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For many people, creating a business from their passion is a dream come true, but actually doing it is another matter. You may have an incredible creative talent, but keeping on top of the business side of things will be the key to making a success of your company, so if you want to turn your clothes making hobby into a job then there are a few simple ways to give yourself the best chance of success.

Where to sell your work

For some, friends and family are their best customers, so selling through word of mouth, Facebook ads or via other social media brings in enough business for them to cope with, at least at first. If you can build up a reputation amongst your key client base then you can save on all the costs of marketing and advertising which can represent a significant saving when you are just starting out. It is important to make sure that you are realistic about your pricing when it comes to this market – the tendency is to charge too little and end up working for almost nothing or worse, losing money.

Many people who start up a creative business choose to focus on selling their items on established sites which cater to those of a crafty persuasion. Etsy is one of the more popular of these sites and it is designed specifically to help people sell handmade items. With around 30 million users, it represents a huge market place and you can list your products on it for relatively low prices so it is a great way to introduce your products to a sympathetic market. You can have a shop with all your available items in it, so that people who like what you do can see more of it, and the percentage taken by the website when an item is sold is minimal, so you can expect a good deal.

If you are intending to sell homemade clothes only as a side-line, then an Etsy shop, or listings on other third party selling websites might be enough for you, but if you do want to create your own website then don’t be put off if you don’t have any experience. There are a number of websites which will help you to create a fully functional website through a step-by-step process and you won’t need to know how to write code or any programming. You can choose from a range of styles and themes, add your own images and text and include things like a checkout page, newsletter sign up and links to your social networking sites.

How to get started

Once you have made the decision that you want to sell homemade clothes, the first thing to do is register as self employed with HM Revenue and Customs. This is a relatively simple process which can be done online or over the phone, and you will receive information from HMRC about how to access their online portal which will allow you to submit your tax return and pay any tax due all on their website. If you already have a job and want to earn some extra income by selling homemade clothes then you will still need to register as self employed as you will need to declare your additional income to the taxman in order to avoid attracting fines. Even if you don’t make enough profit to attract tax, you should still report your earnings to HMRC in order to ensure that every aspect of your business is accounted for officially.

You will need to keep track of your expenditure on materials and any equipment that you use in your business as well as having records of the income you make from it. You will need these for the day-to-day financial management of your business, but they will also be vital when it comes to completing your annual tax return as these are the figures which will help you to ascertain your total income which will be used to calculate how much tax you owe.

How to make money

Establishing a price structure will be one of the first things you need to do when you begin selling your homemade items. This will need to be based on the cost of the materials you are using and the time you spend on each item, plus a margin to take into account the costs of running your business and the rate of tax that you will pay on any profit. You should have an idea of how long it takes you to create your items so that you can ensure you aren’t undervaluing your time, but if you do this around your job then it might help to keep track of the hours you put in.

Research that other people are charging for similar items in order to place yourself in the market – it is always good to see what the competition are doing so you can also find out what’s popular and which items seem to be selling well in order to tailor your offering in a way that makes it most likely to help you turn a profit. It is also worth putting together a business plan which includes some goals for the future of your business such as how much you would like to earn, whether you see yourself branching out into other areas or perhaps starting to do specialist items such as wedding dresses or commission pieces. Whatever your vision for the future of your business, planning could make the difference between achieving your goal and falling at the first hurdle.

Managing your business

Once you have established your homemade clothes business and started to turn a profit, you may wish to think about expanding. This might mean buying more advanced equipment, hiring someone to do some of the tasks that you don’t have time for or just thinking more about how you can maximise your profits. For some, this means a change from operating as a sole trader to forming a Limited company, and people usually make such a move in order to benefit from the tax planning opportunities as well as for the security of limiting their personal liabilities.

If you haven’t already got an accountant, making the decision about whether to begin trading as a Limited company is a good time to think about hiring one. An accountant who has experience of working with the self employed and small businesses will be able to offer you advice and information about how trading as a Limited company could save you money specifically. But, in general, if you are earning £25,000 or more a year then you will almost certainly be able to save money trading as a Limited company. There is a little more regular administration involved in running a Limited company, but for most people this is easily outweighed by the savings they make, particularly when it comes to tax planning.

Some of the main savings can be on your tax bill, because as the director of a Limited company you can pay yourself a fixed salary whilst keeping some money in the business or withdrawing it as dividends. If your earnings are likely to be irregular, with some years taking you into the higher tax bracket and others not, then operating as a Limited company will offer you the chance to keep some money in the business and average out your earnings when it comes to paying tax. This could reduce your liabilities and ensure that you are only paying what you need to rather than moving between tax brackets every time you complete your tax return.

Your accountant will be able to help you identify areas where you can make savings on your tax bills, your National Insurance contributions and in any other area of your business expenditure. They will be able to help you to identify any outgoings which you can write off as expenses against your profits, help you plan for the future and provide you with support and advice to help you make your business successful. Whichever route you choose for your homemade clothing business, having a specialist accountant will help you to save money in both the short and the long term, as well as ensuring that you keep all your financial affairs up to scratch.

Now that you know more about starting your own homemade clothes business you might also find the following pages of use:

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