As James said, that is a broad question. I pondered the same questions years ago in order to try and maintain my sanity while working for a government contractor. What I found was that it depends on so many factors that you will have to spend a great deal of time looking at yourself (interests, skills, creator, businessman, solo or supervisor, mass production or custom, etc.) and the market ( web based, local, retail, wholesale, products, etc.) and any assets you may already have that would give you an advantage (equipment, location, materials, etc.). Location is a major factor since it has a lot to do with the market, and availability of materials and employees. Shipping creates more problems if you are producing bulky products.
Remember that creating objects and running a business, while not mutually exclusive, are definitely not the same and many a fine woodworker simply didn’t have the qualities necessary to run a successful business. And many a woodworker who loved the work turned their beloved hobby into a business only to hate the long hours, dust, customer demands , and financial uncertainty. Having said that, there are so many potential business models dealing with woodworking that you have a lot of options. Do you want to teach woodworking to others? Do you want to produce large quantities of simple products for wholesale? Do you want to operate a storefront or gallery to market direct to the public? Do you want to do custom work on commission or do speculation one-of- a-kind original pieces? Could you write books or articles on the subject? Do you have the ability to do videos on the subject? Each option has potential but you have to take a rather cold-hearted look at all of your options. It does no good to follow your creative heart and destroy the family savings in the process. Speaking of family, don’t forget that others may be taking the ride with you and that should figure heavily in your decisions.
I did create a few crafts for sale years ago and discovered pretty quickly the actual production, compared to the entire business process, was relatively simple but the frustrating and time consuming part was the actual sales process. Other woodworkers I have talked to have told me that working on a commission basis is an almost guaranteed business failure unless you have other sources of income.
Looking to woodworking business models from the past can give some hints but be aware that market conditions have changed. Cabinet shop operation from colonial times may be appealing but they didn’t have to compete with Ikea and neither can you . Above all else, customers need to know that you exist, that you have a product or service that is of value, and that product or service is, at least, competitive. Then you have to be able to complete the entire transaction. You might think I left out “production” but you can still have a business without production if you are teaching, or selling the products of others.
My personal model ended up as a solo operation, limited production runs of a few traditional style ( craftsman, shaker, colonial) solid wood (walnut, cherry, oak) quality furniture products that are traditionally stand alone (as opposed to collective pieces such as suites, dining room tables and chairs, etc.) sold locally directly to the public, along with teaching woodworking to a limited number of students in house. My model has never been put into practice but retirement from my previous job actually makes it more reasonable option. I am really quite content to be a hobby woodworker at this point in my life.