A lot of us go start our own handmade businesses because of the rewards.

We get to channel our creativity and our passions through it, we get to work within the comforts of our own homes, and we have the potential to earn more with it.

Yes, running a handmade business can be incredibly rewarding.

But, amidst the excitement of crafting and selling, managing your finances – an incredibly important part of the process – can feel overwhelming a lot of the time.

So, in this blog post, we’ll tackle five common financial challenges that artists and makers like ourselves face on a day-to-day basis.

Whether you create one-of-a-kind jewelry or hand-painted pottery, this has tons of relevant information to help you manage your money effectively.

We’ll discuss how to handle fluctuating income, determine fair pricing for your work, and a lot more.

These are all essential parts of building a strong financial foundation for your creative business.

By the end of this, you’ll have practical tips to get your finances organized and your business on the path of success.

Challenge #1: Managing Uneven Income

Unlike a stable 9-to-5 job, where you receive a consistent paycheck each month, your income as a maker running your own business will vary from one month to the next.

This can make budgeting so difficult.

Imagine a month where you have a successful craft fair and your sales turn out fantastic.

Then the next month becomes much slower with fewer sales – and, sometimes, what you earn is barely enough to cover your necessary living expenses.

And there’s that fear of never knowing when the next sale is going to come in, right?

This uncertainty evokes feelings of anxiety and insecurity, often leading business owners to simply give up and go back to a stable 9-to-5 job.

This is one example of why we get that roller coaster feeling with our business.

The feeling that none of us really like, even if you’re into roller coasters at theme parks.

So here’s my favorite tip on how you can prepare for these ups and downs in business:

Set aside some savings.

Take a portion of your income from good sales months and place them into a savings account specifically designated for your business.

This creates a buffer for slower periods, so you don’t have to worry so much about unexpected financial gaps.

Friendly tip: check with your bank to see if they have any software features that can help you automate this process.

You basically want to set a savings goal and create a process that automatically transfers a specific amount from your checking account to your savings account each time you make a sale.

Of course, if automated banking features are not available or preferred, you can manually transfer funds into your savings account on a regular basis. That’s totally fine too.

But just make it a part of your routine so you ensure consistent and disciplined saving habits.

With it, you’ll feel so much better about your finances.

Challenge #2: Pricing Your Work Confidently

It’s important to price your work fairly, both for the business and for yourself.

You need your business to be sustainable enough and you need to pay yourself for the work you do.

Problem is, many makers undercharge for a lot of reasons.

One being because they don’t consider all the costs involved from the production process down to the moment you make the sale.

Here are some of the things you need to factor in when determining the price of your handmade products:

• The cost of materials – Compute the amount of money you spent buying everything you use to create your piece, from the raw materials themselves to packaging and shipping supplies. Accurately tracking these expenses ensures that they are properly accounted for in your pricing strategy.
• Your time – Consider how many hours of work you put in just to create each item. This includes not only the time spent on actual production but also any additional tasks such as design, preparation, and packaging. Assigning a value to your time acknowledges the skill and effort invested in creating your products.
• Your desired profit margin – Determine how much profit you aim to make on each sale. Your profit margin should not only cover your expenses but also contribute to the growth and sustainability of your business. 

There are a lot of online tools available to help you calculate fair prices for your products.

These tools take into account your material costs, labor hours, and desired profit margin to generate a recommended price point.

I have a free pricing calculator you can get.

It’s helped so many handmade business owners find their sweet spot in pricing, and I hope it will help you too.

Challenge #3: Tracking Business Expenses

Keeping track of your business expenses is crucial for understanding your overall financial picture.

These expenses include a variety of things, and it’s important to track and manage them all.

Some common business expenses include:

• The cost of materials your purchase to create your products
• Any marketing or advertising costs you incur, such as social media promotion or booth fees at craft fairs
• The shipping supplies you use to send your products to customers
• Business-related subscriptions or memberships
• Phone and internet costs, but only if you use them primarily for your business

To stay organized with your expenses, here is a great tip I can give you:

Develop a system for tracking your expenses that works for you.

You can use a simple spreadsheet you update manually, a dedicated notebook where you keep receipts and transaction logs, or a business expense tracker application to automatically import transactions from your bank accounts and credit cards.

I personally like using WaveApps. It’s totally free to use, and it’s got an easy and smooth interface as well.

You connect your business cards and bank accounts to it and it automatically pulls in all your business related transactions.

You will still need to go in and manually categorize those transactions though.

This categorization allows you to identify patterns, pinpoint areas of high expenditure, and make adjustments as needed.

Whatever method you choose, the important thing is to choose one that you’ll use consistently.

Consistency is key to ensuring that no expenses slip through the cracks and that your financial records remain accurate and up-to-date.

Staying organized with your expenses helps you see exactly where your money is going.

Plus, it will help you make informed financial decisions for your business.

For example, if you see that you’re spending a lot on shipping materials, you might want to find a more cost-effective supplier.

Analyze where your money is going and identify areas where your expenses can be reduced.

Challenge #4: Setting Financial Goals

Once you’ve got a handle on your income and expenses, it’s time to set some financial goals for your business.

Having goals keeps you motivated and focused on growing your creative business.

It may be good to ask yourself: Where do you want to be in 5 years? In what ways do you want your business to grow?

There are a lot of things to consider when setting your own business goals, but it all boils down to what YOU want.

Here are some ideas on what goals to set:

• Short-term goals might be saving for a specific piece of equipment for your production or attending a business class
• Long-term goals could be increasing your sales by a certain percentage or expanding into a new product line

The key is to set SMART goals – Specific, Measurable, Achievable, Relevant, and Time-bound.

Here’s how:

• Clearly define what you want to achieve. Be as specific as you can be, instead of setting vague aspirational goals.
• Establish criteria for measuring progress and success so you can track your progress effectively.
• Set goals that are realistic and attainable within your resources and capabilities.
• Align your financial goals with the overall objectives and values of your business.
• Set deadlines and timeframes for achieving each goal to create a sense of urgency and accountability.

For example, a SMART goal might be: “Increase online sales by 20% within the next 6 months.”

Without those goals, you’ll just move aimlessly in your business.

So if you don’t get to where you want to go, don’t be surprised, right?

So set some clear financial goals to work towards and always remember to track your progress.

Learn to enjoy the process too, and you’ll be well on your way to achieving your creative business dreams.

Challenge #5: Separating Business & Personal Finances

A good practice I always tell handmade business owners to always do is to keep business finances separate from personal finances.

This helps you maintain a clear picture of your business’s financial health and where you want your business to be in the future.

Here’s how to do it:

Open a separate business bank account.

This allows you to track your business income, expenses, and profitability more easily.

Use a business credit card, if you’re comfortable managing credit.

This can help you build business credit and keep your personal spending separate.

There are also tax advantages to keeping your business finances separate.

When it comes to tax time, it is so much easier for your bookkeeper and accountant when your finances are separate.

Come tax time, having distinct financial records simplifies the process of preparing and filing tax returns.

It ensures compliance with tax regulations and facilitates accurate reporting of business income, deductions, and expenses.

Keeping clear records of business transactions also provides documentation to support deductions and minimize the risk of audits.

It’ll help you avoid any unnecessary financial headaches down the road.