Starting Out in a Garage

Business owners weigh in on the question, "Can I bootstrap a woodworking business out of my garage?" January 2, 2014

I am thinking about starting a small very small business. I come from a family of carpenters and I love to work with wood. I have made some pieces of furniture that my neighbors, friends and family buy, even though I just make furniture for mere pleasure. I want to get my licenses to be able to sell and publish myself, but I'm not in a position to rent a shop. Can I have a tiny shop in my garage to manufacture my furniture pieces? Is it allowed in Santa Ana, CA? I will rent a place if I find that I'm selling good, but not for now.

Forum Responses
(Business and Management Forum)
From contributor A:
Garage shops are a long and fine tradition in the woodworker industry. Everyone is entitled to putter and build things there, and whether you get paid for what you build is nobody's business but your own.

Don't even think about getting any kind of business license, as that would close you down instantly. And stay away from any kind of installation if you don't have a contractor's license. Stay small and enjoy!

From contributor W:
I have a little different perspective on this. Many towns have specific ordinances with regard to working from home and what denotes craft as opposed to manufacturing and so on. While I think you could easily stay super small and fly under the radar selling for cash only, you said you want to "publish" yourself. This will eventually mean selling direct to the public, which means you have to collect and pay sales tax. If that happens you will want to buy your materials tax exempt so you will need a tax number and business license. After that you will want to write off expenses and so on.

It has always been my advice to friends that as soon as you feel it's getting the slightest bit serious and leaving the world of someone handing you cash for your goods that you stick in your pocket, do it right.

There would be nothing worse than establishing a business that you rely on and having clients and customers relying on you, and your shop gets shut down because a neighbor wanted to cut down a tree and you said no so they turned you in to the city and you wake up to a cease and desist notice tacked to your garage door. It's worth doing a little anonymous investigation just so you can have a solid plan for the future.

From contributor C:
I agree with all the posters so far. Starting small is the way to go in this economy. I have a shop on my property, separate from my house, but it has had some issues. First, make sure the area you are in is actually zoned to run a business out of. If it is, as in my situation, there are rules that may be strict. My sign can't be bigger than X size (I don't even have one), can't have more than X cars in the driveway, no large dumpster, things like that. You will probably be able to find all this out online with your town zoning laws. I also had to register my business with the town for tax purposes. Second is insurance. When it turns from a hobby to a business is when it will get difficult. I don't think it is necessarily a bad way to start a business, but you also need to understand how much risk you are taking and how long you will be comfortable assuming those risks.

From contributor B:
I'm in Canada, so this might not be relevant, but here goes. Had a guy working for us, decided to go on his own - worked out of his garage, no license, no application for zoning modification. One of our repeat customers told us he was undercutting our pricing - which he could do because he wasn't carrying the expenses of a legitimate business. One phone call later, he's out of business and is being investigated by Revenue Canada. Find out the rules in your area. Play by them. Period.

From contributor W:
It's always better to stick to the rules. If you don't like them, fight them, but while they are there it's best to have a clean operation.

The simple fact is, you know the knock will come on the door the day after you take delivery of a pile of material and have a deadline to meet for a customer you took a deposit from. Now your shop is shut down, you spent the deposit, and you can't deliver the goods and further may be assessed penalties and so on. Forget about making your customer whole.

Stay extremely small and on a cash only basis (basically a hobby), but if you ever think about going into the market, be legit.

From contributor N:
There is an old saying that forgiveness is easier than permission. Sometimes it's a lot more expensive.

From contributor M:
Those of use with professional shops and equipment have paid our dues.

There are quite a few potential issues. Unless you are in a rural area, this is not a good idea. Zoning, permitting, insurance, homeowners associations all come to mind. If you end up facing a lawsuit from a neighbor, you will pay at least $20k in legal fees before you even see a court room. You will end up paying out of pocket, because your insurance will want to settle, forcing you to submit to concessions, only to raise your rates or drop you.

Furthermore. One cannot become a furniture maker or cabinetmaker overnight. You need formal training combined with years of experience. I am sorry but if you have only made "a few small pieces of furniture" for neighbors and friends, you really need to consider your qualifications. I don't mean to sound harsh, but if your goal is to put food on the table, starting small won't cut it.

Keep a job in your current field and continue to pursue woodworking as a hobby. Continue to refine your skills until you are confident that you can market yourself as a skilled professional. Then you can consider starting a real business.

