don't miss the cattle mentality of the corporate world, but those four weeks paid vacation and full benefits sure would be nice to have again. In the current climate, if you can find a consistent target and sell over and over again than it would be something to consider.

smitty1967 · 01-05-2009, 08:47 PM

Hey Termite:

I've been kicking around the same type of thing, only I'm looking at selling more significant pieces of furniture for larger margins. I have to date made a handful of pieces to order, and upon completing my shop, went out on a limb and built a couple pieces for sale. To date I have sold neither of them, but I haven't advertised very diligently, either.

I'm coming to the conclusion that I'd rather keep my business within the family and circle of friends/word-of-mouth, and build only for people I know and love and trust. I think there's way too much trouble to be had by going public. Making a go of it, writing off utilities, supplies, etc, is just too much trouble for me, personally, and would turn a fantastic and fulfilling hobby into yet another task and I would be loath to ruin that part of it for me.

These, of course, are simply my opinions. Others will certainly vary.

regards,
smitty

firehawkmph · 01-05-2009, 09:33 PM

Termite,
Most of the people I know that sell anything at craft shows do it as a hobby and only take cash (wink, wink). So they aren't concerned with writeoffs. I don't know personally anyone who makes a living with woodworking, other than a couple of people that run cabinet shops. It all sounds good until you go to do it. Why try to make a job out of something you really like? I guarantee it will take the fun out of it. And why anyone would want to start a new business right now with the tax and tax and tax and of course spend it all democrats in charge now is beyond me, unless you are a believer in 'spread the wealth'. I'm not. nuff about that before I tick myself off.
Mike Hawkins

steve mackay · 01-05-2009, 09:42 PM

I did it. Love working for myself. But remember : You gotta be THE TOUGHEST boss you ever had. Oh . . . and be prepared to be poor for, at least, the first year. Buy and pay for all tools and machines before quiting the day job. And biggest of all ( to avoid getting your feelings hurt ), when trying to unload your stuff you'll hear a hundred "NO"s for every "YES". Out of a hundred business cards you hand out you'll hear back from ten. And only three of those will be a sale. But there is nothing sweeter than money that comes from your own enterprise.

AZ Termite · 01-05-2009, 09:42 PM

I'm not looking to make this a full time deal at this point. I am really just brain storming at this point. The way I am looking at it at this point is, if I create a business I will be able to recoupe some of the cost of the hobby. Maybe someday I will want or be able to do this full time, but for right now I have to stick to the everyday bump and grind of working for someone else. The benefits I have make it easier to raise a family.

rusty baker · 01-05-2009, 10:25 PM

I did craft shows for 10 years, 24-26 a year. Since 2001 there has been a steady decline in the number of shows and sales at the ones that have survived. The shows are hard work. A typical day is, getting up a 2 am, driving 2-3 hours, spend 2-3 hours setting up, manning your booth for 12 hours, if it is an outside show, fighting thunderstorms, wind etc. Tearing down, loading up, driving home. A 20 hour day, and maybe you sold enough for a profit, maybe you didn't. You can have $1000 or more invested in a weekend show and not make anything. And don't depend on other crafters to tell you the truth about whether a show is good or not. And all promoters inflate the size of crowd they have. We went to a show for a number of years that had 65o exhibiters. In 1998 the average weekend sales were $1800, by 2004, it was $400.

Kenbo · 01-05-2009, 10:45 PM

I gave it a whirl once on a part time basis and found that, although I enjoyed the little church bazzars and making cash from my craft, I enjoy it more when I can do it at my own leisure. I still make some of my pieces for others, but I do it on a word of mouth basis, and I do it at my own pace, on my own terms. I can live with that and if the customer can't, then I'm not interested in selling them an item.
Ken

