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How to Fund a Business: The Ultimate Guide (2024)

February 8, 2022

How to Fund a Business: The Ultimate Guide (2024)

Have you ever wondered why so many small businesses fail? 

The main reason is they don’t have the funds to keep going. Whether that is because of lack of revenue, too few reserves to properly scale and conserve resources, or mismanagement, doesn’t matter. For small business owners to succeed, they need to understand how to fund a business.

We talked with Paul Akers, Founder of Fast Cap, and Mike Andes of Augusta Lawn Care. Paul has created hundreds of products over the years, while Mike has sold over 60 franchises in 2 years. They both know a little about funding a business and managing it to make money.

First, we’re going to give you information on preparing to get business funding. Then we’ll help you establish the best ways for you to fund your business through self-funding, loans, sharing equity, crowdfunding, and some crypto funding concepts that most business owners aren’t utilizing yet.

Throughout it, I’ll provide resources and input from our interviews with Mike and Paul. Let’s make sure you have what you need to truly benefit from this article.

Preparing to get funding

Before you look for ways of raising money for business, you need to be prepared.  Start with our guide to starting up a business. You should do the following tasks before pursuing funding if you haven’t already:

  1. Performed market research. If you haven’t we suggest you start with our article on market research.
  2. Performed market validation to verify that there is enough demand for your product or service. If you haven’t, check out our blog on market validation.
  3. Written a business plan. You’ll need one especially if you are trying to pursue funding from external sources. If you haven’t, we’ve got you covered there too. Check out our blog on how to write a business plan.
  4. Hopefully, you also have a name. It won’t look very good if you say, “Hey will you invest in my small business that has no name?” If you don’t, go try the following business name generator.
  5. Know how much funding you need. Let’s look at that more.

How much money do I need to start a business?

Every business is different, but you can start many businesses for under $50,000. That won’t necessarily guarantee that $50K will cover everything a business owner needs to run the business and live, but it’s typically the minimum money to start a business and provide for yourself.

Here’s how I look at it when it comes to financial projections:

Step 1. How much money do you need to live for five years?

A white note pad and three pieces colored pencils on a desk

You absolutely have to make enough money to cover your bills regardless of cash flow issues or low revenue. Most businesses fail within five years, so how much do you need to make to cover five years of your necessities?

Step 2. What are your additional business expenses?

What additional business costs are you going to have over those five years? In my case, it’s a computer every few years and a few thousand dollars of software each year, but for many businesses, the break-even point is somewhere between $60K and 120K a year.

Step 3. What are other sources of revenue and when do you receive them?

What other sources of revenue do you have? When do you receive them, and how much of them can be applied to business funding? Add these to the third sheet in the workbook I created for you.

  • Once you know the answers to the first three questions, you can create projections for your total costs and earnings for the next five years. I would break them down monthly because monthly will sometimes show cash flow issues that strong annual revenue and growth will hide.
  • At this point, you should have an idea of the budget for your life over the next five years. Assuming $48K per year living expenses and $60K per business expenses, you are going to need $540K minus your current earnings for the business to make it to the 5-year mark.

Now you should have an idea of how much small business funding you’ll need to get to make it to the point where your business is much more likely to survive.

Paul told us:

If you can keep your business open for 10 years, there is no way you aren’t successful.

Keep reading to hear about the most common source of small business funding.

Most small business owners bootstrap

If you can fund your small business yourself, that’s helpful because this is by far the best way to get funding for small businesses. Paul told us:

The less money you have to work with, the wiser you spend it. You can’t be trying to live in the nicest neighborhoods, drive the nicest cars, and expect to be able to bootstrap it. You’ve got to be smart.

A small business owner will typically have several options to be able to self-fund:

  • Personal savings
  • Increase your disposable income
  • Sell assets
  • Loan yourself money from IRA/401-K
  • Rollover as Business Startup (ROBS)

You will probably use many of these in parallel to get the best results.

Let’s look at each.

1. Personal Savings

A clipboard on a brown desk

You can use savings as a funding option. This method is the most common. Using your own finances as a funding method has the benefits:

  1. You retain complete control
  2. No monthly payment on a loan
  3. Don’t have to pay interest

Unfortunately, it can be the slowest way to create business growth because funding is limited to what you have in savings and your disposable income.

2. Increase your disposable income

Disposable income is increased through two methods, more earnings or cost savings. Most places have a limit on how much you can cut your spending so you’ll probably want to increase your earnings.

Ways to increase your earnings include:

  • Asking for a raise if you have been performing well at work.
  • Taking on a second job. Some people either choose to do Uber or Lyft so they can control their own schedule.
  • Perform freelancing in the field you plan to start a business. We’ll discuss this more below.

Freelancing on sites like Fiverr or Upwork is almost identical to running a business but without as high up-front costs. It will earn you extra money, develop your business skills, and create built-in referrals for your new business. I highly recommend it.

If you’ve never run a business before, remember to charge more along the line of what your employer makes for their service than what they pay you. Companies aim to keep wages at under 30% of the costs.

3. Sell Assets

Many people will sell assets to get money to start a business. One of our competitor’s blogs recommends you sell your car and ride a bike, but that seems a bit extreme especially if your business will require you to get around town.

If you have a bike (and no car), use it to your advantage. Our editor knew a guy who started his business by selling kombucha from a big wooden box connected to the front of his bike and turned it into an epic brand. Check out BiciCafe if you are in the U.S. Virgin Islands.

You are better off selling assets like stocks or rental properties, but if you do sell them to get new business funding, focus on ones that fall into long-term capital gains. Later, I’m going to tell you some tricks that can really hyperdrive this scenario, but they involve crypto.

But for now, let’s talk about taking loans from your IRA or 401-K.

4. Take money from your IRA or 401-K

A clipboard and a black eyeglasses on a desk

You can use your retirement accounts for money to start a business, but the next option is a way better solution. I started my business this way and am kicking myself because the assets I sold have quadrupled since then. I’m still going to explain this to you though.

A Roth IRA can be withdrawn tax-free because you already paid taxes on it, but you can pull out money from a traditional IRA or 401-K, but you incur a 10% penalty and back taxes. Sometimes you can structure this as a loan and pay it back to avoid those factors, but you only have five years to pay them back.

I strongly recommend talking to a tax professional about how to get funding this way especially if you have large amounts.

Let’s look at ROBS next.

5. Rollover as Business Startup

ROBS are more complex business strategies that require the following:

  1. Create a C-Corp.
  2. Create a 401-K.
  3. Rollover existing retirement funds to the new C-Corp 401-K.
  4. Buy C-Corp Stock with 401-K.
  5. Fund the business with the proceeds from the stock sale.

This allows you to completely avoid taxes on the withdrawal of money from the 401-K, but it creates some unique benefits and challenges on top of that. They include:

  • Corporate tax and personal tax if all earnings are not paid as income on paychecks.
  • Unlimited gains and losses, with rollovers to different years.
  • Corporate taxes are lower than personal taxes once you reach a certain earnings level.
  • You can give yourself more benefits.
  • You are required to offer any employees the same benefits you receive.
  • Medical is fully deductible.
  • Additional filing requirements.

Most of these are benefits, but double taxation and employee benefits could be a challenge if you aren’t good at predicting your income. I’d suggest you review the following materials before you decide to take this option:

You can get help with a ROBS from the following companies:

  1. Benetrends
  2. Guidant Financial
  3. Pango Financial
  4. Business Funding Trust
  5. MySolo401k

Keep reading for more on how to get funding for a small business.

Borrow Startup Capital

A lady holding a white iPad

If you can’t get money from your assets, it’s time to look at how to raise capital for a business through borrowing it. The most common are:

  • Friends and family loans
  • Credit cards
  • Refinance your mortgage
  • SBA loans
  • Traditional loans
  • Personal loans
  • Peer-to-peer lending platforms

6. Friends and family loans

If you have friends and family, they may be willing to provide loans for you to start or expand your business, but this strategy can end up putting strains on relationships. You don’t want it ending up like the video below.

Remember to treat it like a business arrangement. Show them your business plan, give them the same pitch you would a bank, and honor the terms of the agreement. There are third-party providers who will manage the loan for you. A couple of options are:

  • Zirtue
  • DCU
  • Some banks or financial consultants, but most don’t advertise it online.

Keep reading for other options.

7. Credit Cards

Credit cards are a convenient tool to use to help fund a business as long as you can pay them off in full every month. Unfortunately, if you can’t, the high-interest rates can end up costing you a ton of money.

Most places will accept them, but there are some places that are cash only. Avoid using cash advances because they will normally charge you a fee or extra percentage in addition to removing the grace period for the interest. 

If you can only pay with a credit card, most credit cards will allow you to send via payment apps without a cash advance fee, but check the terms of your credit card to verify before using this tip. use apps like:

These apps will let you send money into them and commonly avoid the cash advance fee. The apps charge a higher fee for credit cards than paying with a bank or debit card though. You can then transfer it to a debit account where you can take out money. This preserves your interest grace period and saves you a lot on interest payments.

Almost every bank offers temporary 0% interest rates, but you’ll need to read the fine print of each of them. Some of the best ones are:

  • Wells Fargo Reflect – Longest introductory rate as long as you meet the payment requirements.
  • Business Advantage – Pay transactions made in the first 60 days with 0% interest over 18 months.
  • Chase Freedom Unlimited – Example of their offerings 15 months 0% interest, $200 cashback on first $500 if spent in the first 3 months, 5% cash back on groceries (first year) and travel, 3% on pharmacy and dining, 1.5% on everything else.

All these require a 690+ credit score for a good probability of getting one and 800+ to get the best ongoing interest rates. If none of these sounds like the right one for you, consider how to get a loan from traditional lenders

8. Tap Home Equity

A white notebook and two colored pens on a black desk

If you have ever wondered how to raise money for a business through your home equity, good news, there are several options to get value out of your home including:

  • Home Equity Line of Credit – A secured loan using your house as the security that typically can be used for 10 years with just paying the interest, then the next 20 years you pay interest, plus principal.
  • Refinancing Your Mortgage – Refinancing your mortgage works by getting a new loan and paying off the old loan, while pocketing the equity. It basically puts you back where you started, but hopefully with a lower interest rate, payments, and the ability to make a higher return on the equity.
  • Second Mortgage or Home Equity Loan – This sounds like a horrible option to me, but I figure I should include it. With a second mortgage, you are taking out another mortgage on the house for the difference between the market value of the home and what you owe. It comes with higher interest and a second home payment each month. I don’t love the idea.
  • Reverse Mortgage – If you own your home outright and want to pull money out over time, this might be the method for you. You get to keep the home, the buyer pays you monthly, and when you die they own it. Only problem is the home is no longer yours to give to your kids or sell if you desire to do so.

The first three are available to a homeowner with a good personal credit score from a local bank, credit union, or traditional bank. I suggest reaching out to credit unions near me first because they tend to offer better rates, but you’ll also deal with a lot of real estate fees that are not present in other loans.

Reverse Mortgage Daily is a good resource to learn about reverse mortgages if you are interested. If you fund your business this way, realize that you will have to budget more effectively than with other equity financing options.

9. Personal Loans

If you can get a personal loan to start a business, it may be more cost-effective than real estate loans because it avoids all the fees. You’ll need a great credit score and will still have to pay interest.

You can apply at traditional banks, online lenders, and credit unions. When you apply, ask if you can have your business included on the personal loan so you can start earning business credit. That way, the next time you apply you may be eligible for traditional bank loans through your business credit.

We’ve talked about funding options for people, but now it’s time to look at how to get money for a business through SBA loans.

10. Small Business Administration (SBA) Loans

The Small Business Administration (SBA) was founded in 1953 in a bill passed by Congress to help small business owners succeed. The SBA offers a variety of assistance to new and established businesses including:

  • Education – Over 300 different learning objectives surrounding planning, launching, managing, market research, business growth, and mentoring.
  • Small Business Grants – Initiatives that are important to the community such as Science Technology Engineering and Math (STEM) businesses.
  • SBA Loan Program – Backs bank loans to encourage financial institutions to offer business credit. You can seek funding from banks, credit unions, and nonprofit lenders.