From contributor D:
I will echo contributor M's remarks regarding the problems you will have. Even if you can legally open a for profit business in your current location, this does not mean there is any income beyond friends and family. Let me guess, they all say "you could make a living doing this!"

Let's face it, the reason family and friends want your work is because:
A They have no money they want to spend and also don't expect to have to give you much, if any.
B You don't know what to charge and so drastically underestimate costs and real world values that will eventually come into play, forcing you out of business.
C They know little or nothing about design, and (perhaps) like you, think that anything made of wood is inherently wonderful and priceless.
D Since you work out of your house, you have no overhead and probably pay no taxes.

Yes, I know I am harsh and cynical, but in 40 years I have seen very few make a living working wood, and almost none started out the way you describe. Even if someone knows how to join two pieces of wood, that does not mean it is attractive. In fact, most of the self-taught woodworkers - pro and amateur - make things that are horrendous and destined for the curb, but an easily manipulated and ignorant public thinks that if it is wood, it is inherently good (see Ikea). Design be damned.

Do yourself a favor and compare the quality and price of what you have sold to the quality and prices of real professionals that have established businesses. Examine the reasons as to why your prices are so much lower - are the professionals rich?

Having said all that, I will say it is possible, but you will have to greatly alter your expectations and plans to be anywhere near successful. And give up on family and friends. In 40 years, I have never sold one thing to a family member or friend. It gets way too complicated way too fast. I'll give it away first.

From contributor M:
You could probably get away with turning bowls if you really want to do something at home part time.

I think you would be better off learning high end finish carpentry and renovation skills. You still get to work with wood and buy a ton of toys, err, tools. I am not talking about doing production trim work. Get a job with a real finish carpenter.

There are definitely some guys out there who do some amazing work on site with a fraction of the tools some of us use. Definitely without a sliding table saw, CNC, edgebanders, shaper, panel saw, etc. This is a good way to learn.

From contributor J:
Sam Maloof started out in an old chicken coop, then built a shop on his place and became famous, very famous. You won't get famous, but you might end up a with a great business. Go for it. Don't listen to these people. Keep a low profile and prepare to move to an industrial area and rent a shop, but by then you may be ready to do it. Half the cabinetmakers in the Northwest work on their property next to their home. Some are even famous and have been on the cover and some featured in articles in one of the industrial woodworking mags. All of them are still in business, while many who decided to get big are gone thanks to the depression we still are in.

From contributor M:
It is not right to violate laws, covenants, contractual agreements, or zoning regulations. If you live in a rural area or your town or city lets you do whatever you want, you are lucky. I have to say I am a strong advocate of strict licensing requirements for the woodwork trades. This notion that anybody can set up shop, and set out to do this work, sets bad precedent.

From contributor L:
CA is pretty nasty about sales tax avoidance! Cut once you have a sales tax license, you are on the radar. I suspect you can hobby it out of your garage as long as you don't offend the neighbors. Making hand crafted furniture is probably one of the hardest ways there is to make a living in wood. If you want to do something as a business, there are lots of things you need to be proficient at other than making something out of wood. Finance, PR, sales/marketing, design. Lots of hats, little time.

From contributor J:
Yeah, don't break any laws. Put your tools away and get a job at McDonalds. Dream about woodworking for the rest of your life and be a happy camper.

From contributor Q:
Don't believe all the naysayers. We all started somewhere, and for many, it was in a garage or a basement. But there will be a point where you will need to go legit if you start as you suggest. You can get there more quickly if you put together a solid business plan and then put the steps in place to create the business.

You will also need a steady stream of customers beyond family and friends with you as the salesman, and you'll need to know your costs of running a real business so you can charge enough to cover your costs, pay your help, pay your salary and earn a profit over and above all of the other costs. Yes, you'll need to be your own cost accountant and estimator too. Plus you'll need to actually get the work out the door either by yourself (most start that way) or maybe with a little help from others. That puts you as an HR person, and production manager. There are several other functions or hats you will also wear as a small business owner.

There are plenty of good resources you can investigate and places you can learn how to run a small business, including SCORE, community colleges and maybe through some associations or trade groups. You'll soon discover that you will most likely be fairly far removed from just "working with wood" if you want to develop a business that is sustainable.

If you have the fire in your belly to make it on your own, and have or create a workable plan that you actually work (yes, it's more than 40 hours per week when you start), you may have a chance of succeeding.

