There are a number of things that go into starting a home-based woodworking business. Some are more important than others but they all deserve your attention. I believe the most important thing though is planing, and the most important part of planning is your business plan. Talk to anyone that has been in business and has been successful and they will tell you that this is probably the most critical step in the start up phase of any company.
Don’t let anyone tell you that going into business is an easy thing to do, there is an old saying that if it was easy to be in business then everyone would do it.
Now that has been said, let me tell you from personal experience (I have started three successful businesses of my own) that if you decide to take the plunge and start a woodworking business and are willing to do the hard work that the rewards will be well worth the effort.
One of the first things you need to do is develop a business plan, in layman’s terms, this is a road map on how to get from here to there. The business plan will allow you to organize your thoughts and goals in a clear and concise manner. Your business plan will need to encompass a number of different issues.
First and foremost are your projected financial statements, which should include a current balance sheet. This is also referred to as a profit and loss statement (P&L) or revenue statement. This is basically an accounting of sales, expenses and net profit for a given period of time. You will also require a cash flow statement, which is a measure of your financial health. It basically shows cash receipts minus cash payments over a given period of time. You will also need pro forma balance sheets and income statements for a minimum of three years, these statements include assumptions and hypothetical information built into the data.
With all this in hand, you will be better equipped to allocate resources. All of the above are absolutely necessary for any woodworking home business, especially if you are going to a financial institution for a loan.
The bank wants to see a business plan for a number of reasons, but basically it shows them that you have taken the time to think things through, and by looking at the financial statements, they can get a good idea if your woodworking business is viable operation and deserving of a loan.
There are a few other things that should be included in your woodworking business plan. Remember, the more detailed the better. If you don’t have a location you will need a location plan but more than likely when starting a home-based woodworking business your location is already fixed because you are turning your existing hobby into a profitable business.
You need to have a portion of your business plan that’s dedicated to risk management (insurance). Because all the equipment we use in our woodworking shops is an inherently dangerous. There is liability insurance, property insurance, work interruption insurance and if you have employees workman’s comp. Risk assessment is a very important part of any business large or small a mistake made here can cost you your business and your livelihood.
Your business plan should also have a portion dedicated to marketing. this can be done in a number of different ways. There are always the traditional methods such as advertising in woodworking magazines or in the newspaper, and these things still work. But in today’s environment, the best way is the Internet and in order to accomplish this you will need a website and you will need to learn SEO (search engine optimization) so you will get noticed on the web. Search engine optimization is like anything else, it’s not overly difficult, but takes time to learn You can also contribute to blogs and forums to get the word out. Marketing is the lifeblood of all business because creating sales channels and customers for your products is essential to your success.
Never let your woodworking business plan become stagnant it should be reviewed at a minimum of once a year to take into account changes that have happened in the overall economy or changes in your goals. However, I personally recommend a semi annual review of your business plan. The closer you are to your business plan, the better the chance you have of being able to adapt to a changing business environment and mapping out your strategies for success.