Etsy Business
Starting an Etsy Business
What used to be the purview of craft fairs and market stands can now easily be sold online to a whole new audience.
If you want to be a successful Etsy entrepreneur, you need a strong, robust plan for your new business. There’s plenty of competition in the Etsy marketplace, so having a novel approach, creating original designs and getting proper business discipline in place is essential.
Etsy Business Formation Guide
In this guide, we’ll explore everything you need to do to set up your Etsy business and maximize your chances for success. We’ll cover:
Understanding the world of Etsy
Paying taxes for your Etsy business
Deciding if you’re ready to start an Etsy business
Hiring employees, managing finances and administering your Etsy business
Planning out your Etsy business
Locating other resources for your Etsy business
Determining the best legal structure for your new organization
Following various rules and regulations
... And much more
By the time you’ve read through our complete Etsy business guide, you will have all the information you need to set up and manage a thriving crafting business. Let’s get into it.
How to Make Money on Etsy
Key Background Stats for Etsy Businesses
The size and opportunity in the Etsy marketplace might surprise you:
1.7M
Sellers on Etsy in 2016, making on average $1,800 each
300M
People purchased goods on Etsy in 2016, spending an average of around $100 each
$3B
Worth of goods were sold through Etsy in 2016
Etsy is in the top 10 most popular e-commerce websites in the U.S.
Nearly 55 million people use the platform
There are around 50 million products listed for sale on Etsy
This all points to Etsy being ripe with new opportunities for focused entrepreneurs, so now might be the perfect time to dive into starting your Etsy business. Bizee is here to help you form your Etsy business and understand the ins and outs of owning a company.
The Keys to Success: What Etsy Customers Want
With nearly 2 million sellers and 50 million products already in the Etsy marketplace, you need to stand out from the crowd if you want your Etsy business to be a success. This means understanding what your Etsy customers want from your products. We recommend focusing on several areas:
Originality
Create beautiful, original designs that showcase your skills and talents. Use your unique creativity and flair to build a “wow” factor into the items you craft — products that your potential customers won’t be able to find anywhere else.
Affordability
Although customers realize they may need to pay a little more for quality, they’re still looking for a bargain. Make sure you price your products well with enough of a profit margin that you can grow your business, but keep prices low enough that you’re competitive with similar sellers.
Niche
Showcase your products in the best possible way. This means using expert photography, good lighting, great backgrounds and the right categories and keywords. Search is one of the main ways customers find items on Etsy, so ensure your descriptions are keyword rich.
Presentation
Finding the right niche to grow your business in is essential. Your niche will largely be dictated by your own crafting skills, with the most popular categories being jewelry, stickers, clothing, craft supplies, bridal goods and baby shower decorations.
If you can combine these four areas together, you’ll have the perfect ingredients for a successful Etsy business.
Main Priorities for an Etsy Seller
With sellers earning an average of under $2,000 on Etsy in a year, it’s clear that for many people Etsy just provides some side income. If you want to make Etsy a major revenue stream for you, that needs some strong focus and a disciplined approach. Here are the challenges and advantages you need to be aware of.
Competition
Search locally, nationally or internationally. There are several in-depth market research reports available for the etsy business in the U.S. You will also want to research demographics in your proposed area — you’re looking for densely-populated areas with lots of renters or students.
Branding
Although your Etsy shop will be under Etsy’s own branding, you still have the opportunity to create an identity for your business. Look at what other sellers are doing and try to create a brand that stands out from the crowd. With most Etsy users being female, you will want a brand that’s friendly and approachable that speaks to their needs and life circumstances.
Discipline
You need to think of your Etsy shop as an independent business with all the focus that one requires. You should have proper plans and processes in place, practice strong financial management and have an in-depth understanding of your costs, sales prices, revenue and profit margins. Bear in mind that there are fees you need to pay to Etsy, as follows:
Marketing
Finally, marketing will play a key role in the success of your Etsy business. You will need to develop a strong marketing plan that combines various channels to give you the most visibility and reach. Look into advertising on Etsy itself, organic SEO, paid search marketing, social media marketing and various other digital marketing opportunities. Make sure you can track your return on marketing investment.
Developing a Plan for Your Etsy Business
Before you start your business, there are a few key areas you need to focus on. You will need to establish whether there’s a demand for your Etsy products, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.
In short, you need a business plan — here’s how to think about your business idea.
Do Market Research and Validate Your Etsy Products and Services
Before you launch your Etsy business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:
Identify your business’s unique selling points (USPs)
These are the areas that will set you apart from competitors and encourage customers to come to you. You might have better pricing, a higher-quality service, faster delivery, unique products or some other special feature. Be sure to bring this out in what you do.
Look at who your competitors are in the space
Carefully review all the possible Etsy sellers who will be competing by selling similar products to you. Look at how they structure their shops, products and pricing. Think about what you could do differently.
Validate your products and services
Test whether people will commit to spending real money on what you’re offering before over-committing. Create prototypes of key products and test them in the marketplace to see if they generate interest and sales.
Talk to clients
Speak with potential customers to understand what they want from your Etsy products. See if you can identify new trends that you could take advantage of. Get involved in forums where your likely customers are hanging out.
Get involved with business communities and discussion groups
Ask questions about Etsy businesses. You can find links to some excellent discussion groups later in the article.
Understand Your Etsy Business Model and Financial Projections
All businesses need a business model, which is how you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.
You will also need to look at financial projections for your Etsy business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself? If you can, try to plan your revenue for the next month, three months, year and two years.