There are three types of SBA loan programs that you can apply for when wondering how to get funding for a business idea:

  1. 7(a) loan program
  2. 504 loans
  3. Microloans

Let’s look at how to get money to start a business through each of these loan programs.

7(a) Loan Program

A blue sticky note and two calculators on a brown desk

7(a) loans are the most common type of small business loan that the SBA guarantees. You can get them from traditional banks and credit unions assuming:

  • The business is profitable
  • You cannot use any other funding options
  • You can prove the need for the loan
  • The business is in good financial standing with all government agencies

7(a) loans can range from $5,000-$5 million and the SBA provides a guarantee to the lender of 85% for loans under $150,000 and 75% for loans over $150,000. These loans are primarily used as funding options for buying large equipment, inventory, and real estate, but under some scenarios, they allow restructuring of debt.

Review the SBA 7(a) loans page to find out more about the 7(a) program or go talk to your local small business development center to talk to someone about the programs they offer. To apply for a loan, go to the lender match to find potential lenders.

You’ll need to answer a few questions about how much capital you need, whether you have financial documentation, and how the funds will be used. Then they will send your information to alternative funding options. I ran one for one of my business ventures and it came up with nine potential lenders.

504 Loans

504 loans are a much narrower use loan that is only available for major assets such as equipment, land, or buildings. They cannot be used for working capital and they have strict requirements including:

  1. Net worth under $15 million
  2. Under $5 million revenue each of the last two years
  3. Profitable businesses only
  4. Only offered through Certified development companies (Find one near you on the Find Local Assistance page.)

This may be the option if you need to fund your business expansion.

Keep reading to learn about microloans

Microloans

Microloans are much smaller SBA-backed loans that are available for amounts up to $50,000. They cannot be used for real estate or debt repayment, but are great for working capital, tech improvement, and redecorating your location.

Microloans are 8-13% interest with a six-year time to pay the loan. Go to the SBA page about microloans to learn more.

Keep reading to learn more about a traditional bank loan.

11. Conventional Small-Business Loans

Business owner applying for small business loan

You can also apply for a traditional business loan from banks, credit unions, or online lenders. When applying for bank loans for your own business, you should expect them to want a higher credit score, good financial history, and a great business plan because traditional financing comes without the financial protection of an SBA loan.

The loans range in their offerings from each provider, but you can expect to pay more interest and get shorter loan durations. Be aware that shorter durations mean higher payments. Paying a loan quicker may consume money that could be used for reinvesting in the business.

Before you apply, make sure to raise your credit score as high as possible, and join a credit union to increase your chances of getting a loan or a business line of credit.

Wells Fargo, Bank of America, and Chase provide over $200 million worth of business loans, but other smaller banks like Huntington Bank are also business-friendly. No matter who you apply through, don’t be surprised if you are offered small business funding that is less than you apply for.

12. Peer-to-Peer Loans

Peer-to-peer loans make it where people can borrow money from other successful businessmen, companies, and investors. It will work similar to other types of loans because:

  • They check your credit
  • You’ll still need the same documentation
  • They report credit defaults
  • You still have to make monthly payments

Unlike traditional banks, platforms like Funding Circle and Lending Tree have a variety of lenders competing for your loans which should save you money and time compared to going to multiple banks. Funding Circle was recognized as the best small business loan of 2021 by Money. Unfortunately, if you live in Nevada, you can’t get them.

Now you have ideas of how to get startup money for a business from lenders, but you can also sell equity.

How Much Money to Start a Business that Sells Equity

Businesses that can sell equity tend to be at least a $100 million market opportunity. If your market opportunity is not legitimately $100 million, go back to the section on ROBS above because your 401K is probably the only one that will buy equity from you.

If you’ve ever wondered how to get start-up money for a business from venture capitalists, angel investors, or incubators and accelerators, they focus on buying a portion of your company which means you’ll be sharing your profits with them.

Check out our playlist of Entrepreneurs who made deals on Shark Tank for insight on how to get deals with the big fish.

These options are typically reserved for businesses that will make hundreds of millions of dollars. However, when you are just trying to make a few million from your business, you don’t want to give up any equity.

13. Venture Capitalists

Venture Capitalists (VCs) focus on buying equity in a business that has huge potential, helping it grow, then making millions or billions when it holds its IPO. IF you are going to try to work with a VC, you need to have a lawyer who is extraordinary at contract law.

If you’ve ever watched The Social Network, it shows how Mark Zuckerberg started Facebook by stealing the idea, then getting his CFO to sign a contract where all the diluted shares came out of his portion of ownership, screwing him out of billions. Don’t let that happen to you.

14. Angel Investment

Angel investors are similar to venture capitalists, but they are typically a single person as opposed to a major corporation. These investors will offer venture capital in a promising project they believe in, but it is hard to get angel investors’ attention because they have so many people competing for the same funds.

These are some of the best places to look to find angel investors:

Now that you know about VCs and angel investors, let’s talk about incubators and accelerators.

Incubators and Accelerators

Incubators and accelerators are typically run by VC’s and Angel investors that want to make sure their venture capital firms get a return on their investment. They will typically supply:

  • A coworking space
  • Lawyers
  • Administrators
  • Financial consultants
  • A marketing team
  • Potentially, a skilled team of developers

Basically, they are helping the entrepreneur have the team and staff they need to succeed at creating billion-dollar companies. If you have an idea that you think is a billion-dollar idea, search for incubators near you.

Miscellaneous Funding Opportunities

The following are miscellaneous options for funding that some businesses may be able to use.They are more challenging than some of the other strategies, but they may have benefits if utilized correctly.

15. Small business grants

The SBA has small business grants for exporting, STEM, technology implementation, and management assistance. Learn more about SBA grants. For a list of all government financial opportunities check out grants.gov, which has grant co-op agreements, and procurement contracts for both people and businesses.

16. Crowdfunding

A laptop and a cup of coffee on a desk

A crowdfunding platform helps entrepreneurs pitch business and product ideas to individuals and if they love the idea, they can contribute small amounts for the project in exchange for being one of the first customers.

If you are going to take this approach, I would suggest finding a freelancer on Upwork with a proven track record of creating great crowdfunding campaigns and making them sign a non-disclosure agreement. Make sure to check their reviews to see how many projects they have done that are similar. Also, ask for links to the crowdfunding ventures they have helped with in the past.

Popular crowdfunding platforms include:

Those are all the mainstream ways of funding a business. Next, I’ll discuss a couple of crypto ways that are pretty cool.

17. Funding a business with crypto

Cryptocurrencies have some fairly unique options that can be really beneficial for small businesses. The primary characteristics of crypto that can help businesses with funding are:

  1. Use stable coins – Use USDT and USDC, to generate interest of up to14% and they are pegged to the US dollar. I personally use USDC on Crypto.com (they have cyber security insurance and store the funds offline) on a flexible term to earn 6% which comes out to $1.15 a week per thousand dollars. You can accept payments for your business through them too.
  2. Decentralized Finance (DeFi) Lending – This can be highly beneficial if you have substantial resources but don’t qualify for loans from traditional lenders. The way it works is that you provide crypto for the secured loan. You can spend the loan and pay it back (plus interest), then you get your crypto back.
  3. NFT titles – There has been some success at converting titles of homes into Non-fungible tokens and using the NFT as a secured loan.

I suspect in the following years you will see more beneficial ways to use crypto to help fund businesses, but we are in the early stages of this technology so I want to start helping people become aware of the options.

Get your business funded

A man drawing on a gray sketch pad

We’ve given you everything you need to decide which funding option works for you. You’ll probably want to use a combination of them over the life of your business.

If you are ready to take the next step and actually apply for funding, we have preferred lending partners that will provide small business funding for up to $5 million dollars for as little as 6% interest. Check out our lending partners today.

What funding strategies would you like to learn more about?

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29 Best Self-Employed Jobs (for 2024)

Are you looking for jobs that let you be your own boss? We cover 27 of the best self-employed jobs you can find.

We have you covered, from entry-level jobs to self-employment business opportunities that leverage years of school and professional experience. You won’t believe that number 12 went from being a surgeon’s assistant to making millions a year, but it’s true (listen to the interview to find out how)!

That’s the perk of asking “How can I work for myself?” These self-employment ideas will give you unlimited earning potential.

[su_note note_color="#dbeafc"]

Click on any section below to find the best self-employment job for you.

Get ready to find your answer to the question “How to work for myself?”

DISCLAIMER

Throughout this article, we refer to several data sources. The way they interact can make the math look a little funny, so let us break it down a bit.

The Bureau of Labor Statistics is normally the best source for data on salaries, and we refer to those numbers in some of the sections below.

All revenue data was pulled from IBIS World. Typically, revenue will be three to five times payroll. In some scenarios, we use freelance data available from Upwork.com that shows the earnings of the best freelancers in each industry.

Self-employed people will normally make somewhere between freelancer wages and average annual revenue. The tech sector is a bit like the wild, wild West, and a freelance developer may have three or four full-time jobs.

What are the Best Self-Employed Jobs?

The answer to that question depends on your skills and interests. What most people are really asking, though, is “What are the highest-paying self-employed jobs?” With that in mind, here are some jobs where you can be your own boss that are consistently profitable business ideas.

Job #1. Digital Marketing

•  Average Annual Revenue: $817K
•  Average Profit Margins: 6.9%
•  Startup Costs: $100-$10K
•  Time To Revenue: 1-6 months
•  Annual Market Growth Rate: 1.3%
•  Best for: Marketing and advertising pros, entrepreneurs with social media and data analysis skills, content creators

Having an effective social media presence is essential for many businesses today, but not all entrepreneurs understand social media marketing. As a result, the digital marketing sector has grown by 28.2% per year on average over the past five years.

This wealth of opportunities is what puts digital marketing among the best-paying self-employed jobs for those who want to set their own hours. Digital marketing isn’t just social media marketing, either. Other digital marketing niches include SEO-focused web design, Google Ads expertise, or helping clients start successful blogs.

While having a bachelor’s degree can help build trust in your services, you don’t necessarily need one to become a digital marketer. A large personal social media presence, for instance, can demonstrate your skills as well as any credential.

Check out our interview with Eric, the owner of Single Grain. Who bought SMMA agency for just $2:

https://www.youtube.com/watch?v=fO1F21040pQ

#2. Cleaning Business

•  Average Annual Revenue: $74K+
•  Average Profit Margins: 6.7%
•  Startup Costs: $500-$30K
•  Time To Revenue: 1-6 months
•  Annual Market Growth Rate: 1.2%
•  Best for: Self-motivated, independent, and detail-oriented entrepreneurs

If you have about $1,000 saved up to invest, look no further than a cleaning business. When it comes to success rate and ease of getting started with no experience, it blows most self-employment ideas out of the water.

The best part is that you can start with no employees but have the option to scale as soon as you have money coming in. Imagine getting rid of your day-to-day responsibilities and operating a business like the leader you are. This is not just another 9-to-5.

A former guest of ours, Chris Mondragon, did $18,220 in his second month of starting a cleaning business. He’s now well over $1.5M a year in revenue. If you’re curious how he did it, check this out.

Watch our interview with Chris below:

https://www.youtube.com/watch?v=YcYIYdqegGA

Job #3. Financial Advisor

•  Average Annual Revenue: $1.8M+
•  Average Profit Margins: 36.1%
•  Startup Costs: $500-$5K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 8.2%
•  Best for: Accountants, investors, and finance professionals, detail-oriented entrepreneurs with strong math, communication, and research skills

You can make good money as a financial advisor working for a firm or bank—the average salary for financial advisors in 2021 was around $94,000, and you can easily make a six-figure salary in this career path.

Becoming your own boss gives you complete control over your financial advising career, allowing you to make more money while setting your own hours. Financial advising is among the best self-employed jobs because there’s high demand for these services from people who are willing and able to pay for them. After all, the people who seek out financial advice are normally those who have savings that they want to invest.

The main role of a financial advisor is to help clients grow their wealth and meet their financial goals. Retirement planning is one of the most in-demand niches in this sector. Captrust Financial Advisors in New York saw more than 30% growth year-over-year in new retirement planning clients in 2021, and while this is just one example, it’s indicative of a trend.