jporter5333 · 01-05-2009, 10:51 PM

AZ

Let me start by saying I am not trying to be negative and I am not trying to talk you out of or scare you away from starting a business. I can't stress that enough. I firmly believe that if a person wants to start a business they should go for it. I tried to do the same recently and all I have to show for it is being $20,000 poorer. My advice would be don't be like me. I tried to go at it without guidance thinking it couldn't be that hard. WRONG! Seek professional help. If I had it to do over I would have. Next, keep it simple. I don't suggest incorporating your business. You will be told about the great personal asset protection and tax advantages this offers and yes, it does. But, it is very complicated and the tax advantages are for the business not you and since intermingling of business and personal funds is a BIG no-no it's hard for you to realize them personally. Not to mention the required corporate paperwork is extensive and can be complicated. I suggest either an LLC or a sole proprietorship. The simplest being the sole proprietorship. Ok, I could go on for days about this but it's just too much to type here so I"ll cut it off here. What I mentioned is just a smidgin of what I learned when I tried to start my business. I learned all my lessons the hard way and some lessons were learned after it was too late and I had too make the decision to dissolve the corporation without ever having conducted the first business transaction. HOWEVER, I am not in the least bit finished with this issue. I still fully intend to own my own business. I am chalking this one up to a learning experience, and I am stronger and better prepeared because of it and I will use what I've learned to "do better next time". But first I now have to recover (financially) from this one before I am able to try again. But next time I will get the proper help and keep it simple as humanly possible. Sorry to ramble but there is alot to be said about this. Do it right and it will be wonderful, but do it like I did and it will be a nightmare. But if it is something you want to do then definitely go for it. I am willing to go deeper into this but I hate to clog up the forum with it. If you would like to contact me outside of here I will be glad to share my whole experience with you so that you can avoid the mistakes that I made. One more time, this is not meant to discourage, only to let you know to do your homework before you start. By all means start a business, after all it's small business that turns the wheels of our great country.

windstorm · 01-05-2009, 11:44 PM

I'm with the majority on this one, Termite. My wife paints commissioned portraits & avoids crafts shows like the plague. All of her jobs are word of mouth and she only has time to do a handful every year. It's strictly a sideline for her, but she enjoys it. She comes from the art world & has a lot of friends who not only do shows, the HAVE to do them to put bread on the table. My advice is give some of your work to friends & neighbors as gifts & tell them you'd love it if they gave you a referral. Building a successful business takes time & I agree with others who say you might just take the fun out of woodworking if you're forced to do it for a living.

windstorm · 01-05-2009, 11:46 PM

Wait, Mike, am I the only Democrat here? Be careful or I'll tax you.

Gus Dering · 01-06-2009, 12:29 AM

You have to love the entrepreneurial spirit it takes to even consider working for yourself.
I own a cabinet shop. I have a pretty good handle on what it takes to make that work. Not so much on the craft circuit.
But the bottom line is you get out of it what you put in. Be clear what you want to have happen and go after it.
It would be comforting to find others that have a mold to follow but that may bog you down more than it helps.
I always say that it's time to make the jump when your side work is in the way of your day job.
I'm not sure how much income you need to show before it's safe to start writing off your shop space, tools , ect. Thats something you have to answer for yourself with some help from your accountant. It's not much fun when big brother calls you to the carpet and you don't have your ducks in a row. A real buz kill

smitty1967 · 01-06-2009, 09:24 AM

Quote:

Originally Posted by windstorm

Wait, Mike, am I the only Democrat here? Be careful or I'll tax you.

Be careful Mike, and Windstorm---Uncle Charlie is listening.....this thread is getting dangerously close to becoming a political thread.

and we all know what happens to political threads, right?

smitty

AZ Termite · 01-06-2009, 09:25 AM

Thank you to all you guys for your input and honesty. I thought I would throw this out there and see what your thoughts were. I have an uncle that is also very passionate about woodworking. He has his own little business on the side. He is always telling me what I need to do to turn this into a little business like he has. He is like a salesman though, only wants to tell the good never anything about the drawbacks. I knew if I put this thread on here you guys would tell me like it is. Thank you. I love woodworking and I don't ever want to lose the passion that I have for it. With the way things are right now I probably won't do anything. I live in a small copper mining community and with the price of copper at $1.20 a pound things are a little up in the air at this point. Most of the mines are cutting way back. I'm glad I don't work for them. Thank you again for your input.

frankp · 01-06-2009, 05:22 PM

windstorm, no you're not the only democrat, but that's all I'll say since we have a "no politics" request in place from several recent threads.

As for starting a business, I'll agree and disagree with jporter. To say incorporating is complicated is a bit misleading, and to be 100% correct an LLC is a type of corporation. Sole proprietorship is the simplest form of creating a legal business entity, but doesn't really give you that many benefits. The LLC is generally the way to go for the advantages gained with the least effort. The suggestion of doing a lot of research before starting is the best one I can think of. Check with your local branch of the Small Business Administration and they'll give you more than you ever wanted to know about how to make the right choice of corporation type, money issues etc. etc.

