They say most small businesses never make it to year two. I would argue that a good amount of those who failed didn't have clarity in their first steps.
I wish someone would've sat me down and given me six simple steps. So, if you're stuck and wondering 'what next?' these are the exact steps to take to turn your sewing side hustle into an actual business.
If you're just starting out, you’re not ready to be an S-Corp. So for simplicity's sake, the first step is to file an LLC in the name of your company. Having a Limited Liability Company protects your assets should you ever get sued. Yes, you'll pay fees. Yes, it is worth it, not just financially, but psychologically as well.
I’m no expert, but as it turns out, your neck is on the line for a whole lot when you’re clothing people. My business serves high- profile clients... my lawyer explained it like this:
“Let’s say a rockstar’s management team calls you and asks you to make him a pair of pants, and you do. Somehow, while he’s jumping around onstage, the crotch seam tears - and he isn’t wearing underwear that day.
What do you think is going to happen to your personal assets, should his management team sue you, and you can't pay the damages?”
In my state, it costs $300 to file. Also, if your operation grows to a certain point, you could get caught simply for operating as a business without a license to do so. Trust me on this, get too legit to quit... from the start.
I first started my business on Etsy, back in 2011. While I haven’t sold a thing on Etsy in years, that store is still open. When I filed as a legal business in 2017, I decided to trademark it too. Around the same time that I filed my paperwork, and used my Etsy store as an trademark specimen (dating all the way back to 2011), someone started using the phrase ‘Music City Sewing’ online.
Now most people would say, “what’s the big deal?”
I was going into business under this name, and they were posting their sewing work attached to the same phrase... and their work looked awful. So right as my business is launching, there’s inferior work circulating local social groups using the name of my business... this could be bad for business.
If I hadn't filed for that trademark, I wouldn’t be able to ask them to stop using the phrase in connection with their work. The USTPO can have your back in a lot of other scenarios too, but people skip this step out of laziness. I won’t lie to you - yes, it's complicated paperwork. But it’s not impossible. I devoted two full days to understanding it and filing it myself, and several months later, got a letter from the USTPO confirming my trademark. So there you go - it's not impossible, and much like business, it requires effort. So set aside time to do it, and pay the fee... it’s that important.
I didn’t do this for two years. I wish I could go back in time, walk into my old house, grab past-me by the shoulders, and shake her until she made the appointment. I am still kicking myself over the heartache, the lost time, and above all, the free money I gave the IRS because I wanted to 'save money' and do it myself.
When you're first starting out, you'll have the tendency to keep things as ‘in-house’ as possible to keep costs low. But did you know how much it costs to make payments to the IRS? Or the actual cost of hunting someone down to get them to fill out a W9, two days before the tax deadline... because no one told you they needed one just for seam ripping garments last year?
I spent two weeks of my precious limited time trying to get an answer to a tax question. I finally gave in and called my (now) business manager, who made the necessary calls for me and had my convoluted problem solved in one hour. Total bill: $40. Cost of Sanity: $priceless.
Make the call my friend. You deserve to outsource things that will make you more money. From hired help to tax season, to forecasting your business, accountants are worth their weight in gold. Set yourself up to win - call one in the same town as you and set up an appointment to get a feel for how they work.
Whether it's a monthly flat fee (usually based on your overall revenue) or an hourly charge - it's going to be worth it. To be profitable, you have to learn to focus on the things you’re great at, and delegate the rest to people who can be great at them for you.
Are you selling a product on Etsy, or doing alterations? Whether you’re doing $100 a month in revenue or $100,000, you need to prepare to pay taxes on the money you bring in as an LLC. It’s a lot tougher to stack tax on top of your services later for your clients who’ve been with you from the start. Avoid that awkward conversation later by deciding how you'll charge for tax upfront. Makes sense, right?
Some alterations shops stack tax on top of their alterations, and some build it into the cost. It’s up to you to know where that cash is coming from when quarterlies are due. You'll be paying franchise & excise taxes in accordance to your state's quarterly deadlines. Head to your Secretary of State's website, set up an account, and schedule reminders in your calendar for your personal tax deadlines.
Next, pay federal quarterly taxes. It’s in your best interest to start making those payments, because what happens if you have a windfall but the rest of the year yields nothing? What happens if you have unforeseen expenses pop up in March, right before your taxes are due? You don't want your neck on the line to pay your whole year's worth of taxes in one day - that's crazy. Being profitable from the start requires knowing your numbers, and you won't if you don't pay quarterlies.
When you break your taxes up into bitesize chunks, it feels a lot less like Robin Hood around here. There are plenty of apps that can estimate how much you owe, and even assist you in submitting payment to the IRS. I recommend you set up an app ASAP so you can watch your business numbers grow.
Oh yay, good, finally something I did right. IMMEDIATELY after filing my LLC, I opened a free business bank account. It’s illegal to operate an LLC and not have a business bank account to operate it from. For clarity's sake, this will be the one account you run every payment through.
If I had to do it all over again, I’d start with Azlo - a free banking service that has the small business owner in mind. They're simple and clean, and a solid mobile banking app. Find a bank that's fee free, no overdrafts, and supports the way you plan to do business. For my business, it was important for me to have tool integrations, great customer service, and high check deposit limits.
When I think back to the start, I remember my cute pink and green floral notebook, and how I documented every penny. Times were simple, payment plans weren't needed, and the planner knew everything. These days, various integrations run my books run smoothly, with little effort from me.
You need to choose some sort of payment organization system - and I don't mean a green & pink journal. There are loads of options out there - and whether it’s Quickbooks or Honeybook, you need a way to know your business’s finances at a glance. You will only be profitable if you’re intentional about documenting how the money flows in and out of your account.
So many tools out there come with options for beautiful proposals and invoices, in-depth profit & loss statements, and receipt categorization. Only you know what you need - but personally, my favorite so far has been Quickbooks for Self Employed. It learns the rules (aka you only have to classify a Joann’s purchase as ‘supplies’ once for it to take note for the future) and I'm all about that. This is about finding whatever system works best for you. Whether it’s passing off a fistful of receipts to an accountant monthly, or using a business finance app, this single step will make taxes and monthly P&L statements a breeze.
If you plan to see customers in your workspace, you'll need one of these. Get the application from your County Clerk’s office, fill it out and pay the fee, and boom, you're in business. Throw that shiny thing in a frame and hang it in your shop/workspace! You're ready to see your first customer - congrats!
So now that you're armed with the resources and tools you need, you'll save time and money, because you aren’t having to band-aid things as they pop up. Make your sewing business legit from the get go, and it’ll be your most profitable endeavor yet. If you're thinking you aren't ready for all this, please know...
You deserve the world, and you most definitely deserve to bet on yourself. Take the right steps to make your sewing biz legit, and remember that you can’t get real results without taking massive action. These steps may sound like a costly time-suck now, but it’s the opposite! Getting legal with your business is the fastest way to become profitable.