Starting a woodworking business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful woodworking business.
Importantly, a critical step in starting a woodworking business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Woodworking Business:
- Choose the Name for Your Woodworking Business
- Develop Your Woodworking Business Plan
- Choose the Legal Structure for Your Woodworking Business
- Secure Startup Funding for Your Woodworking Business (If Needed)
- Secure a Location for Your Business
- Register Your Woodworking Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Woodworking Business
- Buy or Lease the Right Woodworking Business Equipment
- Develop Your Woodworking Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Woodworking Business
- Open for Business
1. Choose the Name for Your Woodworking Business
The first step to starting a woodworking business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own woodworking business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your woodworking business.
2. Develop Your Woodworking Business Plan
One of the most important steps in starting a woodworking business is to develop your woodworking business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your new business.
- Company Overview – this section tells the reader about the history of your woodworking business and what type of woodworking business you operate. For example, are you a custom woodworking, cabinet making, lumber business, woodworking tool business, or an online woodworking tutorial business?
- Industry Analysis – here you will document key information about the woodworking industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your woodworking business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your woodworking business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Woodworking Business
Next you need to choose a legal business structure for your new woodworking business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the business owner and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start a woodworking business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of legal business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a woodworking business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a woodworking business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your woodworking business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Woodworking Business (If Needed)
In developing your woodworking business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a woodworking business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a woodworking business that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your woodworking business, you’ll want to find an area with plenty of room to work and storage space for your power tools and materials. You’ll also want to make sure the area is accessible and affordable. Make sure your customers can easily get to your workshop and that you have good access to transportation routes.
Consider your budget when choosing a location. You’ll want to find an affordable area with the necessary infrastructure, such as electricity and water. If you’re not sure if a site has the essential infrastructure, ask your local council or business development agency.
Once you’ve considered these factors, you should have some options for where you’d like to locate your woodworking business. Be sure to visit the area and talk to local business owners before making a final decision.
6. Register Your Woodworking Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your woodworking business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your woodworking business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
You will need a business license and a tax ID number to start a woodworking business. You will also need to register with the state as a woodworking business. Additionally, you may need permits to operate your business, depending on your location. These vary from state to state but generally include a sales tax permit, a manufacturing license, and a business license. Contact your local business license office to determine the requirements for your area.
10. Get Business Insurance for Your Woodworking Business
The type of insurance you need to operate a woodworking business will depend on the type of operation.
Some business insurance policies you should consider for your woodworking business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Woodworking Business Equipment
The most important equipment you will need to run your woodworking business is a table saw. This table saw will allow you to accurately and safely cut the wood to your desired dimensions. Other essential equipment includes a band saw, drill press, and belt sander. These tools will help you create the precise pieces you need for your woodworking projects. Also, invest in a good quality miter saw, as this will allow you to make precision cuts at different angles. Finally, be sure to have a collection of hand tools such as chisels, screwdrivers, and hammers so you can complete any small tasks that come up.
12. Develop Your Woodworking Business Marketing Materials
Marketing materials will be required to attract and retain customers to your woodworking business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your woodworking business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional woodworking business website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your woodworking business.
13. Purchase and Setup the Software Needed to Run Your Woodworking Business
To run a woodworking business, you’ll need software including a computer-aided design (CAD) program to design your products and computer-aided manufacturing (CAM) program to create the tool paths for your computer numeric control (CNC) machine. The CNC machine is needed to produce the parts. You will also need a computer to run the CAD and CAM programs and a printer to create product prototypes.
You also need a sales and marketing platform to sell your products and an accounting program to track your finances. Finally, you need a shop management program to keep track of your inventory and production schedule.
14. Open for Business
You are now ready to open your woodworking business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
How to Finish Your Ultimate Business Plan in 1 Day!
Don’t you wish there was a faster, easier way to finish your woodworking business plan?
With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!
Click here to finish your woodworking business plan today.
How to Start a Woodworking Business FAQs
There is no one-size-fits-all answer to this question, as the ease or difficulty of starting a woodworking business will vary depending on your woodworking skills, experience, and resources.
However, if you follow the steps above, you should be able to start your woodworking business without too much difficulty.
There are a few things you can do to get started in woodworking without any prior experience. One option is to take classes at a local community college or woodworking workshop. This will give you the basic skills you need to get started. Another option is to watch video tutorials online or read instructional articles. Finally, consider finding a professional woodworker who can help you get started with your woodworking business. This person can provide guidance and advice as you take your first steps in starting your own business.
The most profitable type of woodworking business is a custom furniture-making business. This type of business can be lucrative because there is high demand for custom furniture. It is also a relatively easy business to start and operate. Another profitable type of woodworking business is a cabinet-making business. Cabinets are in high demand, and there is often fierce competition among cabinetmakers. So, if you can differentiate your cabinets from the competition, you will be more likely to succeed. Finally, a woodworking business specializing in hardwood floors can be quite profitable. Demand for hardwood floors is high, and if you offer quality-made flooring, you can charge a premium price for your products.
The cost to start a woodworking business can vary depending on the scope of the operation. A small woodworking business may cost as little as a few hundred dollars, while a larger business could cost tens of thousands of dollars. Some startup costs for a woodworking business include the cost of renting or buying space for your workshop, the cost of tools and equipment, the cost of supplies, and the cost of marketing your business.
The ongoing expenses for a woodworking business may include the purchase of materials, the cost of rent or property ownership, insurance, and employee wages.
There are a few ways a successful woodworking business can make money. One is to sell products to consumers. Another is through opening a wood shop and providing services, such as carpentry or construction. Finally, a woodworking business can rent out tools and equipment to other businesses or individual customers.
There are a number of reasons woodworking is a profitable business. One reason is that the demand for woodworking products is high. People often want to buy furniture and other wood products that are made from high-quality materials.
Another reason owning a woodworking business can be profitable is because the cost of starting up the business is relatively low. You don't need to have a lot of money to start a woodworking business.
Finally, owning a woodworking business can be profitable because there are many ways to market the products. You can sell the products online, in stores, or to contractors. There are also many ways to advertise the products, which means that you can find a marketing strategy that works for you.
One of the main reasons woodworking businesses fail is a lack of planning. Business owners often do not have a solid business plan, leading to financial instability and eventual closure. Other reasons for business failure include a lack of marketing and sales skills, poor management, and competition from larger businesses.