How to Start an Etsy Store

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Quick Reference

Do you have a product that you want to sell, and you’re looking for the right place to sell it? All sorts of people look to Etsy to find creative products to purchase. Maybe you make jewelry or t-shirts or sell vintage items or something else entirely. You can start your own Etsy store easily and start selling your products immediately.

Business Overview

An Etsy store sells a product or products of various types for consumers to buy online.  Usually, the products are of a creative nature, such as jewelry, art, or clothing.  Customers purchase the products, and then the Etsy store ships the products to the customer.

Industry Summary

According to Statista, in 2020, there were 81,900,000 buyers on Etsy, and 40.1% of those were repeat buyers. Etsy’s revenue in 2020 was $1.7 billion.  Gross merchandise sales on Etsy in 2020 were $10.28 billion.

Industry Trends

The Etsy online marketplace is growing in the number of buyers and sellers, and the merchandise sales on the site in 2020 were up 106.84% from the previous year.   Mobile purchases were 61% of total sales.  How the economy impacts the industry varies by the product and price point.

Target Market

Your target market will be online shoppers who are looking for the product that you are offering.

Skills, Experience, and Education Useful in Running an Etsy Store

There are several specific skills that you will need to open an Etsy store.

  • Experience.  Experience in and a talent for producing the product you are offering are important.  Your product will need to stand out from the competition.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Costs to Start an Etsy Store

Here are the typical costs you will face when you open an Etsy store.

  • Initial inventory $200 – $1,500 depending on your product.
  • Laptop or desktop computer – $500 – $2,000
  • Camera, lighting, backdrops, etc. – $100 – $1,000
  • Initial shipping supplies like packaging and shipping labels – $200 – $500

In addition to the costs to start your Etsy store, there is a standard listing fee of $0.20 per item. This listing fee is for four months.  Additionally, Etsy charges a 5% transaction fee from the sales of products.

Steps to Starting an Etsy Store

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your Etsy store should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your start-up expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect Etsy store name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

In addition to the legal name of the business, you will need to pick a unique Etsy shop name. Etsy limits names to 4 to 20 characters which can be challenging, but your Etsy shop doesn’t have to be the same as your legal name.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

RelatedComparison of Business Entities

Step 4: Select your Location

Most Etsy shop owners run their business from their homes. Be sure to check for restrictions or registrations, such as a home-occupation permit to run a business from your home.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

While there isn’t a business license or permit specifically for an Etsy business, there will likely be general business requirements such as a local business license, sales tax permit, and an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start an Etsy store is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

While listing your products and advertising on Etsy will bring shoppers, promoting your store on social media platforms like Facebook, Pinterest, Instagram, and others will help drive more traffic to your store.

Understanding how to pick the right keywords will make a huge difference in getting the right shoppers. Check out Etsy’s Keyword 101 article to learn the tips on using the right keywords in your listings.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

An Etsy store needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You may need employees to help you run your Etsy store.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your Etsy store is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning an Etsy Store?

Your potential revenue is completely dependent on the type of product you are selling.  You can research other Etsy stores that offer similar products to see what prices they charge. The average revenue for Etsy store owners was $537.50 per month last year.

Things to Consider Before Starting an Etsy Store

Running an Etsy store or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge. There were over 4 million active Etsy sellers in 2020, so you will face massive competition, depending on your product, and so you’ll have to spend money to get your store noticed.

You should test your product first to see if people like it and are willing to pay for it.  You don’t want to start making a product that you can’t sell.

Talk to other small business owners for tips on starting a business and do your homework to determine costs.  Research other Etsy stores to see what they offer and what prices they charge.

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