This is one self-employed job where a bachelor’s degree is a hard-and-fast requirement. You will also need to obtain several licenses to legally operate your own business as a financial advisor. Certifications like CPA or CFP are optional but can help you build trust with prospective clients and grow your business faster.

Job #4. Software Developer

Software developer writing code on a large Mac monitor

•  Average Annual Revenue: $400K-$1M+
•  Average Profit Margins: 14.5%
•  Startup Costs: $100-$50K, depending on size and scope
•  Time To Revenue: 3 months to 2 years
•  Annual Market Growth Rate: 3.1%
•  Best for: Coders and developers adept in programming languages, independent and self-motivated entrepreneurs with strong communication and project management skills

The average salary of a software developer was over $120,000 in 2021, and with demand for these services continuing to rise, there are ample job opportunities for developers seeking traditional employment. That said, you can achieve both financial freedom and the freedom to set your own schedule by pursuing self-employment.

Some developers work with clients as independent contractors or on a freelance basis. Often, they’re brought on by businesses to help them develop and maintain software systems in their organizations, or to create new apps and software for use by their customers.

You can also truly be your own boss as a developer by designing your own programs and selling them straight to users. Going this route opens up more potential for passive income, too.

The career path to become a developer usually starts with getting a bachelor’s degree. There are also boot camps and professional certifications that can grow and verify your proficiency in programming languages and coding best practices.

Workello started as an agency to connect business leaders with freelance writing talent, but they truly unlocked their potential when they pivoted to become an SaaS company. Find out how they built their software business in this podcast episode:

#5. Vending Machine Business

•  Average Annual Revenue: $182K+
•  Average Profit Margins: 4.3%
•  Startup Cost: $2K-$10K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 0.5%
•  Best for: Those who like to tinker with machines and understand mechanics and those who enjoy driving

TIME is our single biggest enemy as entrepreneurs. Most self-employment ideas require a time commitment most of us don’t have...but vending is a different breed. It’s one of those rare self-employment ideas that’s perfect to start on the side. 

If done right, once you place your vending machines, you’ll only need a couple of hours a week to maintain them. In fact, as we speak, one of our friends, Adam Hill, is operating his six-figure vending machine business working just two days a week. 

He’s done so well for himself that we bugged him until he agreed to create a FREE masterclass for our UpFlip readers. It reveals exactly how he did it.

Watch our interview with Adam below:

https://www.youtube.com/watch?v=-s_Y-O1nosw

Job #6. Makeup Artist

•  Average Annual Revenue: $47K+
•  Average Profit Margins: 7.1%
•  Startup Costs: $500-$5K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 0.9%
•  Best for: Creative and artistic entrepreneurs knowledgeable about fashion, style, and trends, people who are detail-oriented with strong communication and collaboration skills

Are you the person your friends turn to when they need makeup for a big event or help with their Halloween costumes? Then you may want to consider working for yourself as a freelance makeup artist.

The average salary for makeup artists is $66,000 per year, though this varies widely. Those just starting out may earn as little as $30,000 per year, while experienced MUAs can earn $120,000 or more.

You don’t need a bachelor’s degree to hold a self-employed job as a makeup artist. Depending on the type of makeup you do, though, you may need a cosmetology or esthetician license, or to be a Certified Makeup Artist, in order to start your own business (learn about the state-by-state requirements here).

Job #7. Business Consultant

•  Average Annual Revenue: $364K
•  Average Profit Margins: 6.4%
•  Startup Costs: $1K-$3.5M
•  Time To Revenue: 6-18 months
•  Annual Market Growth Rate: 2.2%
•  Best for: Executives and business leaders, entrepreneurs with management or business expertise, people with strong analytic, problem-solving, and communication skills

Business Insider lists business consultant as the fourth highest-paying side hustle in 2022. With the potential to earn up to $98 per hour, it’s among the top high-paying self-employed jobs.

A consultant’s role is to help people who own their own businesses run them better. To do this, you need a firm understanding of effective business management. Most people who thrive as consultants pivot into freelance jobs after gaining experience in the corporate world or as successful business owners.

This experience is more important than your education, and if you have business expertise, you don’t need a bachelor’s degree (or even a high school diploma) to succeed as a self-employed individual in consulting.

Self-Employed Job Ideas in the Skilled Trades

Job #8. Painter

•  Average Annual Revenue: $76K+
•  Average Profit Margins: 7.2%
•  Startup Costs: $1K-$100K
•  Time To Revenue: 6-18 months
•  Annual Market Growth Rate: -2%
•  Best for: Home improvement pros, construction workers and contractors, people who enjoy physical work and have a sharp eye for detail

The hassle and mess of painting a home leads many homeowners, property managers, and business owners to hire someone to do it for them. A self-employed individual in this field can earn as much as $50 per hour for exterior home painting, significantly more than the average salary of painters employed by other companies.

Starting a house painting business is an excellent self-employment idea for those seeking a scalable niche. Joshua Douglas started his company, A Painter’s Touch, with $6,000, and has since grown to five crews bringing in upward of $25,000 a month.

His goal when starting the business was to achieve better balance between his work and personal life, but he ended up making more money than he had in his previous job, too. Hear his story in this podcast interview:

Job #9. Handyman

•  Average Annual Revenue: $204K+
•  Average Profit Margins: 5.4%
•  Startup Costs: $500-$5K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 0.7%
•  Best for: People with construction and home repair experience, mechanically minded and detail-oriented entrepreneurs with strong customer service skills who like working with their hands

If you’re a whiz at troubleshooting and fixing problems around the house, working as a handyman could be the best self-employed job for you. Handyman services are in high demand, and you can charge as much as $100 per hour for performing basic home maintenance tasks like cleaning gutters, mounting TVs, or repairing cabinetry and drywall.

One advantage of self-employment as a handyman is that there’s a very low barrier to entry. You don’t need any special licenses or permits, or even a high-school diploma, to start booking jobs. The startup costs are minimal, too, especially if you already own basic repair tools.

Caleb Ingraham worked as a contractor before becoming a self-employed handyman. Five years in, he averages $25,000 a month in revenue and is booked up six weeks out. See how he built his business in this interview:

[su_youtube url="https://www.youtube.com/watch?v=leUta_q_MPQ"]

Job #10. Electrician

•  Average Annual Revenue: $1M+
•  Average Profit Margins: 6.2%
•  Startup Costs: $1K-$100K
•  Time To Revenue: 6-18 months
•  Annual Market Growth Rate: 0.9%
•  Best for: Certified contractors and electricians, people with high dexterity who enjoy working with their hands, strong problem solvers with excellent customer service skills

According to the Bureau of Labor Statistics, the average salary for an electrician is just over $60,000 per year and the industry is expected to grow at a rate of around 7% per year through 2031. That means wages and demand for employees are expected to grow faster than revenue.

Like other jobs in the skilled trades, the consistent demand for electricians is what makes it one of the best self-employed jobs. You’ll have a lot of options to find work, whether you work with customers directly or as an independent contractor for other construction firms.

You don’t need a bachelor’s degree to work as an electrician, but you will need to get licensed to demonstrate you can perform electrical work safely. The specific requirements vary state by state but normally require 4,000-8,000 hours of experience as well as passing an exam.

Once you have these skills, the sky’s the limit when it comes to earnings. Joe Walsman looked for self-employment options after the 2008 recession and decided to start his own business, Jefferson Electric. Today, it makes $500,000 a month in revenue on average. Hear how he built his business in this podcast interview:

Job #11. Construction

•  Average Annual Revenue: $696K+
•  Average Profit Margins: 3.4%
•  Startup Costs: $1K-$100K
•  Time To Revenue: 1-6 months
•  Annual Market Growth Rate: -1.3%
•  Best for: Contractors, builders, and makers, people with strong math skills who like physical work

If you excel at bringing designs to life and love building things by hand, construction could be the best self-employed job to go to work for yourself. While surging interest rates have put a damper on new construction, the long-term forecast calls for growth, with a CAGR of 5.2% through 2027.

This is another industry with a low barrier to entry. You don’t even need a high school diploma to do construction work, though contractors do need to be licensed by their state.

That doesn’t mean you need tons of experience to get started, though. Avanni Petras started his own business in construction at just 19 and in his first year made more than $125,000 in revenue. See how he built his business from scratch here:

[su_youtube url="https://www.youtube.com/watch?v=_PpDwut_2Lw"]

Self-Employed Business Ideas You Can Start with a High School Diploma

Job #12. Delivery Driver

•  Average Annual Revenue: $131K
•  Average Profit Margins: 3.6%
•  Startup Costs: $100-$9.5K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 6.7%
•  Best for: Skilled drivers and navigators, organized and reliable entrepreneurs who are strong communicators

The rise in on-demand delivery is one trend from the pandemic that seems likely to continue long-term. Food delivery alone has more than tripled its market value since 2017, and that’s just one of the work-for-yourself jobs available in this sector.

The easiest way to become a self-employed food delivery driver is to sign up through a service like DoorDash or Uber Eats. You can do the same with a grocery delivery service like Instacart. These services allow drivers to set their own hours, so you don’t need to build a company from scratch to balance your self-employed job with your personal life.

You can also start your own business in the delivery sector. Doing so will require more time and money invested up front but can bring you much higher revenue down the line than delivering groceries or food through an existing app. If you’re considering this option, check out this interview with the founder of Trellus Same-Day Local Delivery to hear how they got started:

Job #13. Lawn Care and Landscaping

•  Average Annual Revenue: $272K+
•  Average Profit Margins: 8.7%
•  Startup Costs: $2K-$10K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 8.1%
•  Best for: People who love green spaces and working outside, gardeners and plant experts, detail-oriented entrepreneurs who excel at customer service

Landscaping and lawn care services are great business ideas for lovers of the outdoors. The number of landscaping businesses in the United States has increased by an average of 3.2% per year over the last five years, and demand for them is continuing to grow right along with it.

Some self-employed landscapers have bachelor’s degrees in landscape architecture or a similar area of study, but that’s certainly not a requirement to get started. You also don’t need a ton of money or specialized equipment, giving lawn care an overall low barrier to entry.

Not only is landscaping among the best self-employed jobs, but it can also easily be scaled into a very profitable business. Mike Andes grew Augusta Lawn Care to more than $1 million in revenue by age 24, then scaled it even further by turning it into a franchise. You can hear how he got started in this YouTube interview:

[su_youtube url="https://www.youtube.com/watch?v=RLeOYgF54tE"]

Job #14. Nanny or Childcare Services

•  Average Annual Revenue: $143K+
•  Average Profit Margins: 0.9%
•  Startup Costs: $0-$1K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 51.7%
•  Best for: Teachers, tutors, babysitters, parents, caregivers, compassionate and patient entrepreneurs with strong organization and multitasking skills

Childcare services are in high demand, especially in rural areas, where nearly 60% of families don’t have access to the childcare they need. Parents in urban areas need reliable childcare, too, and thanks to this rising demand, the overall childcare market is projected to grow at a CAGR of 12.8% through 2027.

This opens up a lot of self-employment opportunities for entrepreneurs who have experience teaching, watching, or caring for kids. It’s also driving up the average salary for childcare professionals across the country. The average hourly rate for a nanny was $17-$18 in 2023, but that can go much higher depending on where you live and if you bring other skills like tutoring or medical knowledge to the table.

This is another self-employed job that has lots of growth potential. While you can certainly make a good living as a one-person operation, you can also build on those skills to start a small business like a daycare or nanny agency.

Twinkle Toes Nanny Agency has grown to more than 20 locations with a cumulative annual revenue of $11.2 million since it was started in 2011. Find out how its founder went from being a surgeon’s assistant to making millions per year:

Job #15. Event Planner

Woman event planner holding a tablet under a beautifully decorated white wedding tent

•  Average Annual Revenue: $94K+ as wedding planner
•  Average Profit Margins: 12.2%
•  Startup Costs: $500-$5K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 1%
•  Best for: Organized and social entrepreneurs who are strong networkers and planners, creative problem-solvers

Like other sectors that rely on large gatherings of people, the pandemic put a damper on the event-planning industry. The good news is, it bounced back in a big way in 2023. The event-planning market is expected to surpass $1.5 trillion in value by 2028, which represents a growth rate of 11.2%.

