I do this every year. Gifts that the recipient will want are so much better than shop bought crackers that are filled with plastic tat that will end up in landfill and, even if you buy nice ones, they are always the same. Nobody needs 3 mini nail clippers, a tiny set of screwdrivers and half a dozen mini photo frames.
If you aren't good at craft, you can buy precut cardboard and all the bits you need (snap, joke, hat etc) or preassembled crackers that you put the gift in and seal. John Lewis and Waitrose sell the preassembled ones.
Cracker suppliers also sell small gifts, if you need inspiration. Gifts I've used include personalised plectrums and case, small kitchen gadgets (nutmeg grater, spoon holder), perfume/aftershave, scented tea lights, jewellery, soap, make up/nail polish, face masks, jewellery, make up brushes, hair accessories, fragrance oil/incense, silk scarves, hand warmer, seeds.
As well as the gift, I fill the cracker with something cheap like wrapped penny sweets, chocolate coins/sprouts or bath pearls, sometimes a scratch card for everyone. It might seem a bit OTT but it makes what is a bit of a wasteful tradition into some a bit special but useful that is a highlight of the day. I don't put anything in that I don't know the recipient will love, even the filler sweets have to be a favourite.
Just be careful where you pull them if you are putting in delicate items like a fossil!