Written by Lan Nguyen

Dina Gan has always loved making things. In college, she designed offbeat, inexpensive jewelry and sold it around campus. But it wasn't until she moved from New York City back home to Baltimore that she once again started to make one-of-a-kind pieces as well as oven mitts and handbags. And in April, she launched Madebydina.etsy.com with the help of Etsy.com, an online marketplace that specializes in handmade goods.

Building a company from a cherished hobby sounds easy enough. After all, according to the nonprofit Craft & Hobby Association, the industry is $31 billion strong, with the top five selling crafts being scrapbooking/memory crafts, arts and drawing, other painting and finishing, home décor painting/accessorizing/finishing and woodworking. But experts say starting a crafting business takes some planning. Here's how to do it without losing the passion.

Honesty Is the Best Policy

Take a hard look at your products. Are they items you would pay money for? Turning a hobby into a money machine requires not only dedication but also the skills of a professional. Just because it's handmade and looks homey doesn't mean it shouldn't also be well crafted and designed.

Don't be afraid to take your pieces to boutiques and galleries you admire and ask their opinions. Says Kathie Fitzgerald, author of Country Living Crafting a Business: Make Money Doing What You Love (Country Living), "You need to take them out and show them to people who are not your friends and family. You need a cold-blooded assessment of your product."

Pricing Can Be Tricky

Ling-Yen Jones has taken many classes in her 15 years as a jewelry designer to figure out how much her pieces should cost. Why is it so hard? Not only does the price have to cover the cost of your raw materials, it also represents your salary. Your time is money, too.

Jeweler Laurie MacAdam agrees, adding, "You have to produce everything so you have to pay yourself for producing it. If you are going to go wholesale, you have to count in things like cost of electricity, studio rent, any other overhead. So typically, you need to add up your per-hour rate and the cost of your materials, then multiply it by three. If you are doing the art shows and retailing, you have to sell this yourself so you also have to pay yourself as if you hired someone else to do it."

The better your reputation, the more you can charge. After all, crafting can be serious art. But given these tougher economic times, says Craft & Hobby Association CEO Steve Berger, successful craft retailers are ones who "look to their key strengths that separate them from the big box stores and the other local competitors, and focus on providing those services to their customers."

Where's the Market

Besides thinking about your audience, you need to figure out where your designs will be available. Will you go the wholesale route or travel-show circuit? Wholesale can be easier because you're selling year round to retailers. You also save on time and travel expenses since you won't need to take time off to travel to a show and set up a booth. You also don't have to worry about getting approval from the organizers to even pay for a booth. Most shows are juried, say the experts, and juried fees can start at $25. But the drawback: You miss the interaction with customers.

For a start-up, experts recommend trying to keep your feet in both areas. And given the rising cost of certain raw materials, gas and show fees (which can run several hundred dollars per event), Laurie MacAdam plans to restart her wholesale business.

Don't Forget the Internet

Given the popularity of e-retailing nowadays, a Web presence is a must. To keep costs down, Gan used Etsy.com to set up her business. The Web site not only helped her quickly create an e-storefront, it also helped her figure out what she wanted to produce.

"You can see how many items people have sold, which tells you if there is a market for the product or not," says Gan. "You can also see what sold that second and also what remains undiscovered."

Cost: 25 cents to list one item, while setting up an account is free. But be sure you are pretty handy with a digital camera or know someone who is. Since storefronts tend to look the same, it's your products that will set you apart. Another trick is to not post all your items at once. Update periodically so clients feel like you have something new to offer all the time. Specialize and make the most of the tag features. "This lets you list up to 14 terms that describe your item so buyers can find you when they type in a certain word into the Etsy search engine."

Controlling Growth

Another hard question to ask yourself is what kind of business you want to be. If your plan is to produce one-of-a-kind pieces, how are you going to fulfill demand? After all, there's only one of you. To get around this issue, says author Fitzgerald, the founder of Confetti Cakes decided to make TV appearances and write cookbooks.

Time and Money

So how much is it going to cost you?Most of the 30 women Fitzgerald profiled in Country Living Crafting a Business started with as little as $2,000. Yet, all launched their companies while holding down another job. Because, no matter the craft, you need to build up inventory. That takes time.

MacAdam lived with her mom in part to cut down on expenses and devote herself to her jewelry line. She recommends making two years worth of products before launching because "if you don't have enough stock, then you don't have anything to sell."

Have a story idea? Email Lan.thestreet@hotmail.com.

Lan Nguyen is a freelance writer based in New York City. She has written for the New York Daily News, The Wall Street Journal, Worth magazine and Star magazine.

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