How to Start an Embroidery Business | SkillsAndTech

With decorated apparel in the middle of an extended boom, starting your own embroidery business today could satisfy your passion and lead to significant income tomorrow. Whether you start in a spare room or open your own shop, getting started in embroidery has never been easier.

This step-by-step guide will walk you through all you need to know to develop and launch your very own embroidery business and put you on the road to entrepreneurial success!

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Decide if the Business Is Right for You

There are many factors to consider when deciding on the business you want to pursue, so here’s a breakdown to get you acquainted with the embroidery industry.

Pros and cons

Weighing the pros and cons is essential in measuring long-term value and potential return on investment. Before you make that first stitch, here are a few points to keep in mind:

Pros

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• Fast, cheap and easy to get started
• Minimal regulations
• Creativity and self-expression
• Work when and where you want
• Highly profitable

Cons

• Significant skills required
• Meticulous, time-consuming work
• Saturated market, many small-scale players
• Finding skilled labor is difficult

Embroidery industry trends

Industry size and growth

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• Industry size and past growth – The commercial embroidery services market in the US is valued at $1.2 billion and recovering from the pandemic slump, according to market analyst IBISWorld.
• Growth forecast – In the wake of the pandemic, the global and US decorated apparel markets are both expected to grow at a stunning 12% annual rate through 2028, creating considerable opportunity for entrepreneurs. Embroidery accounts for a significant 42% of the market.
• Number of businesses – The US is home to 905 embroidery businesses.
• Number of people employed – The industry employs more than 8,000 people.

Trends and challenges

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Trends that shape the embroidery industry include:

• Growing use of digitized embroidery
• Use of 3D embroidery
• Rising demand for embroidered necklaces and other jewelry pieces

Challenges in the embroidery industry include:

• Time-consuming machines
• Thread breaks

What kind of people work in embroidery?

• Gender – 73% of embroiderers are female, while 27% are male.
• Average level of education – 40% of embroiderers hold a bachelor’s degree and 31% have a high school diploma.
• Average age – The average age of an embroiderer is 50 years old.

How much does it cost to start an embroidery business?

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Starting an embroidery business is surprisingly affordable, with low-end startup costs of around $2,000 for a home-based setup. If you have a bit more capital and would like to open an embroidery shop, you could spend $20,000 or more to get started. The average startup cost for an embroidery business is around $11,000.

For a commercial embroidery business, your primary expense will be a computerized embroidery machine, as well as an increased marketing budget to draw business. 

You’ll need a handful of items to launch your embroidery business. Here’s a list to help you get started:

• Embroidery hoops
• Needles
• Scissors
• Embroidery thread
• Stick and stitch stabilizer paper
• Water-soluble pen
• Floss bobbins
• Floss organizer case
• Metal rings
• Needle minder
• Needlebook

If you have a shop or intend to set up a large-scale embroidery business, you may need additional equipment including a computerized embroidery machine, shop furniture and fixtures, computers, and other equipment.

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Here’s a sample cost breakdown to give you a better idea:

Start-up Costs	Ballpark Range	Average
Business licenses and permits	$100 – $100	100
Branding, marketing and advertising	$1,000 – $7,000	$4,000
Embroidery tools and supplies	$600 – $1,250	$925
Computerized embroidery machine	$0 – $10,000	$5,000
Hiring	$0 – $250	$125
Insurance	$100 – $400	250
Website and software	$200 – $1,000	600
Total	$2,000 – $20,000	$11,000

How much can you earn from an embroidery business?

There are essentially three main questions to ask when considering the potential revenue from your embroidery business.

• Will you be selling hand embroidery or digitized embroidery?
• Is your setup home-based or shop-based?
• Are you focusing on consumers or businesses?

With a home-based embroidery business in your first year or two, you can expect to embroider 5-10 items every day. That puts your average at 7.5 items per day. If we assume you make $25 per item, then you’ll see more than $68,000 in annual revenue. Assuming a profit margin of 80%, you’ll earn more than $54,000 in annual profit.

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As your business grows bigger, you can potentially decorate 25 to 45 items daily, and average at 35 items a day. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of almost $320,000, you’d get a tidy profit of $128,000.

Although your overall revenue and per-unit revenue will depend on a variety of factors, it’s worth noting that even small operations can significantly grow in profitability as you strengthen your market share. You might take a cue from the founders of the Foundry Printshop, who, despite humble beginnings, are now on their way to $1 million in annual sales.

What barriers to entry are there?

While getting into the embroidery market isn’t particularly difficult, there are some challenges that you should take note of:

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• A specific skill-set and creativity are required for the business owner and employees. You’ll need to study up, train, and gain extensive experience with machine operations, fabric selection, and stitching. There are also different embroidery techniques for different types of materials that you and your team should know. Because embroidery is often considered a form of art, it’s design-focused. This means you need to have a healthy bank of creative designs to attract and retain clients.
• Competition intensity is high. Embroidery is growing fast, so you’ll need to find a way to stand out. You can do this by showcasing your unique selling point, or USP, which might be expert knowledge, unique stitching styles, custom designs, or impeccable customer service.
• No switching cost for customers. Because embroidery primarily entails similar techniques, customers easily hop from one supplier to another to compare designs and price points.

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

Hone Your Idea

At this point, you’ve got all you need to know to determine the viability of your embroidery business. The next step is to refine your idea into an action plan. 

Let’s start with identifying your business opportunities.

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Why? Identify an opportunity

Traditionally, embroidered products were used in household items such as bedding, table linens, and clothing. But these days, the biggest opportunities are in the corporate sector. Many organizations are now opting for embroidered uniforms because of their higher durability compared to other types of decorated apparel.