There are many niches you can go into as an event planner. Wedding planning and corporate events are among the most consistently profitable, but the truth is you can earn a sizable revenue by planning any kind of event, from social gatherings like parties and reunions to business events like product launches and conferences.

Having connections to other local businesses like event venues, caterers, and entertainment is key to success when you’re working for yourself as an event planner. This makes it one of the best self-employed jobs for people with experience in hospitality, food service, and similar industries as they can draw on that knowledge to grow their new business quickly.

Job #16. Virtual Assistant

•  Average Annual Revenue: $35K-$50K
•  Average Profit Margins: 10.5%
•  Startup Costs: $100-$200
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 1.9%
•  Best for: People with strong organization and communication skills, those who want to work from home and set their own hours

Virtual assistants work with busy professionals on a freelance or contract basis, handling administrative tasks so they can focus on their other responsibilities. The things you’ll do as a virtual assistant can include replying to emails, scheduling meetings and travel, managing and posting to social media accounts, and similar types of tasks.

You can start a virtual assistant business online by creating an account on a freelance platform like Upwork or 24/7 Virtual Assistant. While you’ll need basic computer skills and a reliable internet connection, the most important traits for virtual assistants are soft skills like reliability, communication, and multitasking, and you certainly don’t need a bachelor’s degree or other formal education.

Job #17. eCommerce Reseller Business

Smiling women in a bright red blazer holding boxes including one marked "Reseller"

•  Average Annual Revenue: $60K-$120K
•  Average Profit Margins: 5-15%
•  Startup Costs: $100-$1K
•  Time To Revenue: 30-90 days
•  Annual Market Growth Rate: -9.3% (Based on eBay annual reports)
•  Best for: People with sales and marketing skills, collectors who can spot valuable items, those seeking flexibility and the potential for passive income

Opening an online store costs less than starting a brick-and-mortar retail store. It also gives you more schedule flexibility than many working-for-yourself jobs since it doesn’t involve working with clients.

The inventory you sell will be the main cost of starting an e-commerce business as a reseller. If you have an eye for spotting hidden gems at flea markets, thrift stores, and garage sales, you can make a consistently high profit with this kind of business.

Mike Wilson started Golden State Picker with $1,000 worth of inventory and has grown that into a $30,000-a-month business. Hear how he started in this podcast interview:

Self-Employed Jobs from Home

Job #18. Graphic Designer

•  Average Annual Revenue: $123K+
•  Average Profit Margins: 13.5%
•  Startup Costs: $500-$5K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 2%
•  Best for: Visual artists, designers, creative and artistic entrepreneurs

In a recent report from Upwork, graphic design topped the list of most in-demand creative skills. Graphic designers help businesses create their brands, a crucial ingredient in attracting customers and growing sales, so it’s no surprise this service is so needed in today’s market.

The average salary for a graphic designer is $24 an hour, but an experienced freelance graphic designer can charge $100 or more an hour for their services. You’ll be able to charge more from the start if you have a bachelor’s degree in graphic design or a similar area of study. You can also learn the skills you need from online courses and how-to videos, though, so a degree isn’t a requirement to get started.

Job #19. Web Designer

Bearded web designer in a t-shirt working on site design on a Mac laptop

•  Average Annual Revenue: $239K+
•  Average Profit Margins: 5.3%
•  Startup Costs: $100-$1K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 1.4%
•  Best for: Programmers with knowledge of HTML, CSS, and JavaScript, visual artists and designers, detail-oriented entrepreneurs with strong time and project management skills

Similar to graphic design, web design is an in-demand skill, and self-employment is common in this industry. Many businesses hire freelance web designers to build and maintain their websites, and there’s a particularly high demand for designers with e-commerce or SEO expertise.

The average salary for a freelance web designer was $65,000 a year in 2023, which equates to roughly $31 an hour. You can charge more if you have those niche skills mentioned above.

Having a portfolio of past work to show potential clients is the best way to grow a web design business. If you’re just starting out, building your own website or doing some free work for friends and family can help you create this portfolio.

Job #20. Translator

•  Average Annual Revenue: $75K-$200K
•  Average Profit Margins: 12.4%
•  Startup Costs: $100-$200
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 1.2%
•  Best for: Bilingual or multilingual entrepreneurs, excellent communicators

Translation is among the best self-employed jobs for people who speak multiple languages fluently. There’s a wide variety of work available in this niche, too, from translating books to writing multilingual captions for videos or doing live translation at events and functions.

The pay for translators varies widely, with an average salary of $61,000 per year. You can make more money if you can translate between English and in-demand languages like German, Mandarin, and Arabic.

Job #21. Freelance Writer

Screenshot of Freelancewriting.com’s homepage showing "I’m a writer" and "I want to hire writers" options

•  Average Annual Revenue: $46K
•  Average Profit Margins: 14.6%
•  Startup Costs: $100-$200
•  Time To Revenue: 1 month to 3 Years
•  Annual Market Growth Rate: -1.5%
•  Best for: Writers, editors, and language experts, people with SEO, marketing, and advertising knowledge, creative entrepreneurs

Despite the recent emergence of AI content generators, freelance writing remains among the best self-employed jobs you can start from home with almost no upfront investment.

Freelance writers can take on a wide range of work. Some focus on fiction and other creative writing, either under their own names or as ghostwriters. Technical writing is one particularly high-paying freelance writing niche, with an average salary of $75,700 in 2023. There is also high demand for online content like blog posts and advertising copy.

The bottom line is, if you are a strong writer and wondering how to work for yourself, you can create your own job writing about the things that interest you.

Job #22. Proofreader Business

•  Average Annual Revenue: $25K+
•  Average Profit Margins: 9%
•  Startup Costs: $100-$1K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 1.9%
•  Best for: Grammar and writing experts, people with a sharp eye for detail

Another great self-employed job in the content creation sector is proofreading. Proofreaders give written texts professional polish, catching and correcting errors in books, blog posts, marketing brochures, and other types of copy.

While proofreading pays less on average than writing, an experienced proofreader can make up to $25 an hour. You can make extra money by adding services like fact-checking or content editing to your business, too.

Job #23. Photographer Business

•  Average Annual Revenue: $50K
•  Average Profit Margins: 7.3%
•  Startup Costs: $1K-$10K
•  Time To Revenue: 1-6 months
•  Annual Market Growth Rate: 0.3%
•  Best for: Visual artists, photographers and videographers, creative entrepreneurs with strong customer service skills

There are lots of ways to make money from photography. You can photograph events, take family or school portraits, or work with businesses to take pictures of their products for store listings or advertisements.

Mile High Productions offers drone photography and videography services for clients ranging from real estate agents to TV productions. They’ve grown to $35,000 a month in revenue thanks to their high-profile clients. You can see how they started here:

[su_youtube url="https://www.youtube.com/watch?v=EUcv1HAAbns"]

Photography equipment is the most significant startup expense for a self-employed photographer. If you already have a professional camera, the main cost to start will be marketing to attract your first clients.

Job #24. Tutor

•  Average Annual Revenue: $389.5K+ (normally has multiple employees)
•  Average Profit Margins: 13.10%
•  Startup Costs: $100-$1K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 8.5%
•  Best for: Educators, people who are compassionate, empathetic, and can explain complex concepts in simple terms

If you’re knowledgeable about school subjects like math, English, and history, tutoring should be on your list of best self-employed jobs. The rise of online tutoring platforms like Skooli and TutorMe makes it easier than ever before to find students and teach them right from your home. Other than knowledge, all you need to get started is a reliable internet connection.

How much you can make as a tutor depends on your experience and areas of expertise. The average rate is around $24 per hour, and you can charge more if you can offer college-level tutoring or services like standardized test prep.

Ways to Work for Yourself: More Ideas for Self-Employment

Job #25. Real Estate Agent

•  Average Annual Revenue: $298K+
•  Average Profit Margins: 44.6%
•  Startup Costs: $500-$5K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: -0.3%
•  Best for: Skilled negotiators, friendly people with strong sales and communication skills

Most real estate agents are self-employed, even if they work under the supervision of a broker. Typically, this means they get to set their own schedules and choose the clients they work with, putting real estate agent among the best jobs for people who want full control over their workdays.

Real estate agents can represent either the buyer or the seller in property transactions. Some agents switch between these roles, while others have a specialty. Whatever your focus, you will need to be licensed to become a real estate agent. Licensing requirements vary state by state, but the licensing process is typically fairly quick and easy, and you only need a high school diploma or GED to qualify.

Job #26. Property Manager

•  Average Annual Revenue: $372K+
•  Average Profit Margins: 10.1%
•  Startup Costs: $100K-$3.5M
•  Time To Revenue: 6-18 months
•  Annual Market Growth Rate: 1.3%
•  Best for: Home maintenance and repair experts, organized and system-focused entrepreneurs who are great communicators

Another self-employment option in the real estate sector is to become an independent property manager. Property managers are often hired as independent contractors by people who own rental properties or commercial real estate. They take care of day-to-day tasks for a property, like collecting rent, arranging or making repairs, and fielding tenant concerns and issues.

Property managers made an average salary of $53,600 in 2023, but there’s the potential to earn six figures or more. Generally speaking, the larger the property, the higher the pay. One highly profitable niche is managing Airbnb properties for their owners. Airbnb business Nicasa manages others’ properties in addition to its own real estate investments and earns $3 million a year in revenue. Learn more about its winning strategies in this video:

[su_youtube url="https://www.youtube.com/watch?v=6m-MosXlpOE"]

Job #27. Life Coach

•  Average Annual Revenue: $63K+
•  Average Profit Margins: 10.5%
•  Startup Costs: $500-$5K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 1.5%
•  Best for: Excellent motivators, empathetic active listeners, people with strong time management, organization, and problem-solving skills

As a life coach, your job is to encourage clients to become the best versions of themselves. This can mean helping them solve problems in various areas of their lives, from their personal relationships to their physical and mental health or broader life goals.

There are no licensing or formal education requirements to become a life coach. As with other self-employment jobs, though, having some training can help you build client trust when you’re first starting.

This Forbes review of the best life coaching programs is a great place to learn about the top life coaching certifications. A bachelor’s degree in psychology, social work, or another social science can also help you gain the skills you need to improve clients’ lives.

Job #28. Career Coach

•  Average Annual Revenue: $64K+
•  Average Profit Margins: 2.8%
•  Startup Costs: $500-$5K
•  Time To Revenue: 1-3 months
•  Annual Market Growth Rate: 0.8%
•  Best for: Recruiting and human resources professionals, strong networkers with industry and job market expertise, effective writers, communicators, and motivators

Career coaches help other people land the jobs of their dreams. This can include tasks like helping write or improve resumes and cover letters, interview preparation and practice, and helping people develop the skills they need to advance their careers.

A career coach usually charges around $100-$150 per session. With a full client load, that adds up to an average salary of $63,300 per year in 2023. You can earn more if you offer specialized services, like executive coaching or helping people navigate career changes.

Job #29. Hair Stylist

Woman barber with bleached white hair and tattoo sleeve holding hair scissors and brushes

•  Average Annual Revenue: $51K+
•  Average Profit Margins: 5%
•  Startup Costs: $1K-$100K
•  Time To Revenue: 3+ months
•  Annual Market Growth Rate: 0.9%
•  Best for: Beauticians and barbers, people with knowledge of fashion and style trends, creative people who are great active listeners and problem solvers

In many salons, the hairdressers aren’t employees. Instead, they’re self-employed stylists who rent a chair or work on commission. For many, this arrangement is the best of both worlds. The salon owner pays for the equipment and does their own marketing, and the stylist gets scheduling freedom and control over their own client list.

You don’t necessarily need to go to beauty school to become a hair stylist, but you will need a cosmetology license (see the requirements for each state here). Apprenticing with an established hair stylist is a great way to build your client list while gaining the skills and experience you need to become a self-employed stylist.

Did You Find The Self-Emploment Job For You?

The best self-employed jobs come in all fields. If you want even more inspiration, check out our blog of 561 self-employment ideas.