Write a Business Plan for Your Etsy Business
Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:
An executive summary with the most important points from your business plan
Your goals and what you hope to achieve with your Etsy business
A description of your business, background information, and context
A description of your business, background information, and context
An overview of how your business is structured
Your business model
How you will market and sell your offerings
Financial projections, revenue, and profitability
Appendices
We’ve got the perfect guide to writing your business plan.
Setting up Your Etsy Shop
Once you've legally created your Etsy business, you’ll need to get some other things in place. The most obvious first step is to create your Etsy seller account at etsy.com. Etsy will walk you through creating a seller profile, adding your products, and creating store policies, like those for returns and exchanges and customer service. You'll want to have attractive product photos and descriptive listings to help people find your products.
There are other logistical matters you'll need to consider in order to get your Etsy shop up and running. These include:
Location of your workshop
Where are you going to create your products and run your business from? Some crafters may have a workshop at home, but remember you will need to store inventory and manage shipping. This can take up a lot of space. As your business grows, you might think about getting a more professional crafting space, complete with an area that's well lit for product photos.
Software that Integrates with Etsy
Is there software that can help you manage and market your Etsy business? Some tools integrate with Etsy to help you manage your orders, estimate profits, create email campaigns, manage social media posts, or take better photos. There are also software platforms that help you cross-sell on other platforms, like Facebook. Explore whether these tools can help you run your business more effectively.
Marketing on Etsy
You will need to develop a brand and use digital marketing channels to drive traffic to your Etsy shop. This can include using keyword optimization in your Etsy listings so you show up in results, or it could include email and social media marketing. You also might want to consider paying for Etsy ads to get your listings more views. You'll find lots of great advice on these topics in the "Etsy Business Resources" later in this guide.
Equipment
What equipment do you need to manage your Etsy business? You will need a computer and smartphone at minimum, but you will also require crafting tools, machinery and raw materials. Make sure you account for likely demand and possible waste. Understand exactly what you need to spend so you can write it off against business expenses.
Finances and Taxes
What kind of bank account will you get? How do you find the best business credit card? How will you pay your business taxes? These are important questions to consider so your Etsy business stays in the green. Here at Bizee, we can even help you file your taxes.
Certification and Training
Running an Etsy business comes with certain rules, regulations and legalities you need to be aware of. Bizee offers a Business License Research Package for you or you can take the time to do the research yourself.
Business Maintenance
Most states require businesses to file an Annual Report once a year. You will also be expected to pay estimated taxes on what you plan to earn in the current business year. Your federal, state, regional and city business licenses and permits may need to be renewed on a regular basis, typically once a year.
Employees
Do you need to hire employees to help you? More on that below.
Processes
Make sure you have the right processes in place to understand what your most popular products are and analytics on how your business is doing. Etsy has some built-in analytics that will help you here, but you'll want to make sure you know how to get these reports and that you look at them regularly. Again, you'll find helpful advice on developing these processes in the "Etsy Business Resources" later in this guide.
You'll also want to find ways to manage your finances carefully and create your products in a cost-effective manner. Sometimes this can mean searching out cheaper resources for your raw materials, or cutting down on the time it takes to craft each individual item.
The Complete "Start Your Business" Checklist
A Clear and Comprehensive Guide to Starting Your Business the Right Way
Hire Employees for Your Etsy Business
If you’re just running your Etsy business solo, you don’t need to worry about employees. If you are hiring people to work for you, you will need to know what to do.
Get an Employer Identification Number (EIN)
Contact the IRS and let them know you will need an EIN for your Etsy business. This is a number you will use to file and pay your taxes. We put together this guide to getting your EIN. You need this even if you don’t plan to hire employees.
Make Sure Your Employees Can Work in the U.S.
Your employees must be legally able to work here. Carry out background checks and ensure they have all necessary legal documentation.
Report Employees as “New Hires”
In most cases, you will need to report the hiring of employees to your state.
Learn About Legal Requirements and Responsibilities to Employees
You do have certain responsibilities and requirements for hiring employees. In addition to getting a proper employment contract in place with them, you have a duty to provide them with a safe working environment, proper training, regular pay and certain other criteria. OSHA covers your health and safety requirements, while the U.S. Department of Labor provides information on other responsibilities.
Get Workers’ Compensation Insurance in Place
As listed above, you will need to make sure you have proper workers’ compensation insurance to cover injuries, illness, medical costs and the like.
Pay Employees on a Regular Basis
You will need to run payroll and compensate your employees on a regular frequency. Your state may mandate how often employees need to be paid.
Withhold Income and Payroll Taxes
You will need to calculate and keep back income tax so you can pay the appropriate bodies. You will also need to pay the employer portion of the payroll tax.
Social Media and Discussion Groups for Your Etsy Business
Connecting with other business owners in your industry can be incredibly helpful. Here are some of the best social media and discussion groups:
Useful Online Tools for Your Etsy Business
Here are some really great online tools for managing your Etsy business. They will reduce the time you spend on administration, help you collaborate with others and free up your time to grow and manage your new venture.
Collaboration
Social Media Management
Communication
Email Marketing
Advertising
Marketing Automation
Customer Relationship Management (CRM)
Customer Support
Human Resources
Website Development
Analytics
Hiring
Please note: This page contains affiliate links and we may receive a commission if you make a purchase using these links.
Conclusion
Etsy is a very empowering marketplace. In particular it’s a great way for female entrepreneurs to get started and with the right approach and discipline, it can grow from being a side project to becoming a powerful revenue stream. Follow the advice in this Etsy guide, and you’ll be able to create an Etsy business selling beautiful and amazing crafted products to the world.