Logistics of starting a longarm business by Kris Vierra
Whether you have just decided to start a longarm business or you have been quilting for a while as a hobby and have now decided to start taking customer quilts, there is a lot of preparation that needs to go into setting up a successful business.
You need to advertise, work hard on building your skills, and start establishing a customer base; but, did you also know that you need separate insurance for your business and a tax ID number? Do you know how to set up wholesale accounts or whether you need to charge sales tax on your services?
I’m going to discuss these and other considerations that you might want to investigate before starting your business. This article is by no means meant to cover everything you need to start your business, but rather will give you an idea of the types of questions you should be asking as you set up your business plan. Keep in mind that each state has its own rules you will need to follow and it is important to seek assistance from an accountant and/or legal professional when creating a business.
The first thing that you should do is start by deciding what you want to accomplish with your business. Are you trying to supplement an existing income or do you want this to be your primary job? How many quilts do you think you can accommodate a month? Are you going to focus on custom quilting, edge to edge, or a combination of the two?
You will also need to consider if you want to have set hours when customers can pick up and drop off quilts. It is an easy mistake to make early on when you are really excited that people are bringing you quilts to let them come whenever it is convenient to them. What you really should do is have them come when it is convenient for you. I find that, for me, it works best to have people come one or two days a week for pick up and drop off. I schedule multiple appointments on these days rather than having one or two people coming every day. This allows me to get more work done, as I am not being constantly interrupted.
After you have decided what your business goals are, you need to decide how to set up your business. Do you want a sole proprietorship or should you set up a Limited Liability Corporation (LLC). There are pros and cons to each that you should discuss with your accountant to find out which works best for your situation. At this time, you also need to apply for your tax ID number. In most states, this is simply a matter of filling out a form and can often be accomplished online. Your tax ID number is used for everything from collecting sales tax to setting up wholesale accounts with suppliers. You will also want to discuss withholding taxes with your accountant. As a business owner, you will need to withhold your own taxes, FICA and Medicare. This can be done yearly or quarterly, but you want to be careful to make sure that you are doing it correctly, as the fines can be horrendous. Sales tax is another tax that you will probably need to collect as a small business owner. Almost all states require that you collect for any goods sold, but others, like my home state of Nebraska, also charge sales tax on services. Many states will allow you to pay sales taxes once a year instead of monthly if you ask in advance. This can really help cut down on your monthly paperwork.
Speaking of paperwork, you will want to invest in a good bookkeeping program. There are many different programs available, so look for one that is easy to use and lets you spend more time quilting and less time doing all that essential but boring paperwork. I personally love the Machine Quilters Business Manager, which can be ordered from your local Gammill dealer. It not only handles the financial side of your business, but also lets you create wait lists, work logs, customer databases, and in-take forms for each quilt. Having all of this information in one place is a real time saver. It will also make your accountant happy and save you a ton of time at tax season, if you just get in the habit of setting aside a little time each week to keep it up to date.
I would also recommend using some type of intake form. The database that comes with MPMQ works well. You could even invent your own. Whatever you choose, this tool is invaluable to establishing a professional start to each interaction with customers. It should cover items such as: cost, when the quilt will be finished, what services you will provide, any problems noted with the quilt, and thread choice. This is by no means everything, but it should give you an idea of where to start. I find this form really helps with my out-of-state customers to avoid misunderstandings as we may never meet in person.
This brings us to our next biggie. What should you charge? Some people charge by the inch, whereas others might charge by the yard. I want to give you some things to consider to help you decide on what to base your charges. First, figure out your baseline operating costs. This will include such items as: utilities, insurance, advertising, and machine maintenance. These are relatively stable costs that should be roughly the same each month. Next, figure out how long it takes you to do different types of quilting, i.e. custom or E2E. You will need this information to figure out your labor cost. When you add this to your operating cost, this should give you an idea of how much you need to charge in order to break even. I recommend doubling this number to get the amount you should be charging for your quilting services. Keep in mind that this is your gross income; you will still need to deduct all of your taxes from this amount. This is your charge for quilting only; materials such as batting, backing, and thread should be a separate charge. Also, any additional labor should be an additional charge i.e. turning a quilt, seaming the backing, or fixing seams. If you live in an area that is very competitive or that the attitude is such that charging these separately would hurt your business, then figure them into your overall quilting charge, but make sure that you are still charging for these services. Don’t forget, your time is valuable!
The last thing I want to mention is insurance. Very few home owner’s policies will cover any supplies used for a home business. Obviously, you have a huge investment in your longarm and want to make sure it is covered, but additionally you need to have a policy that will cover your customer’s quilts. Also, make sure that you are covered from a liability stand point if, anyone was injured on your property. Allstate offers a very reasonably priced policy designed specifically for home crafting businesses, but you might also be able to find one through your current home owner’s policy. Just make sure you don’t skip this step as it is extremely important to protect you and your business, especially if you have a sole proprietorship and not an LLC.
This may seem like a lot to assimilate, but it is doable, if you just take it step by step. Start with your business plan and bookkeeping software; then move on to pricing and quilting forms. You can also check with your local chamber of commerce or community college, as many have free or reduced price programs designed specifically to help small businesses get up and running. Start with a well thought out plan and you will have a successful quilting business in no time. And remember it’s OK to make money while you are having fun quilting.
For more information about longarm businesses, click here for Gammill’s business resource page.