Which of the ideas did you like best?

Business ideas

How to Start an Etsy Shop (and Make $60K/Month)

Cash is not king. Creativity is. Have you ever wanted to start your own Etsy shop? Vlad Kuksenko started TagPup and in 18 months became the top pet product seller. You can do it, too!

We sat down with Vlad and learned how he loved art but earning a living as an artist wasn’t an option until graphic design became a major field. Today, he creates personalized dog collars, leashes, and bandanas that fill the number one pet products shop on Etsy.

[su_note note_color="#dbeafc"]
We’ll share the tips and strategies he used to become number one in his category. (Click the links below to jump to the sections that interest you most.)

Get ready to become your own Etsy shop manager.

What is Etsy?

Etsy is an online marketplace where shop owners can sell products to Etsy’s 82 million buyers looking for handmade and vintage products. Etsy listings fall into eight major categories:

  1. Jewelry & Accessories
  2. Clothing & Shoes
  3. Home & Living
  4. Wedding & Party
  5. Toys & Entertainment
  6. Art & Collectibles
  7. Craft Supplies
  8. Seasonal Offerings (think Valentine’s Day, Veterans, Memorial, and Labor Days, 4th of July, Halloween, Thanksgiving, and Christmas)

Keep reading for things to sell on Etsy.

What to do before opening an Etsy shop

Before you sell items on Etsy, there are a few things you should do, including answering:

  • What to sell on Etsy?
  • What is the industry outlook?
  • Who are the major players on Etsy?
  • What will my Etsy business plan be?

What to sell on Etsy?

If you’re wondering what sells best on Etsy, check out the Etsy best sellers list. The best-performing segments according to Etsy’s 3rd Quarter 2021 Earnings Presentation are:

1. Homewares & Home Furnishings: $4.2 billion
2. Jewelry and Personal Accessories: $2.1 billion
3. Craft Supplies: $1.4 billion
4. Apparel: $1.4 billion
5. Paper & Party Supplies: $600 million
6. Beauty & Personal Care: $300 million

Many of these are vintage items, handmade goods, or personalized items that do particularly well with Etsy shoppers. Vintage items are classified as over 20 years old, while handmade means that each is unique.

Vlad spent a lot of time talking about the decision-making process of what to sell in an Etsy shop. He explained:

[su_quote]Etsy is a want-based business. If you can personalize it, you can sell it.[/su_quote]

He went on to explain:

[su_quote]You need a keyword to be able to sell it. If there is no keyword people are searching, you can’t sell it.[/su_quote]

He suggests using eRank to help with your search engine optimization (SEO). eRank has various tools to help small business owners come up with product ideas, optimize their listings, and track their shop page against the best Etsy shops.

Vlad described his product development process as:

  1. Research what has a high search volume using eRank.
  2. Input the term you are targeting into the Etsy search bar.
  3. Look for products with at least one review per day because that means they are selling at least 5 to 10 per day.
  4. Review the listing to establish:
    • What is frequently favorited?
    • What do the favorited items have in common?
  5. Design your offerings based on this search.

Vlad gave two additional pieces of advice that small business owners should follow when wondering how to start an Etsy shop:

  • “You need multiple products that work well together. Carrying a single product doesn’t do as well.”
  • Be aware of seasonality. For instance, items like planners, weight loss tools, and wall hangings tend to do better at the beginning of the year.

Now that you understand how to decide what to sell on Etsy, you’ll want to know the differences between Etsy and other major players in the industry. Let’s take a look.

What is the industry outlook?

According to eMarketer, U.S. eCommerce sales are expected to grow by 10 to 15% per year and total over $1.6 trillion by 2025. Most of the earnings will be from top players like Amazon and Walmart.

Etsy had an industry-leading 107% increase in Gross Merchandise Sales, which means if you meet the requirements to start an Etsy shop, it is the place to be.

Now that you know where the industry is going, keep reading to learn how to start an Etsy shop.

Who are the major Etsy sellers?

Etsy doesn’t share each company’s revenue, but they share the number of transactions for each Etsy shop and the number of followers. Some of the most prominent players are:

  • Planner Kate: An organization shop with 1.8 million transactions and 60K followers
  • Bead Boat: Craft supply shop with 1.4 million transactions and 57K followers
  • ModParty: A bridal shop with over 1.22 million transactions and 113K followers
  • Peggy Sue Leather: Leather supply shop with almost 790K transactions and 25K followers

Pro Tip: See more top sellers on Practical eCommerce’s blog 20 Top Selling Shops on Etsy.

Etsy offers plenty of opportunities for shop owners to make a great living. Here are a few business owners that we’ve interviewed who run businesses similar to Etsy sellers:

  • Urbanity: $102K per month in revenue selling clothes
  • Portland Gear: $120K per month in revenue selling Portland-themed clothes
  • Blk Sunflower: $180K per year selling homemade candles.
  • TagPup: The Etsy seller we’re featuring in this article. Check out our first of two videos with him below.
[su_youtube url="https://www.youtube.com/watch?v=7b_58Bppsb4"]

Write an Etsy business plan

You don’t need a business plan for an Etsy shop, but it will be much easier to start an Etsy shop if you start by writing a business plan. A business plan is something we recommend for every new business.

Your Etsy business plan should include:

  1. Your business name, idea, and goals
  2. Industry and competitor research
    • Market research
    • Size of market
    • Gaps in market
    • Whether Etsy is the best place to reach your market
  3. Financial estimates and budgeting
    • Are there gaps between the money you have and the money you need? How will you solve them?
  4. Marketing goals and processes.
  5. The path to achieving your set goals

Check out our interview with Mike Andes on how to write a business plan.

[su_youtube url="https://www.youtube.com/watch?v=C8MyjkibCxk"]

We’ve gathered some templates and resources for you to make creating a business plan for an Etsy shop easier. Check them out below.

Etsy Business Plan Templates

We’ve gathered templates to help you develop your business plan. Here are some of the best:

EXCITING ANNOUNCEMENT: Stop guessing and gambling with your time and money on Etsy. Discover Vlad’s Secrets to building a $3.2M Etsy business. Start boosting your success and stop making costly mistakes with a 30% discount on his course.

How to start an Etsy shop

Starting an Etsy shop can be a great way to sell handmade, vintage, or unique items. Here are step-by-step instructions on how to get started:

  1. Sign up or log in to Etsy
  2. Open your shop
  3. Choose your shop preferences
  4. Name your shop
  5. Stock your shop
  6. Add clear photos
  7. Set your prices
  8. Choose your payment methods
  9. Establish shop policies
  10. Calculate shipping costs
  11. Promote your shop
  12. Fulfill orders promptly
  13. Provide excellent customer service
  14. Monitor your shop
  15. Consider Etsy advertising
  16. Stay compliant with Etsy policies
  17. Reinvest in your business

Let’s start by opening getting an Etsy account.

Sign up or log in to Etsy

If you don’t already have an Etsy account, you’ll need to create one. If you do, log in.

Open your shop

How to make an Etsy shop shown by a desktop with the screen that populates when you click on the "Sell on Etsy" button in the top right corner of the Etsy homepage

Click on “Sell on Etsy” in the top right corner of the Etsy homepage.

To create an Etsy shop, you’ll need to go to the Etsy official site and create an account. You can use Etsy sign-in through Google or Facebook to make it easy. After you have created an Etsy account, you’ll want to go to etsy.com/sell. Review everything and click “Open your Etsy Shop.”

Choose your shop preferences

It will take you to a “shop preferences” page that asks for your shop language, shop country, and shop currency. You can change these with the drop-down menu.

It also asks, “Which of these best describes you?” and gives the following options:

  • Selling is my full-time job.
  • I sell part-time but hope to sell full-time.
  • I sell part-time, and that’s how I like it.
  • Other

All the answers on the shop preferences page have default answers already added. If you wish to change the answers, do so, then click “Save and Continue.”

Name your shop

In this step, you’ll choose a unique shop name for your new Etsy shop. The shop name needs to meet the following guidelines:

  • Shop Name Length: Include a maximum of 20 characters, only Roman letters and numbers, no spaces or punctuation.
  • Shop Name Availability: Push “Check availability” to verify whether the name is available.
  • Descriptive: Does it describe what you sell?
  • Memorable: Is it easy to remember?
  • Available in other places: Is the name available as a domain, social media, and trademark?
    • Use our business name generator to verify the name is available as a domain.
    • Search “[your location] business license search” to check availability in your location.
    • Use uspto.gov to check trademark availability.

Once you’ve settled on a great name, enter it then click “Save and continue” to proceed to the next page, where you will create listings.

Want to hear more about Vlad’s TagPup success? Listen to his podcast episode below.

Stock your shop

Concept showing Etsy instructions to list and sell handmade goods with Vlad in the foreground holding his sewing machine on his shoulder.

On this page, you’ll want to add all your listings. You’ll click the blue box that says “+ Add Listing,” which will take you to the “Add a new listing” page. This page is relatively long, so we’ve broken it into sections to make it easier to follow.

  1. Photos
  2. Videos
  3. Listing Details
  4. Inventory and Pricing
  5. Variations
  6. Personalizations
  7. Shipping

What should I include in my Etsy listing details?

You’ll want to include the following information in the listing details:

  • Title: What you call the product, no more than 140 characters
    • Example from one of my hoodies: “Unisex Shaded Hands Heart Hoodie- Artwork by Daisy Gray”
  • About this Listing: Three questions
    • Who made it? Me, member of my shop, or another company or person
    • What is it? Finished product or supplies and tools
    • When was it made? Made to order (use this for print-on-demand), Recent (choose dates between 2003 and today), Vintage (Pre-2003)
  • Category: Search for and select your product type
  • Sizes and Colors: Select the option that describes it best, or select “multiple” to create variations.
  • Optional classifications for Etsy search: Holiday, occasion, style, and graphic
    • There are a lot of attributes, and they change based on the category. Review them and select whatever fits best as they can help with search results.
  • Optional for clothing: Sleeve length, closure, and clothing style
  • Renewal: Auto or manual
  • Type of Product: Physical or digital
  • Description: Describe your product, 1,100-character maximum

Vlad told us:

[su_quote]Read your competitors’ descriptions. Use graphics as opposed to descriptions when possible. For instance, take the dog collars and a ruler to show the different sizes.[/su_quote]

  • Production Partners: Asks for information about any outside partners, including the following:
    • Partner name
    • Location
    • Additional information
    • Why you work with them, your role, and their role
  • Tags: Keywords you want your product to show up for, maximum of 13 tags
  • Materials: Type of raw materials. For instance, cotton and polyester.

The tags are the key to getting your shop name in front of your target audience. Don’t forget to use eRank to help with the tag selection.

We asked Vlad, “What Etsy tags should I use?”

Vlad told us:

[su_quote]When creating tags, think about ‘Where should I show this product?’

If you’re creating t-shirts, you don’t need the word ‘t-shirt’ in each one. Just include it in the first three, and use other tags that will put it in front of other people.[/su_quote]

To do this section right, expect to spend an hour per product or more.

Example of tags

Given Vlad’s suggestion, you may want to use the following tags if you have a Taylor Swift shirt (which is one of the trending topics for t-shirts this year):

  1. Taylor Swift tour shirt
  2. Taylor Swift Eras shirt
  3. Eras tour shirt
  4. Taylor Swift tour
  5. Taylor Swift Eras
  6. Eras tour
  7. Taylor Swift outfit
  8. Taylor Swift merch
  9. Red Taylor Swift
  10. 1989 shirt
  11. Lover shirt
  12. 1989 Taylor Swift
  13. 1989

How to set up an Etsy shop video

Etsy recommends creating a product video. They give you instructions on how to take listing videos in the Etsy Seller Handbook. If you add product videos, they should meet the following qualifications:

  1. 1080p or higher resolution
  2. 5-15 seconds long
  3. Less than 100 MB file size
  4. 30 frames per second
  5. Don’t edit the video before loading it into Etsy. (If you edit the video from standard video sizing to a 1:1 height-to-width ratio, you may have issues uploading from an iPhone.)

You can make a video with a 1:1 ratio after adding the video to Etsy by using the editing tools on their site.