I'm a big proponent of "doing what you love" but remember that no matter how much you love it, if you answer to someone else (be it boss or customer) it's going to feel like work. I've always said the only way I'd make any of my hobbies into my job is if I did what I wanted and then people bought it. Working on commission can be very lucrative, but it's simply too much work (in my opinion).

Back to the whole research thing... do the numbers first. Try it part time for a while, buy your tools, as someone else suggested, while you still have a "day job" and then when you've had a couple years of continuous sales make the jump. When you do, don't expect to make a profit for at least 3 years, not 1 year. 1 year is very optimistic to say the least. the biggest reason most small businesses fail is poor planning. If you plan it out well, including the financials, you will be much better off.

Good luck, whichever way you go.

Sawduster · 01-06-2009, 05:28 PM

No politics? I knew there was something I liked about this place.

jporter5333 · 01-07-2009, 11:19 AM

AZ, FrankP mentioned a great resource, the small business administration. sba.gov is the website. Also try irs.gov. These sites are a must for someone looking to start a business. They will explain the similarities and differences in LLC's, corps, the two types of corps, sole proprietorships, and partnerships. The sba even has free tutorials to help you out with the running of a business. The fact that fankp and I disagree on complexity of a corporation and whether or not an LLC is in fact a type of corp should shows that there is alot of info out there and research is key. A point we both agree on. I also think frankp had an excellent idea about doing it part time first. He was also correct that it will probably be in the neighborhood of 2-3 years before you actually start to make money. And finally, he couldn't be more right about planning. But I would like to say one thing about it becoming a chore. I think if you love woodworking it will not become a chore. What will become a chore is the business side, but if you will prepare well, and learn everything you can beforehand, it will make bearable and won't ruin the part you love. At least IMO.

Tony B · 01-07-2009, 11:46 AM

I agree with Frank. A sole propriatorship is the way to go. I found no real benefits in incorporating. My accountant explained to me that any monetary benefits I will get from incorporating will be spent on him doing my taxes. Incorporating is somthing you look at when you have grown to a certain size, dollar wise.
I currently am self employed and hire an accountant to take care of my taxes. I find that some info I get from others in my situstion when relayed to my accountant gets a 'nay' sign from him. Some people twist the laws to fit their situation and invariably end up hiring an attorney in addition to an accountant to try to get themselves out of trouble.
A lot of the fun is taken out of woodworking when you do it for a living unless you have a showroom and sell your creations out of it. When you take on commission work, you are not always doing what you want, you are doing what the customer wants.
Finally... the money thing. You are not competing with other woodworkers or furniture stores. You are competing for ALL dollars. Does someone by a new TV set or your table? Do they buy your bedroom suite or do they put a deposit on a new car?
These are just things to think about. Dont think of yourself as a woodworking business, think of your self as A business.

Hope this will help.

justin2009 · 01-07-2009, 11:49 AM

I can help with any accounting/tax questions anyone has, if needed. I'm a CPA with 10 years experience and a masters in taxation.

Stay away from a corporation as a form of business. The business is taxed and then you're taxed if you take money out of the business (dividends are taxed and so is your salary). It's called double taxation and not good for a single owner business 99% of the time. Single member LLC is best bet in most states as it's a disregarded entity for federal tax purposes (you file your business income and losses on a schedule C and still enjoy limited liability).

Corporations also require strict bookkeeping and recordkeeping. You will need to have a book of minutes that is updated, articles of incorporation, etc., that are all kept up to date. Big hassle, more taxes in many cases, etc. From a tax standpoint, an LLC is NOT a corporation, it is taxed either as a disregarded entity if there is one owner, or as a partnership if there are more than one owner. LLC (limited liability companies) are typically formed and governed by a partnership agreement (if more than one owner) and are not formed by articles of incorporation, so technically, they're not "corporations".

windstorm · 01-07-2009, 01:10 PM

Having created several LLCs throughout my career, they have their advantages & disadvantages. LLC stands for Limited Liability Company, not Limited Liability Corporation & they're often mistaken for one another. You can incorporate as a business without creating an LLC & there are certain tax advantages to doing this. The primary purpose for creating an LLC is if you're bringing in investors, whose liability will be "limited." In other words, if the LLC goes belly up, the investors are not responsible for any remaining debt. One disadvantage of an LLC is that you are required to issue quarterly financials (loss & profit statements) to your investors & K1s at the end of every year & this usually requires the services of a CPA, and is costly unless you're raising a heck of a lot of money. There are also several different types of corporations & you should investigate every option before going this route.

BTW, thanks for the support, frankp.