From contributor M:
I cannot comprehend why anybody would recommend that somebody start out in a manner that is not entirely legitimate.

The kind of customer base you need to make a living will see right through the smoke and mirrors that is a home hobby shop masquerading as a business. This will send them to the competition and result in a negative hit to your reputation. Anybody who markets themselves as a cabinet or furniture maker without learning the trade first, and seeking relevant training, is cheating their customers out of the experience of working with a skilled professional who has.

Any professional that would encourage the idea of doing so is devaluing their own experience and credentials. To suggest that someone start out on their own without learning the trade first is bad advice.

In order to pursue the dream, it would be far more constructive to learn the trade first by continuing to pursue woodworking as a hobby or by working for a qualified professional. The benefit is you get to keep a real job and earn a living. Once you have learned the trade, starting a business that is successful is certainly possible.

From contributor U:
Have you looked for a co-op in your area? With this new trend called "makers," there are several places that rent space/share rent. Ask at a local hardwood supplier about co-ops, or local art suppliers. I'm of the generation that learned with black and white Fine Woodworking magazines, and worked in basements and garages. Been woodworking for over 40 years, 26 of them professionally. Do whatever it takes.

From contributor V:
You asked about legality. Some of the answers can't be provided without intimate understanding of your state and local laws, of which I personally am not familiar with. However, I am very sure that the state of CA has very clearly defined sales tax laws, under which you would fall, that require you to get a resale license and collect and submit sales tax.

Whether or not you are allowed to operate that kind of business out of your house would be up to local regulations. Whether or not you need a business license (in addition to sales tax registration) could be up to local and/or state requirements.

Another potential concern is insurance. If you are operating a business out of your home, with homeowners coverage only, don't expect to get a claim paid that is a result of your business operation. This could be far worse than the situation alluded to of a deposit spent on material you can't get paid for. That could bankrupt you entirely.

I would start off by going to your town office and ask them what the options are. They may have a "home business" or "craft business" exception that allows a certain amount of work done in a residential area. However, being that you will be operating (fairly noisy) woodworking equipment, they may require a public hearing to allow neighbors the opportunity to voice their concerns, which may either deny you the right or limit your hours of operation.

If you get a go ahead from the town, the next step would be to register with the state for sales tax, and find out if any additional licensing or registration is necessary. One thing you are required to do is register with the EPA, but you should easily be able to qualify for an exemption; however, you still need to have the filing.

Once you have all the paperwork in order, talk to your insurance agent and make sure you have adequate coverage. If you decide to operate as a sole proprietor you won't be required to have workers comp insurance unless you start hiring employees. Good luck - it will be a long road but it can have a great reward.

From contributor J:
Just ask Bill Gates if his garage shop was legal. Or the Facebook guy who started his operation from a dorm room, then a rented house, or the Apple dudes Steve and the big guy that started out of a garage. Or the endless taco stands started by Mexicans who after 10 years of hard work become legal, buy a 10,000 square foot house, and pay lots of taxes, and own your favorite Mexican restaurant.

From contributor B:
The real issue with this type of question is the rules vary so widely depending on both your location and your business model. Unfortunately, we are a community of professional woodworkers, not lawyers or accountants (for the most part), so our advice can only be considered anecdotal at best. Once you have determined which hoops you need to jump through in order to start your business, posting your requirements and location could be of immense value to other members of our community. And yes, even though we are often competitors, we are still a community. I hope the tone of some of the responses has not discouraged you. I believe we all simply want you to be aware of the challenges you will face starting up your own business so you can make an informed decision about whether or not this is the way to go for you. Best of luck!

From contributor Y:
I think it would be better for you to check out the rules and regulations in your area regarding such situations, as they would vary from one place to another.

From the original questioner:
I want to thank to each and every one of you who took the time to respond. It has been some time now and I am still on the same road. I will never give up! Working with wood is life for me. I grew up in a family of woodworkers and continued to work in woodworking factories until I got into college. I am almost done with my BS in finance and operations management. I have saved some money... not much due to the cost of school, but I believe enough to get me a place to work peacefully and without getting into any legal trouble. I've bought most of the tools needed. I am now working on my business plan, which is all in my head right now... Just a matter of putting it on paper. I plan to get started by 2015, once I have finished school and saved more money. I am quite confident that this will be a true success after tons of hard work.