Now that you know how to add a video to your Etsy listing page, let’s look at the other information covered in Etsy listing details.

Add clear photos

How to open an Etsy shop with great pictures shown with a polaroid of Vlad and his sewing machine next to a tablet with Etsy products loaded on a wood grain table

High-quality images are crucial to start selling. Take well-lit, clear photos that accurately represent your items.

Etsy allows you to add up to ten photos on the website. Want some tips on how to create great product images? Check out the list below.

  • Use natural light and no flash. Late afternoon is the best time to photograph.
  • Include a common object for scale, or use a ruler if needed.
  • Show the item being held, worn, or used.
  • Shoot against a clean, simple background. Most platforms require white backgrounds for the primary photo, so it’s best to have at least one that shows the image on a pure white background because you’ll probably sell on other platforms too.
  • Add photos of your variations so buyers can see all their options.
  • Set the pixels per inch to 72 and 2000 x 2000 pixels.
  • Verify that the combined photo image sizing is no larger than 1 MB total. Otherwise, it slows pages on mobile devices not connected to WiFi.

After you add photos, remember to edit the meta description to help with search engines by hovering over the image and clicking on the pencil. You can also crop or delete the image in the hover menu. If you click and hold onto an image, you can change its placement.

Set your prices

Consider the cost of materials, time, and any fees when setting your prices. Be competitive but also make sure you’ll make a profit. The pricing should be high enough to cover the following:

  • The cost of the goods
  • Your time
  • Etsy’s $.20 listing fee
  • Etsy transaction fees of 5% of the product price plus shipping price
  • The Etsy payment processing fee of 3% + $.25 in the U.S. (varies by country)
  • Etsy’s 15% off-site marketing fee, which is charged every time Etsy randomly places your product in an off-site ad that results in a purchase
  • Cost of shipping labels ($6.99 at the time of writing; learn more about shipping labels in Etsy’s Seller Handbook)
  • Any other costs associated with your Etsy shop

How to start an Etsy shop with no money

You can open an Etsy shop without money, but the Etsy platform requires a $.20 per item listing fee that you’ll have to pay when the product sells. If your items are not made-to-order, Etsy shop owners can get started for free. This is especially true if you can start selling vintage goods you already own as you won’t have to buy new materials.

Now that you know how to start an Etsy shop, let’s look at Etsy payments.

Choose your payment methods

Considering Etsy payment processing fees shown by business owner holding a smart phone with PayPal loading in one hand and a credit card in the other

Set up your preferred payment method. Etsy Payments is a commonly used option that allows buyers to pay for a physical or digital product assuming your payment account settings allow each of the options as Etsy payments:

  • Credit cards
  • Debit/bank cards
  • Etsy Gift Cards and Etsy Credits
  • Apple Pay
  • Google Pay
  • PayPal
  • Klarna Financing (U.S. only)
  • Klarna installment payments (Australia, Canada, Spain, UK, U.S.)

Establish shop policies

Define your shop policies regarding shipping, returns, and exchanges. This helps set clear expectations for your customers. You’ll have to follow Etsy’s policies, but as a shop owner, you can also define your own about subjects like returns, exchanges, and cancellations. Printify goes into more detail about Etsy store policies.

Calculate shipping costs

Etsy offers a free shipping option, and I highly recommend using it. While Vlad didn’t specifically mention offering free shipping, he offers it on many of his products, and considering how much we love free shipping, we assume that’s part of TagPup’s success! He made some comments that suggest including the shipping in the price of the goods:

[su_quote]Be very clear in what they are buying to get better reviews.[/su_quote]

and

[su_quote] Don’t trick people.[/su_quote]

Additional shipping charges can be tricky at times, so I (the author) suggest using the free shipping feature. It is straightforward; they’ll ask you a couple of questions, including:

• Origin zip code: Where it’s mailed from
• Processing time: How long it takes from when the customer orders until when it ships
• Where I’ll ship: Continents or specific countries
• Shipping services: Your offerings for shipping
• Free shipping: Domestic or international (I would discourage offering free international shipping unless you are well-versed in shipping and pricing costs)

Then you’ll have an option to add shipping to the price of the product. Review Etsy pricing strategies to include free shipping and learn how to include the pricing in the product cost.

In addition to specifying shipping options, remember to establish and post a very clear return policy that details:

  • When you accept returns (standardized product, within 90 days, not-made-to-order, manufacturer error)
  • When you will not accept returns (damaged after shipping, custom made, after 90 days)
  • Time frame to return the product
  • Who pays for return shipping

Promote your shop

Marketing is the trick to growing any business. You have to get your business and products in front of people to sell them. Fortunately, Etsy makes it pretty easy for a small business to sell on its marketplace.

If you don’t have much experience with marketing, it starts with market research. Mike Andes goes into great detail about market research, including identifying potential customers, target markets, and demographics. Check out our interview with him below:

[su_youtube url="https://www.youtube.com/watch?v=7dqHBHA4AmU"]

Vlad had a lot of input on how to sell on Etsy. He emphasized the importance of product design:

[su_quote]Art ought to communicate to [potential customers]. If it doesn’t communicate, it’s not art and won’t sell.[/su_quote]

He also told us you should “price your products based on the middle of the pack” because Etsy customers aren’t looking for items they need but that they want. They will go for the one that meets their desires the best.

He also shared this advice:

[su_quote] Don’t race to the bottom and satisfy the keyword.[/su_quote]

His strategies for becoming one of the best Etsy shops for pet products are also used by retail giants, and you can leverage them, too. As you start marketing your Etsy shop:

  • Create a loss leader: This is a pricing strategy that intentionally takes a loss on a product to gain market share. Vlad uses this with new products to gain traction on the Etsy website.
    • Vlad told us: Underbid, rank, then raise the price.
    • Use Etsy promotional pricing.
  • Utilize Etsy free shipping: Everyone loves something free. With the success of Amazon Prime, online shoppers expect every online marketplace to offer free shipping.
  • Gather data and improve: While underbidding, he’s able to gather data.

He told us:

[su_quote] I’ll take a loss to gather data and improve my knowledge about whether it performs, then introduce new keywords.[/su_quote]

Vlad also suggested:

[su_quote]Use the sales and coupons. I’ll set the product to the original price, then discount it heavily. I also match products together to create packages people love. Always create sales for holidays.[/su_quote]

He also said that he throws in a small gift for repeat customers occasionally, but he doesn’t do it all the time.

For more on TagPup’s winning formula, watch our second video with Vlad here.

[su_youtube url="https://www.youtube.com/watch?v=7dqHBHA4AmU"]

Helpful marketing tools

There are some useful marketing tools that small business owners use to market their companies:

  • Canva: Simplify graphic design with Canva. Get access to thousands of templates for websites and social media for as low as $4.99 per month.
  • SurferSEO: Write blog content faster and rank higher on search engines with SurferSEO.
  • MailChimp: Email and SMS marketing automation is one of the keys to success that many small business owners mention. Get started with Mailchimp.

Fulfill orders promptly

Ship orders as soon as possible after they’re placed. This will help you provide excellent customer service. You can use Etsy shipping labels to save up to 30% on your shipping cost. Learn more about shipping label fees on Etsy.

You can also provide tracking information by using Etsy tracking labels or providing the tracking codes to the customer by other means. You’ll need to check Etsy and your preferred shipping provider to figure out the best way to handle shipping.

Provide excellent customer service

Action shot of Vlad holding his sewing machine and a custom dog collar and surrounded by blurbs of his customer service advice

Respond to customer inquiries and concerns in a timely and friendly manner. The service you provide both before and after a purchase will impact customer satisfaction, whether they return to your shop, and whether they review and suggest your shop to other people.

According to inc.com, it takes 40 positive reviews to fix the damage done by a single negative review. When someone is upset, take the time to solve their problem politely. Vlad told us:

[su_quote]I work with customers on returns as long as they are less than 90 days. After that, we don’t. I just try to make them happy.[/su_quote]

The process I (the author) have found works wonders for dealing with unsatisfied customers is:

  1. Apologize for the inconvenience they are experiencing.
  2. Ask what you can do to fix it.
  3. Listen to their answer.
  4. Gather information about whether it was your error or theirs.
  5. Do exactly what they asked unless it is unachievable.

This can be a challenge because it may result in a single order resulting in a loss, but it’s far less costly than a bad review.

Monitor your shop

Vlad discusses his workflow at the 35-minute mark of UpFlip podcast episode 10. If you haven’t already listened to it, check it out now.

He told us:

[su_quote]Review your store and each item for week-over-week growth. If that section of the pie doesn’t grow, stop. If the reviews for it aren’t good, consider discontinuing the product.[/su_quote]

Consider Etsy ads

Etsy has a built-in ad feature where you can specify your daily ad spend limit, and they promote your products accordingly. The Etsy Seller Handbook answers how Etsy Ads work in more detail, but you basically create a budget of between $1 and $1,000 a day.

Vlad told us:

[su_quote]I typically spend between $300 and $1,000 per day on ads. Etsy really creates a level playing field, so going higher doesn’t mean it all gets spent.[/su_quote]

He went on to tell us the best way to use ads is to utilize keyword research.

[su_quote]Find the most creative way to make the ad as quick as possible to make it where the ad budget goes as far as possible.[/su_quote]

Stay compliant with Etsy policies

Young woman holding a laptop learning how to open Etsy shop by reviewing seller policies page

Familiarize yourself with Etsy’s policies to ensure you’re abiding by their rules and regulations.

Reinvest in your business

You’ll want to reinvest in your business to help it grow and get more customers. Vlad told us:

[su_quote]Margins are 50-60% if you don’t reinvest in the business, but we tend to reinvest in machinery.[/su_quote]

In addition to adding machinery, you can create new products or increase marketing to expand your business. Once you earn more income consider opening a retail location or hiring more employees to help.

Selling on Etsy FAQ

Where to buy materials and equipment for an Etsy store

You can purchase materials from a variety of places. Some of the places to buy when you first start are:

  • A brick-and-mortar store: JOANN Fabric and Michaels are two that offer lots of selections for craft businesses.
  • Etsy Craft Supplies: Find craft supplies you know are selling well on Etsy.
  • Amazon: Craft supplies and tools can come directly to your home from the number one online retailer.
  • Alibaba: Get bulk orders from overseas (allow weeks to months for shipping).

If you’re looking for equipment, Amazon and Alibaba might have it, but you can also check places like:

Vlad told us:

[su_quote]You can spend 200 bucks at JOANN and customize mugs with vinyl. The materials and equipment costs depend on what you’re making and what machines you need.[/su_quote]

He also told us:

[su_quote]Inventory is such a big issue. Sometimes I spend $5,000 on shipping to get $10,000 of product. One of the ways to fix that is to pay half up front and half on delivery.[/su_quote]

Do I need a business license to sell on Etsy?

Etsy does not require a business license to start listing physical or digital product, but the government might if you make more than $600 from your Etsy shop. In addition, a business bank account, reseller’s license, and business credit card will all require a business license.

Each city, state, and country have different licenses, permits, and tax forms required. Refer to the SBA License and Permits page to identify what your Etsy shop needs.

Learn more about Etsy businesses

Vlad suggested reading the book E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. You can get it through our Amazon shop.

  • Check out Vlad’s YouTube, TalkShop.
  • Save 30% on Vlad’s course.
  • Etsy has 2 YouTube channels:
  • Nancy Badillo, a highly successful Etsy seller, has almost as many followers as Etsy’s channels combined.

Start your own Etsy shop

We’ve explained the market outlook for eCommerce, how to start an Etsy shop, licensing requirements in case you want to make your shop a formal business, and marketing strategies to improve your business results.

If you’d like to consider other business ideas, check out our blog about the 30 best businesses to start for under $10,000.

Etsy can be an extremely satisfying way to earn a living. What kind of products are you thinking about listing on Etsy?

Business ideas

How to Start a Bakery: A Step-by-Step Guide (2024)

Have you ever wanted to make people happy with yummy cakes or tasty breads? Ever thought about entering one of the fastest-growing industries for small businesses? It may be time to start a bakery!

Today we're revealing insider information on how to start your own baking business.