But the appeal of custom embroidery not only lies in its durability but also in its elegance, which the corporate sector finds especially useful. It’s used as a branding and advertising tool by many organizations, while the fashion industry uses embroidery as ornate decorations for garments.

This increasing adoption of embroidery among consumers and the corporate sector presents ripe opportunities for entrepreneurs looking to start a new embroidery company.

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What? Determine your products or services

The secret sauce to your success will be largely based on the level of creativity and innovation. You can leverage the technique you’re most skilled at or combine several styles to boost demand within your target market.

There are a handful of embroidery techniques you can choose from, so in case you don’t know where to start we’ve listed the most important ones below:

• Surface embroidery
• Counted-thread embroidery
• Outline embroidery
• Whitework embroidery
• Candle-wicking embroidery
• Needlepoint

Here’s a list of the most popular downstream fields of embroidery that you should also consider:

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• Headwear (caps, sunhats, visor, etc.)
• Household items (kitchen towels, pillowcase, blanket, etc.)
• Coats
• Footwear
• Dress Shirts
• Denim
• Dresses
• Bags and accessories

How much should you charge for your work?

When deciding on a competitive price for your products and services, there are a few things to consider, including overhead costs and order complexity.

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If you’re a new, small-scale business owner operating from home, your overhead expenses will be minimal. You might change $0.50-$1.50 per 1,000 stitches, depending on your experience, quality, and job complexity. This gives your rate a competitive edge over shop-based embroiderers.

On the other hand, if you’re looking at a shop-based embroidery business, you’ll have to charge a higher rate to compensate for labor and overhead expenses. Your price range might be between $1.50-$4.00 for 1,000 stitches depending on your costs, knowing you can deliver a higher volume of orders.

The price of hand-embroidered hats averages $5 to $10, while t-shirts range between $20 and $30. 

For orders that need precision embroidery, using a computerized machine will increase the cost. The average cost of digital embroider items runs from $10 to $60 depending on stitch count and complexity.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

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Who? Identify your target market

To establish a successful embroidery company, you should understand the local market dynamics, demand drivers, and how well you’re connected with your target market to sell your products.

You could specialize in a particular type of embroidery for a specific target market niche or offer a wide range of services to a wide target market. Your final target market segments should be influenced by market-related factors rather than your personal choice.

The following are potential target market segments for an embroidery business:

• Households
• Food and coffee chains
• Local businesses
• Corporate sector
• Textile manufacturers
• Municipalities and city councils
• Custom fashion brands
• Schools

Where? Choose your business premises

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In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a storefront. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Brainstorm a Business Name

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Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• The name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “stitches” or “embroidery”, boosts SEO
• Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

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Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity. 

Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
• Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
• Product and Services: Describe your embroidery products and services in detail.
• Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
• Competitive Analysis: Analyze main competitors, assess their strengths and weaknesses, and create a list of the advantages of your services.
• Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
• Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
• Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
• Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
• Appendix: Include any additional financial or business-related documents.

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If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

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Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to embroidery. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your embroidery business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

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Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Register for Taxes

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The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

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Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

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Bank and SBA loans are probably the best options, other than friends and family, for funding an embroidery business. You might also try crowdfunding if you have an innovative concept.

Apply for Licenses/Permits

Starting an embroidery business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

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You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Open a Business Bank Account

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Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your embroidery business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Get Business Insurance

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Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Prepare to Launch

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As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

If you want to be competitive, you’ll probably need good embroidery design software such as Hatch Embroidery, Stitch Era, and EmbroideryStudio to create designs from scratch or by scanning images.

Accounting

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• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Some of your business will come from the casual passerby or online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, make sure you link to your social media accounts and vice versa. Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products: 

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• Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
• Instagram: Same benefits as Facebook but with different target audiences.
• Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now.” This can sharply increase purchases.
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include: 

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• Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as the first corporate client each month gets half off. 
• Signage – Put up eye-catching signage at your store and website. 
• Flyering – Distribute flyers in your neighborhood and at industry events. 
• In-Person Sales – Offer your products/services at local markets and trade shows.
• Post a video – Post a video about your embroidery business. Use humor and maybe it will go viral!
• Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
• Seek out referrals – Offer incentives to generate customer referrals to new clients.
• Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
• Create infographics – Post infographics and include them in your content.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

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You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

 Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your embroidery business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your embroidery business could be:

• Best embroidery skills in town! 
• Wildest, most creative designs
• Digital embroidery creations for businesses large and small 

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Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an embroidery business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in embroidery for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in embroidery. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

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Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an embroidery business would include:

• Embroiderer: Your embroiderer is at the heart of your operations, that’s why this person must be qualified and experienced enough to handle large, multiple assignments.
• Digital content creator: Building a strong digital footprint takes continuous effort and requires a well-thought-out content strategy that a digital content creator can help you with.
• Sales executive: A sales executive will be focused on closing sales online or through face-to-face encounters with prospective customers in the shop to boost revenue.
• Operations assistant: Your operations assistant will be on top of all operational, clerical, procurement, and administrative tasks so you can better focus on running the business.

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At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Start Making Money!

Now that you have an in-depth understanding of the embroidery market, it’s time to roll up your sleeves and put your plans into action. The hardest part will be the first 100 days of business development, when you’re still trying to find clients. 

But you can make this work if you put in a lot of hard work and use the marketing strategies we’ve outlined above. You can also do affiliate marketing, where you compensate third parties in order to generate traffic to your website. You can develop long-term relationships with these affiliates and generate traffic for each other.

You’re now ready to start embroidering and making good money!