How I Started My Small Business
Updated: May 20, 2021
When I started out, my pottery practice was a just hobby. It took years for me to actually start Mammoth & minnow as a small business. For a long time, it was something in between.
Making the decision to start a pottery small business selling handmade ceramic home goods and decor was one that I progressed toward slowly but (as I can now see) inevitably. Years ago, I couldn't have known that selling sculpted porcelain vases and wheel-thrown stoneware mugs, which are such simple, personal things, would bring me joy, a sense of accomplishment, and a much-needed outlet for my creative drive. It's also given me the chance to share inspiration, behind the scenes, and life lately via this little corner of the internet. I'd like to share how Mammoth & minnow came to be, and in particular really break down the steps that I took to start my small business. My hope is that it will help someone who stumbles upon this post to take the leap in formalizing their passion project, side hustle, or hobby. As you'll see, the leap doesn't need to be all that big. My biggest lesson learned from starting my business was this: it's okay to start where you are. I'll expand on that below.
Finding What You Love To Do
I first got my hands on clay as part of a Groupon class that my sister-in-law found. It was at a local studio once a week for a few hours. After it was all over, I mentioned in an offhand way to Kev that pottery was something I could see myself getting into, but that I felt I needed more lessons, perhaps at a different studio that offered more hands-on guidance. For Christmas the next year, he gave me a 6-week wheel class at my current studio. This second beginner's class was what truly ignited my love for ceramics, and if he hadn't found the studio and given me that push to take classes again, all of this might never have happened.
I found the classes really effective, and was inspired to take advantage of open studio hours throughout the week to practice, practice, practice. By the end of the 6-week class, I was hooked and I knew that I would stay on as a studio member to continue making pottery. This second set of classes is what made pottery really click for me, and it's where I learned the foundational skills of wedging and recycling clay, centering and throwing on a potter's wheel, trimming, and glazing. One evening when all of the wheels were occupied during open studio hours, I got an impromptu lesson in hand-building pottery as well, and that helped me expand my craft even more.
Takeaways from the origins of M&m are A) investing in classes helped me develop necessary foundational skills to make pottery that I am now proud to sell and B) when exploring an interest, sometimes you need to take multiple classes and try different styles of learning.
To Sell or Not To Sell? Turning a Hobby into Something More
Hobbies are good for your soul, it's a fact. Another fact: not every hobby needs to be monetized. Finding something you love to do is in itself a wonderful thing. By no means do you need to be making money off of it for it to be worth your time. Joy is an end.
Sometimes, you begin to feel entrepreneurial and toy around with the idea of growing a hobby into a business. For me, this occurred after I'd been making pottery for about a year, when my tiny galley kitchen was overrun by pottery, after already having given a number of cracked, wobbly, and sometimes even nice pieces to friends and family. Truth be told I've also always had an enterprising streak in me, and the idea of selling my mugs, ring holders, and coffee scoops came naturally.
However, I didn't run off to file with the state, open a business checking account, and hire a brand consultant. Before formalizing my business, I wanted to test the market, grow my skills as well as what would be my business operations (e.g. shipping system, inventory tracking system), and just generally confirm to myself that it was something I wanted to pursue more seriously in this way.
Start Where You Are
When I say "start where you are" what I mean is that you don't need to have a ton of inventory, a logo or super refined brand identity, branded shipping materials, or even a website to begin selling your handmade goods.
While it's certainly amazing if you can have all of those things and more, the truth is that it's all costly and not everyone has the resources or the risk tolerance for that kind of start-up investment for a new small business.
What worked for me as a next step was to do those things that had no or low barriers to entry. That meant opening an Etsy shop, which for a low cost allowed me to quickly take my ceramics to a world-wide online marketplace. If my pieces didn't sell, I wouldn't be wringing my hands with anxiety over the cost of setting up my store. Luckily, I did begin to make sales, and selling just a few pieces on Etsy allowed me to begin moving inventory as well as get some sense of which designs were popular with shoppers. It's true what they say, that each time you buy from a small business, someone somewhere does a little dance. Seriously. Every time.
I also set up Instagram and Pinterest profiles for my pottery practice, separating these accounts from my personal ones, as they are essentially free tools that would allow me to define and evolve my "brand" and, hopefully one day, act as channels that drive traffic to my product listings.