We connected with Puran Deep, a successful bakery owner who runs the wildly popular Wild Wheat Bakery in Kent, Washington. In 2019, his bakery exceeded over $1 million in revenue!

Now, we're passing his expert advice on to you. We'll show you step-by-step how to plan, start, and grow a thriving bakery business in this $30 billion per year industry.

[su_note note_color="#dbeafc"] In addition, we're giving answers to popular questions like these: [/su_note]

Click any of the links above to jump ahead to that section.

How Do I Start My Own Bakery?

You'll find everything you need to know in this step-by-step guide for starting a bakery!

If you are new to the bakery world—or haven't ever stepped foot in a kitchen—it's a good idea to visit some bakery businesses to glean information and practical experience. Small business owners are often happy to share what they know.

We interviewed Puran Deep (P.D.) from Wild Wheat Bakery in Kent, Washington. P.D. started four different businesses in the past and now runs Wild Wheat, a cafe-bakery often featured in The Seattle Times and the winner of many “Best of Kent” awards.

See the YouTube video about how to start a bakery below.

[su_youtube url="https://www.youtube.com/watch?v=j2_xwBgyFFU"]

P.D. grew tired of the rat race and wanted to start his own business. That's when the opportunity to purchase Wild Wheat, an established bakery-cafe with an excellent reputation, landed on his desk.

P.D. bought an existing bakery, but he still has tons of advice to offer to someone starting from scratch. We'll share his expert tips and other practical advice as we proceed through the steps for starting a bakery as a new business.

[su_quote]You have to treat everybody that walks in this door with great customer service. Make sure they are getting what they need. Make sure you're giving them quality food. Over 50% of our customers on a daily basis are our regular customers.[/su_quote]

Another alternative is to buy an existing bakery.

Step 1. Consider Bakery Business Ideas

The first step of starting a bakery is considering the different types of bakery ideas you're interested in. Retail bakeries, home bakeries, and wholesale bakeries are viable options.

Recently, the baked goods industry has grown significantly, so it’s a good time to get started. Several options are available for starting your own bakery business.

Bakery Cafes

• Average Annual Revenue: $1.52 million per year
• Average Profit Margins: 5.4%
• Startup Cost: $100 (at home) to $3M (Panera Franchise)
• Time To Revenue: 1-6 months
• Annual Market Growth Rate: 1.1%
• Best for: Cooks, chefs, people who love cooking

A bakery cafe offers tables where customers can sit down and eat in a dining area. It combines the benefit of freshly baked goods with the enjoyment of a small restaurant business.

Like a small restaurant, this type of business also provides coffee, other beverages, and an extended menu. Wild Wheat Bakery offers an extended breakfast menu featuring omelets and other egg dishes.

As an added component, P.D. roasts his own coffee beans on location. Customers can enjoy a cup in the cafe or take home the beans to brew themselves.

A perfect example of a Bakery Cafe is the world-famous Ferrara Bakery in New York City.

Wholesale Bakeries

This type of bakery business does not keep a storefront and acts as a supplier to restaurants, grocery stores, etc.

Wholesale bakeries benefit from predictable and reliable sales to retail businesses. Wholesale bakeries sell to customers who buy in bulk. And there's no worry about the upkeep of a retail bakery.

Finding grocers, local coffee shops, and restaurants to carry your product is the key challenge of a wholesale bakery. This critical aspect may be difficult for a new business trying to break into the baking market.

However, it is very important for any bakery. We asked P.D. why wholesale is so important for a bakery, and here's what he told us:

[su_quote]You have your staff; you have your employees that are producing a certain number of breads or whatever they're making. It's not a huge cost for them to produce a little bit more with the same employees and the same equipment, but you can increase your sales significantly.[/su_quote]

Marsee Baking is a wholesale bakery that operates in Seattle and Portland and would be a great model to build your business on.

Counter-Service Bakery

Typically, small counter-service bakeries expect customers to pick up their orders and go. One benefit is that it limits the time and energy spent on customer service.

Part of the larger category of retail bakeries, it's possible to combine a counter-service bakery with a wholesale bakery. The bakery would sell baked goods to grocers or restaurants and provide pick-up and/or delivery service to retail clients.

Clark Street Bakery in Los Angeles started in an apartment and now has four counter-service locations.

Food Truck Bakeries

One of the most affordable ways to open a bakery is through food trucks. Food truck bakeries have become a viable option for running your own business. For more information on how to get started, check out our blog post on How to Start a Food Truck Business.

The Teal House Coffee and Bakery food truck is one of the most well-known around Austin, Texas!

Home Bakeries

Cottage industry businesses can be a simple way to dip into opening a bakery without a large investment. For those wondering how to start a home bakery, simply alter the steps in this business guide to meet your home baking needs.

[su_quote]Baking can be done with a few simple ingredients, so it's about simplicity and nostalgia – people are reminded of their childhood.” – Paul Hollywood – Celebrity Chef and Judge on The Great British Bake Off [/su_quote]

Specialty Bakery Cakes

Many business owners succeed with specialty bakeries like a cake business. One of my favorites is Freed’s Bakery in Vegas. They create custom wedding cakes and other treats for special events. Check out their fidget spinner cake below.

[su_youtube url="https://www.youtube.com/watch?v=0pW-5YkkOv8"]

How to Start a Bakery Business From Home

Many people start a bakery from home simply by selling their baked goods to friends and family. You might not need a formal business plan, but check into local regulations on how to run a bakery from home without a commercial kitchen.

Step 2. Perform Market Research

You might wonder whether starting a bakery business in your area is viable.

It's important to know what's happening in the baking business in order to meet customer needs. This market research report provides tons of information and industry data about Bakery Cafes in the US.

The good news? Bakeries are on the upswing!

Even so, it's important to research your local business environment for things like:

  • Demographics
  • Local Market Trends
  • Competition
  • Budget
  • Target Audience

All of this information will be vital later when you build your business plan.

According to P.D., knowing what customers need is critical to running a business. He says:

[su_quote]…you have to have the right mindset, you have to take care of the customers and know their needs.[/su_quote]

So, before you even get started in business, find out what potential customers want by doing your research ahead of time.

When considering which baked good offerings to provide, know that certain segments of the market are larger than others, as seen below:

[su_note note_color="#dbeafc"]
  • Bread: 32%
  • Rolls: 19%
  • Cakes: 15%
  • Retail bakery products: 10%
  • Soft cakes: 8%
  • Pies: 2%[/su_note]

    Step 3. Understand Your Local Business Laws

    Because it can take time for agencies to process paperwork, it's important to understand business licensing early in the process. The bakery industry deals with food, so the Health Department in your area should be your first contact.

    Licensing and registration varies between states and even within local jurisdictions. One excellent resource for learning the basics is the Small Business Administration. The required permits depend on the type of bakery and location.

    Run through this list for a cost estimate of your licenses and permits:

    • Business License – Around $50. Based on location/type/size. Renewable.
    • Food Service License: $100-1000. Based on size, # of employees. Renewable.
    • Employer ID Number (EIN) – Free. Issued by IRS for tax purposes. Takes time.
    • Certificate of Occupancy – Around $100. Proof of final inspection. Locally issued.
    • Fire Department Permit – $50-200. Inspection of ovens, etc. Locally issued.
    • Food Handler's Permit – $100-500 for each employee. Renewable.
    • Sign Permit – $20-50+. Allows a permanent sign. Locally issued.
    • Music License – $250-500 to play music.

    Here's a link to the U.S. FDA list of regulations and codes for food service establishments by state. It clarifies the differences in regulations between states.

    For county and city information, perform a quick internet search or inquire at your local health department.

    Can I Get A Baking License For At-Home Bakery?

    Sometimes. It depends on your local laws. A home bakery business may also be called a home baking business or cottage food business. There may be special requirements for how to start a bakery from home including:

    • Refrigeration 
    • Ingredient 
    • Packaging
    • Maximum Revenue
    • Distribution

    Cast Iron is a home-based food business management software platform that has a list of laws that make a good starting point for those wondering how to start a cake business from home. It’s a good place to start for others starting a baking business too.

    How Long Does It Take to Start a Bakery?

    Starting a bakery can take from a few weeks to a few months, depending on the scale of the operation.

    A bakery at home can be fairly quick when your customers are people you know. A retail or wholesale bakery may take a few months or even a year to start, depending on your location, funding, and other circumstances.

    Step 4. Consider Locations

    A retail bakery does best in a high-traffic area. Ideally, your space will be easily accessible to lots of people, have enough space for seating, and a reasonable rent for the square footage.

    For example, the world-famous Ferrara Bakery is located in New York City in the heart of Little Italy on the corner of Grand and Mulberry Street. 

    It may not be the most spacious cafe, but the foot traffic more than makes up for the lack of seating. Try to find this balance with your location!

    [su_quote]In any business, location is key. If someone is planning to open up a new location, pay a lot of attention to the foot traffic where you are opening it. Location can be something that can make or break your business. It's very important.[/su_quote]

    Consider these factors when choosing your business location:

    • Accessibility: Is it easy for customers to get to your location? 
    • Competition: Are there other bakeries nearby?
    • Foot traffic: How many potential customers pass by on foot? Remember P.D.'s advice.
    • Parking: For customers arriving in their own vehicles, is there enough space to park?
    • Growth potential: Is there a possibility to expand in the future?
    • Demographics (target audience): Who lives or works in the area? Does this align with your ideal customer?
    • Cost: Research all the details of the price to buy or rent the space.
    • Bakery layout: There's much more to consider than just how customers will move through the bakery. Keep reading below.

    Bakery Layout

    You should consider the new bakery floor plan before you open a bakery in a commercial space. You’ll want to consider the following features:

    • Counter space
    • Bakery equipment
    • Prep space
    • Dining space
    • Office space

    All this goes into a bakery floor plan. You should probably consult an architect and a commercial real estate agent before choosing a small commercial space where you’ll open bakery operations.

    Step 5. Get Menu Ideas

    Before determining the cost of opening your new business, you must have a rough idea of your menu. Mastering recipes takes time and practice. The good news is that you can enjoy tasting the test recipes!

    Business success hinges on offering the highest quality products that people want. It's important to create an eye-catching menu.

    Offer special items that make you stand out from the crowd. Give customers a reason to do business with you!

    If you need some inspiration, here are some recipe sites to review:

    Look at the bakery offerings that offer the highest profit potential.

    Step 6. Understand the Finances

    While spending time in the kitchen is loads of fun, you also need to crunch the numbers to open a successful bakery. You’ll want to consider the following:

    • Cost of opening a bakery
    • Monthly operating costs
    • Cost of goods sold for the products.

    How Much Does It Cost to Start a Bakery?

    The startup capital for starting a bakery varies based on the type of bakery you choose to start. Those who want to know how to start a baking business should expect the following startup costs depending on what type of business entity they start.

    • Home-based: $100+
    • Food Trucks: $100+. Learn more about getting the startup capital for food trucks.
    • Franchises: You’ll need to demonstrate up to $7.5 million net worth for starting a Panera franchise.

    While the low end is just for a small bakery to buy the materials, those who are really interested in owning a bakery should expect $2-5K just for the business licensing. Depending on the scale, you can get by with the minimum, or go all out.

    Learn How to Price Your Baked Goods

    To run a profitable business, you must figure out how much it costs to make each one of your baked goods. This allows you to price items for the highest profit margin.

    It's easy to lose money on a product if you don't know exactly how much it costs to make it. This includes ingredients, labor, packaging, and even cooking time to account for the electricity (or gas) running the oven. Most restaurant managers aim for the cost of serving to be approximately 1/3rd of revenue.

    Before you open, call local vendors to price their supplies, and then determine the cost of production. Consider this pricing guide based on information from the Houston Chronicle.

    PRICING GUIDE FOR BAKED GOODS

    Click through the 10 steps below to calculate your costs.

