Your Hobby-to-Small-Business Move: 6 Ways to Guarantee Success

Your Hobby to Small Business Move  |Updated November 21, 2025

Turning something you love, like knitting, crocheting, sewing, or any creative hobby, into a real business is incredibly rewarding. But the jump from “I enjoy making things” to “People pay me for what I make” takes planning, strategy, and a realistic financial foundation. As someone who teaches and has owned businesses both online and offline, I know firsthand how exciting (and overwhelming!) this transition can be.

Below are the most important things to think about when you’re ready to take your hobby to the next level, whether you want a side income or a whole, thriving small business.

A woman is working at a laptop with knitting and yarn beside her

Build a Cash Reserve

Most small business owners start their companies with a cash deficit. Applying for small business loans can be a helpful way to get your operation off the ground, but paying them back promptly is essential. If you have business loans, keep up with payments and pay extra if it makes sense to (to reduce interest).

Build a Realistic Cash Reserve

Experts like SCORE recommend having 2–3 months of business expenses saved, especially for new entrepreneurs. This includes:

  • Yarn and materials
  • Website fees
  • Shipping supplies
  • Monthly digital tools
  • Emergency costs

👉 Tip: Start small—add 5%–10% of every sale into a savings account for business use only.

Charge What You're Worth

Growing a part-time hobby into a business is exciting, but there can be downsides. Many small business owners undervalue their time and effort because the point of a hobby isn't to make money.

It's essential to evaluate your product or service and assign it a price that reflects your time, expertise, and supply costs. Calculating profit margins is complicated, but doing the math can maximize your earnings and help you plan for growth.

You can also conduct surveys to determine how to improve your sales and marketing. When you incentivize participants, you can increase survey response rates, engagement, and response quality, yielding more valuable insights.

By using these user research incentives, you can encourage participants with cash, gift cards, prepaid cards, or a charitable donation in their name.

Crafters who produce physical products for retail sales notoriously underprice themselves. A good pricing formula is:

Materials + Time + Overhead = Wholesale Price
Wholesale × 2 = Retail Price

Research your competition on Etsy or Ravelry, and keep track of:

  • Yarn cost
  • Time per project
  • Packaging + shipping
  • Platform fees

Key fact: Most profitable craft businesses aim for 30–50% profit margin.

Utilize a Recurring Revenue Model

In small businesses, every dollar counts—but what if you could guarantee dollars months ahead of time? 

This is one area where modern craft businesses are thriving.

Great recurring models for knitters/crocheters include:

  • Monthly pattern clubs
  • Yarn subscription boxes
  • Membership communities
  • Exclusive pattern libraries
  • Seasonal workshops
  • Patreon-style tiers

Recurring revenue may not work the same for all businesses, but some creativity can help you maximize recurring profit. 

Build Passive Income Streams

Passive income is perfect for hobby-based businesses. Top options:

  • Printable PDFs
  • Knitting or crochet patterns
  • Mini-courses
  • Stitch dictionaries
  • eBooks
  • Affiliate links
  • Ad-supported tutorials
  • Repeat-use templates

Platforms to sell on:

  • Etsy
  • Payhip
  • Shopify
  • Ko-Fi
  • Ravelry
  • Teachable

For crochet businesses, digital patterns are one means of passive income, as you create the pattern one time and sell it forever. Explore other possible digital products to help you round out income streams.

Plan for Possible Cost-Cutting

While investing in your business can improve sales, having a bare-bones backup plan can help avoid financial disaster. Brainstorm ways to cut costs if needed and determine when to enact your plan based on expected earnings and expenditures.

For example:

  • Keep materials and supplies organized so you can check inventory and equipment at a glance.
  • Research product "dupes" (cheaper alternatives) to your regular supply staples.
  • Explore alternate supply sources (including online and non-local if they are more affordable).
  • Denote high material cost products or services to pause when profit is low.
  • Set up sales for slow-selling products (sold at a discount is better than sitting on a shelf) or items with slight imperfections.

This plan can also help you continue operating if you're unable to source your regular supplies or equipment to keep up with demand.

Establish a Business Structure

Choosing a business structure is the first step in legitimizing your new venture and separating your personal finances from the company. Forming an LLC, for example, limits your liability, offers tax advantages, and gives you flexibility. You can even use a formation service to skip lawyer fees.

Most crafters start as:

  • Sole proprietors (default)
  • LLCs (if you want liability protection)

Consider:

  • A dedicated business bank account
  • Bookkeeping software
  • Separate PayPal or Stripe account
  • Tracking expenses for taxes

Fact check: LLC laws differ by state. The U.S. SBA confirms that LLCs offer liability protection but do not replace insurance.

From creating long-term profit to choosing a business structure, small business owners have a lot to think about when monetizing a hobby. With this guide, you're off to a solid start—and a financially solvent one.

Build a Brand Identity

You will need certain things to build your brand authority

  • Business Name
  • Logo
  • Color palette
  • Photography style
  • Social media aesthetic
  • Website Address

This builds trust and helps your patterns or products stand out.

Protect Yourself (Business Insurance)

For craft businesses, consider:

  • General liability insurance
  • Product liability (if selling handmade items)
  • Home-based business coverage
  • Copyright education (protect and respect designs)
  • Consult experts in any areas you feel you are not qualified to handle (Attorneys, Accountants, Tax Experts)

Marketing Tips for Modern Craft Businesses

  • Pinterest is still essential
  • TikTok and Instagram Reels show process videos
  • A simple email list grows repeat buyers
  • SEO-friendly blog posts 
  • YouTube

Frequently Asked Questions 

Do I need to form an LLC to start selling?

No. Many crafters begin as sole proprietors. An LLC offers liability protection, but it’s optional and varies by state and country.

How do I know what to charge for my handmade items?

Use a formula that includes materials, time, overhead, and profit margin. Compare similar products online, and don’t undervalue your expertise.

Materials + Time + Overhead = Wholesale Price
Wholesale × 2 = Retail Price

Research your competition on Etsy or Ravelry, and keep track of all your expenses on a spreadsheet or accounting software.

What is the best place to sell knitting or crochet items or patterns?

Popular platforms include Etsy, Ravelry, Payhip, Ko-Fi, and your own website. Your audience size and product type should guide your choice.

Do I need a separate bank account for my hobby business?

Yes, if you want accurate records and easier tax preparation. Separate accounts also strengthen your financial professionalism.

How much should I save before turning my hobby into a business?

Aim for 1–3 months of business expenses. This buffer helps with slow periods and unexpected costs. Estimating what fees you may incur can be challenging for someone just starting.  For example, here is an abbreviated list of possible costs: 

  • Materials & tools
  • Branding & packaging
  • Website + hosting + email
  • Platform fees (Etsy, Ravelry, Payhip)
  • Payment processing fees
  • Business licenses
  • Bookkeeping + accounting
  • Photography equipment
  • Marketing/advertising
  • Shipping & postage
  • Craft fair fees + displays
  • Insurance
  • Education + courses

Conclusion

Turning your hobby into a small business doesn’t require a big budget or a huge following, just smart planning and an understanding of what it truly takes to run a creative business. When you build a financial cushion, price your work correctly, explore passive income streams, and choose a business structure that suits your goals, you set yourself up for long-term success.

Your creativity is already your superpower. The steps in this guide will help you pair that creativity with smart business strategy so you can grow confidently and sustainably—on your own terms.

Author Bio

Mariah Flowers created Gift Guides For All because like so many others she loves giving but often has trouble picking out the right gifts for her loved ones. With her website, she explores the beautiful world of giving and helps visitors find the perfect ways to celebrate everything and everyone.