Another example of starting where you are is that I would package my orders with recycled packing material, using boxes we received at our place. In fact, this is something I still practice today. While I do order boxes in specific sizes and eco-friendly paper "bubble" wrap, I save and re-use packing materials and boxes whenever possible. This helps lower cost and is better for the environment, a win-win. Even though my packages may not always be "pretty" on the outside, I make sure to wrap everything up with care, tying each item with ribbon or twine and always hand-writing thank you notes.
For product listings, I would take pictures with my iPhone and edit them using a free photo editing app. Although it would have been great to have, I didn't hire a product photographer for high resolution images, or spring for a fancy camera. My point is: you can work with what you've got, and upgrade when you can.
Why I Decided To Form a Business Entity
After selling on Etsy for some time, I knew that I wanted to put more time, energy, and attention toward growing Mammoth & minnow. I decided to make it official by forming a business entity.
In my mind, formalizing M&m would force me to be disciplined about collecting the data that would help me to grow my business and allow me to assess sales, year-over-year performance, and expense types. If your business sells goods or services, you have to file sales taxes on a regular basis. You are also required to include your revenue and expenses as part of your annual tax filing, so it's important to track in-flow and out-flow.
Having a business entity would also give me access to business banking, so that I can manage business finances separately from my personal finances. A business checking account would set me up to begin fielding wholesale accounts and business-to-business sales, where buyers may send payments made out to Mammoth & minnow that I would only be able to accept into a bank account titled under M&m rather than my name. I'd made sales of handmade goods to a business in the past (hand-knit baby hats), and from that experience I learned that without a business account, the purchasing company must issue a 1099 tax form to me personally, under my SSN, to account for their spend.
Another, more personal reason that I decided to file was that it was meaningful in a symbolic way to me; it made M&m feel that much more real. It would be my very own venture to nurture.
Do You Need A Business Plan?
Honestly, no. It's great if you've been able to put one together, but it's okay if you haven't. Not having a business plan doesn't mean that your small business is doomed to fail. I would, however, suggest looking at business plan template examples so that you can see the types of questions you may want to be able to answer for your business. (Here's a good resource as a place to start from Shopify, another more geared toward home-based businesses, and another more in-depth guide.)
I think one of the main benefits of taking the time to put a business plan together is that it forces you to organize your thoughts. When writing a plan, you have to articulate your objectives, circumstances, and challenges for the business.
Confession: I still don't have one for M&m. I've taken a look at templates and how-tos and feel that the formats aren't quite the right fit for my maker-owned business. Although I sell home decor items, I regard a portion of my items as ceramic art and design objects (in particular, my one of a kind sculptural vases and other larger pieces such as serve-ware).
I do, however, write a list of goals for my business each year, and revisit the document often to track progress and make edits. My goals aren't solely business-centric and reflect my hopes to grow my craft; my 2021 objectives include such line items as "take on a very challenging commission" and "explore surface finishing techniques." They also include more measurable items such as what I want to restock, as well as administrative items that I want to complete and improvements I want to make to my processes.
Doing Some Research Before Getting Started
My experience will be reflective of the process that is in place in New York State, but some of the below links will be helpful for those in any state. Depending on where you are, your local government should have online resources to help you as you choose the legal structure of your company and take the steps to file the necessary forms and paperwork. Note that you don't need to form your business in the state you reside in (see this short explainer). However, I chose to form by business in-state since M&m's ownership is straight-forward (me!), the out-of-state benefits from filing with a state like Delaware would be negligible for my business activity, and I wanted to keep the process as simple as possible.
I used resources available from the New York State Department of State (DOS), Division of Corporations to select the legal structure (LLC in my case), and used their guide and FAQs to complete the necessary steps for formation. It was worth it to me to use a service such as Legal Zoom or Harbor Compliance to formalize my small business, but you can absolutely file completed forms on your own by downloading a fillable PDF from the forms catalog. Whether or not you choose to use a service, I would recommend reading through these resources available from your state first, so that you get an understanding of the requirements for your type of legal structure beyond the initial filing.