     

    [su_tab title="1" disabled="no" anchor="" url="" target="blank" class=""]Calculate the number of batches you can get from a bulk ingredient. For instance, if the recipe calls for 8 ounces of milk and you buy your milk in gallons, here is the formula: 128 oz / 8 oz = 16 batches[/su_tab]

    [su_tabs][su_tab title="2" disabled="no" anchor="" url="" target="blank" class=""]Divide the cost of each ingredient by the number of batches. If a gallon of milk costs $4, this is the formula: $4 / 16 batches = $0.25 per batch for milk Complete this step for each ingredient in a recipe. [/su_tab] [su_tab title="3" disabled="no" anchor="" url="" target="blank" class=""] Add together the cost of all ingredients per batch.  This will calculate the total cost of ingredients for an entire recipe. [/su_tab] [su_tab title="4" disabled="no" anchor="" url="" target="blank" class=""] Divide the cost per batch by servings per recipe.  So, if the total cost per recipe is $5 and makes 10 servings: $5 batch / 10 servings = $0.50 per serving [/su_tab] [su_tab title="5" disabled="no" anchor="" url="" target="blank" class=""] Add in other items (cupcake liners, packaging, etc.).  For example, cupcake liners cost $5 per 100, so each cupcake liner costs $0.05. $0.50 per serving + $0.05 liner = $0.55 per serving [/su_tab] [su_tab title="6" disabled="no" anchor="" url="" target="blank" class=""] Add in the cost of equipment usage.  Here, divide the cost of equipment by the number of days of its expected usage and then divide that number by the average number of servings you will produce per day. For instance, for an oven that costs $10,000 and lasts for ten years (1825 days) and bakes 500 servings per day, this would be the formula: $10,000 / 1825 days = $5.48 $5.48 / 500 servings = $0.01 Repeat for each piece of equipment. [/su_tab] [su_tab title="7" disabled="no" anchor="" url="" target="blank" class=""] Figure operating costs. Do the same as above to include all operating costs. This includes utilities, storage space, rent, advertising, printer ink, labor, etc.  For instance, if your monthly electricity bill is $500, then divide that by 30 days and the estimated 500 servings per day: $500 / 30 days / 500 servings = $0.03 Again, do this with all of your operating costs and add all of that in. [/su_tab] [su_tab title="8" disabled="no" anchor="" url="" target="blank" class=""] Divide your per-serving cost by the number of expected items sold.  Bakeries must be realistic about the fact that they will not sell out of everything in their shops, and perishable items must be counted into the cost of doing business. If you think that you can sell 75% of your items, and your per-serving cost is $0.50, then your formula is this: $0.60 / 0.75 = $0.80 You must increase your per-item cost to $0.80 to account for unsold baked goods. [/su_tab] [su_tab title="9" disabled="no" anchor="" url="" target="blank" class=""] Add in your profit margin.  Here, add 100 to your desired profit margin and then divide that number by 100. For instance, if you need a 200% profit margin: 200% + 100 = 300 / 100 = 3.0 Then multiply the cost by your profit margin to determine the per-serving price like this: $0.80 cost x 3.0 profit margin = $2.40 per serving price [/su_tab] [su_tab title="10" disabled="no" anchor="" url="" target="blank" class=""] Compare prices. If this per-serving cost is similar to what other local bakeries are charging, then you're on the right track. If it's under, then you should up your price. If your cost is higher, reconsider if this is a product you can sell at a profit. [/su_tab][/su_tabs]

    Track Your Finances

    Along with determining costs, you need to decide on a way to keep track of your business finances. One option is to hire a trusted bookkeeper or accountant to free up your time to run the business.

    There are also several options available for small business accounting software including Quickbooks, Freshbooks, Wave, Xero, and more.

    Step 7. Create a Bakery Business Plan

    A detailed business plan is helpful when starting a bakery.

    Consider these components when writing your bakery’s business plan:

    • Executive Summary: contains the most important points from each of the following categories
    • Company Overview: a description of your business
    • Market Analysis: includes pertinent information from your market research
    • Business Offering: a list of the products you will sell to your customers
    • Management: includes business partnerships, number of employees, who will run the various areas
    • Marketing Plan: information on how you plan to reach customers, advertise, etc.
    • Financial Projections: predictions for the financial success of your business

    The Small Business Administration offers this business plan writing guide. We’re also partial to our business plans created by Mike Andes or Brandon Boushy to help you create a bakery business plan.

    Is a Bakery a Profitable Business?

    Baking can be very profitable if you work hard and provide the best products for customers. Depending on various factors,  bakery owner salaries range from around $17K to $71K per year.

    These statistics include tiny home bakeries, so there's potential for earning much more!

    Step 8. Create a Business Entity

    With a business plan in place, it's time to create a legal company. Register your business at the federal and state levels and establish a legal structure. It's possible to register online.

    Choosing a business structure (Limited Liability Corporation, Sole Proprietorship, Corporation, S Corporation, or Partnership) can be complicated if you're not familiar with the process.

    The IRS has extensive resources on business structures, but it’s best to work with an accountant and/or business attorney to maximize your legal and tax benefits.

    Typically, a bakery will be set up as a Limited Liability Corporation (LLC) to avoid exposing the owner's personal assets to legal action (like a slip and fall in the bakery).

    Step 9. Secure Funding

    If you have personal savings available to start your business, that's fantastic! But you may need to borrow a portion of your startup costs until it becomes a viable business.

    If you only have around $50,000, but want a larger cushion at $100,000, you may get a business loan. However, you must provide viable financial projections that show your ability to pay back the loan.

    As P.D. said,

    [su_quote]If you make a good business plan and the lenders buy into that, you can get funding.[/su_quote]

    Consider these different options to secure funding for your business, as suggested by the Small Business Association:

    Venture Capital Funding

    If you can find an angel investor who believes in you and your plan, this type of funding can be effective.

    However, it means shared ownership, which many entrepreneurs are not super excited about. But it also lowers risk and prevents borrowing money.

    Consider this video we've created about Venture Funding.

    Crowdfunding

    Another way to avoid a loan is to raise the money from many people who invest a small amount of money.

    Typically, investors get something in return, such as advertising credit, or gifts and other perks. Several online platforms host crowdfunding campaigns.

    Business Loan

    The amount and interest rate on business loans varies significantly. You can try for a loan through a local bank, as well as through the government-assisted loan programs with the SBA.

    Securing this type of funding requires a business plan, financial projections (usually for 5 years), and expense sheets.

    Friends and Family

    If your friends or family are interested in your project, you may find you can borrow the funds from someone you know.

    How to Start a Bakery Business With No Money

    If you want to start your bakery on a shoestring budget, that's great! As mentioned above, you can save a ton of money by starting in your own home and by selling to friends and family.

    Another option, if you have good credit, is to leverage a zero-interest rate period on a credit card. It's risky but possible to use the zero-interest period to start your business and then pay the card off before the interest kicks in.

    Note: Have a solid business plan in place if you're thinking about this option.

    Step 10. Develop a Marketing Plan

    When you invest in starting a bakery, make sure customers can find you!

    P.D.'s strategy for getting new customers is based on Social Media Marketing, like these recommendations from Neil Patel. He outsources a marketing company to run his Instagram, Facebook, and other profiles.

    They focus on letting customers know about new product releases and any interesting news.

    [su_quote]These days everyone is on their phone![/su_quote]

    You can get your name out there and draw in customers in a variety of ways, including these options:

    Traditional Advertising

    This includes print ads, billboards, radio, flyers, and going door-to-door.

    Social Media

    Initially free to use, you can also purchase additional social media ad options. It's possible to outsource your social media marketing by hiring a professional marketer. Find a professional to help with this through Fiverr or Upwork.

    Press Releases

    Besides social media, don't forget about print and online newspapers. Depending on your location, your local paper may print your bakery opening as business news when you present it to them as a press release.

    Coupons

    Consider placing coupon ads in a local paper. To offer bounce-back coupons (used on a return visit), use an online tool like Canva to design them, then have them printed locally. Many bakeries or coffee shops have loyalty cards designed and printed this way.

    Is It Hard to Open a Bakery?

    Opening a bakery is hard work, but it is worth it! According to P.D.:

    [su_quote]There's nothing you can't learn if you have the right mindset and the right attitude. You need to be open-minded. Keep the right mindset. Stay the course, do what you have to do, keep at it. Eventually, things smooth out and you come out on top.[/su_quote]

    Step 11. Purchase Equipment

    You've found your space and secured funding. Now you must prepare your kitchen and dining area to bake and serve the best products.

    What Equipment Do I Need to Start a Bakery?

    Reliable equipment is essential for any commercial kitchen. Purchase your equipment online or locally. Your bakery equipment list for your commercial kitchen should include:

    • Ovens – Commercial-grade ovens can be extremely pricey but are a vital piece of equipment for your business. P.D. says his ovens cost around $100K each brand new. Many bakeries choose to lease larger equipment to save on startup costs.
    • Mixers – Large capacity stand mixers, with special dough hooks for kneading bread.
    • Refrigeration – For storing your perishable ingredients such as milk and cream.
    • Tables/Workspace – Depending on the type of baking, tables may be necessary for decorating cakes or for packaging products.
    • Storage – A place to store your ingredients prior to use, and for storage of packaging, or other items. Carts with shelves may be useful for cooling baked goods fresh out of the oven.
    • Dining Area – Tables, chairs, and a counter for the retail area are all important aspects of your bakery.
    • POS System – One critical point for any business is how to let your customers pay. A Point-of-Sale system is vital to your business. When you can choose one that links well with your accounting software (mentioned above), it's even better!

    Step 12. Hire Staff

    For a retail or wholesale bakery business, qualified employees working in the kitchen are the backbone of the business. Bakeries open very early, and it is essential to have reliable employees willing to bake bread at four in the morning.

    If you're running a cafe-bakery, counter help and possibly servers are a necessity. They act as the front line for providing great customer service that ensures return business.

    Here are some sites where you can post jobs and find qualified candidates:

    Finding top talent in food service is no simple task, so go beyond traditional job hiring sites like Indeed. Instead, reach out to local culinary schools and food programs (community colleges) to secure reliable talent with interest in the industry.

    According to P.D., in taking care of your staff, you don't want to skimp:

    [su_quote]I tell them to make sure that your people are taken care of, and the rest will be fine. You only have so many hours in a day. You'll burn out if you're not careful. It's not worth stressing yourself out.[/su_quote]

    Step 13. Build Your Business

    Once you've started baking, pursue continuous growth for your business. That means setting goals and making plans to find and keep customers.

    P.D. says you should ask yourself a simple question:

    [su_quote]I want to grow 10% every year. What do I have to do?[/su_quote]

    Here are some other questions to ponder on growth:

    • What should I do differently or better to gain new customers and keep existing ones?
    • Is there room to add new products?
    • Would a customer loyalty program help our bottom line?
    • What does our marketing data show?

    Brainstorm and research ways to please your customers and then execute the best ideas.

    According to P.D., wholesale products are one of the best ways to grow a bakery business. They provide large profit margins without a large investment.

    It may mean running the ovens a bit longer or arranging for more deliveries, but it's a steady way to increase revenue without a lot more work.

    P.D. says that with samples in hand, cold call restaurants with whom you want to do business and let them try your products. If your product is of outstanding quality, it should sell itself. But you must get people to try it.

    [su_quote]I would throw a bunch of samples in my car and just go to a bunch of different restaurants and drop off samples and ask them. Look at their menu, whether they're serving hamburgers or if they're a sub shop. Give them hamburger buns or baguettes for their sandwiches. And when they like the product, they call and they're ready to order.[/su_quote]

    What Are the Biggest Mistakes When Opening a Bakery?

    P.D. stated that one of the biggest mistakes in opening a bakery is not finding and keeping the best employees. With 36 full and part-time staff, P.D. offers this insight:

    [su_quote]Employees are what you need for your business. You can't be everywhere, so you have to put trust in your people and take care of them, then they'll take care of your business.[/su_quote]

    Conclusion

    If you can already smell the heavenly croissants baking in your oven, then it might be time to get started with these steps on how to start a bakery! Follow our guide to overcome many of the hurdles beginning entrepreneurs and bakers face. 

    With planning and perseverance, you'll be serving customers and raking in dough (get it?) like P.D.

    If you were thinking about starting a bakery, would you start a home bakery, wholesale, or food truck bakery? Let us know in the comments below!

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