Why I Chose a Limited Liability Company (LLC) As My Legal Structure
In reading about the various legal structures I could select, I felt a LLC was the best fit for M&m. A sole proprietorship was an option, but I would have to also file a Doing Business As (DBA) form (officially called the Certificate of Assumed Name) with the state because Mammoth & Minnow is clearly not my legal name. In addition, a sole proprietorship does not offer any legal separation (i.e. protection) for its owner. A corporation was also an option, but seemed to me to be a better fit for a business with a more complexion structure and activities. I would also have to pay myself a salary if I selected a corporation.
My company is set up as a pass-through LLC, meaning that business gains and losses are reported with my person income on my annual federal and state taxes, similar to the way sole proprietorships are taxed. This was appealing to me, allowing me to keep things streamlined when tax season rolls around.
How to Form A Business - The Nitty Gritty
Here's what's needed to start and maintain an LLC in New York State, how I went about fulfilling each requirement, and how much each step cost me:
Articles of Organization are required to be filed with the DOS. You may find the form on the DOS website forms catalog linked above if you'd like to file yourself without using a third-party filing service. I used a service for this step. I used LegalZoom for this, which cost a few hundred dollars.
Before filing, check with the state that your desired business name is available by searching the Corporation and Business Entity Database. I did this myself at no cost.
Requirements for various tax purposes
Obtain an Employer Identification Number (EIN) if applicable. An EIN is used to identify the business entity (as separate from you, the owner) to the IRS. Based on the resource linked above, I do not need an EIN to operate my business. However, I decided to obtain one around the same time I formed M&m in order to further distinguish the business entity from myself. It will also be necessary if I ever do hire an employee or if any other circumstances change that would then require one. I applied for an EIN myself using the IRS website and it was very easy. It's free to apply for an EIN by yourself, but you can also choose to pay a service to obtain one on your behalf.
Certificate of Authority to collect sales tax. This is basically the state allowing me to charge customers sales tax. With this certificate, I am allowed to collect sales tax and am therefore also required to file sales taxes with NYS on a regular basis. I obtained this certificate myself as well by applying online. There is no cost to applying for this certificate.
Other initial requirements
LLCs in New York require the designation of a Registered Agent to receive business correspondence from the government and legal correspondence. This guide further explains what it is and why an LLC requires one. You may act as your own registered agent, but because the registered agent's address is publicly listed, I chose to use a service instead and I pay on an annual basis. If you choose to use a registered agent service, this could cost approximately $100+ each year depending on the company you choose.
Publication in local newspapers. This is one of the more antiquated requirements for forming an LLC in New York. Once your LLC is formed, you are required to publish notice that you have done so in two newspapers that circulate in the same county in which your business office is located. These newspapers need to publish notice of your LLC once a week for six consecutive weeks, after which you must obtain affidavits from each regarding publication so that you may file for a Certificate of Publication which documents that you've met this requirement. It's a good idea to have your registered agent selected before completing the publication requirement as the business address is listed in the notice. Publication costs for me in NYC ran me about $650 for the two listings. The Certificate of Publication filing fee is $50 on top of that.
Ongoing, recurring requirements
If your business sells goods or services, you must file sales taxes with the state on a quarterly or annual basis. You start by filing quarterly, and after some time may receive a notice in the mail (as I did) that you may instead file annually. I file my sales taxes myself, after having created an account with the NYS Department of Tax & Finance. You can find more information, including filing due dates, here.
Once a year, New York LLCs which have had business activity are required to file form IT-204-LL. The instructions for each calendar year will specify the filing due date, which may be different from when state/federal taxes are due. I have had my tax preparer file this form for me each year, but she told me this year that it's a very simple form and suggested I save some money by doing it myself and mailing it in going forward. The IT-204-LL filing fee depends on the business's gross income for the year and starts at $25.
LLCs are required to file a biennial statement every two years, basically validating key business information such as address and ownership. I complete this filing myself. The biennial statement is filed online every 2 years and costs $9.
As you can see, there are quite a few steps to forming a small business, and these are all on top of the actual work of building and managing that business. It can seem daunting to know where to start, and maybe even more so when you've begun your research and are looking at all of the requirements, but it's very manageable if you take it one thing at a time. Like me, you can hire help to complete some of these steps. You may also choose to file all necessary forms and applications yourself or pay a service to complete everything. Either way, the nitty-gritty of starting up should not be a barrier to you if you've got a big idea or a project you love that you really want to give a go. If that's you, I hope reading about how I did it helps you start your journey - good luck!