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How to Start an Etsy Store

Overview

How to Start an Etsy Store

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.

Etsy 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 handmade goods, 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 Etsy shoppers, 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.

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 shop.

  • 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.

Checklist for Starting an Etsy Store

If you’re thinking about starting an Etsy store, it’s important to do your research first. Here is a checklist to help you get started.

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.

Related: How to write a business plan

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 the 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.

When deciding on which business entity is best for an Etsy store, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: 3 steps to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

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.

If a larger facility is needed for the production of goods and packing and shipping, be sure to look for a facility that can expand as your business grows.

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: What licenses do Etsy stores need?

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 bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

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.

Related: How to start selling on Etsy

You should test your product first before making a significant investment 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.

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 Etsy SEO and 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

Every business is going to need a logo. Make a professional logo in no time with the free Canvaa logo maker!

Step 9: Get Business Insurance

To protect an Etsy store, there are a few types of insurance that should be considered. A couple of these include:
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.

The cost of insuring an Etsy shop will vary on several factors. 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: Hire 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 the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start an Etsy store?

Here are a few common costs you will have 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.

How profitable is 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. According to Etsy, the average revenue for Etsy store owners was $537.50 per month last year.

Are there grants to start an Etsy store?

It’s extremely rare to find a grant to start an Etsy store. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for an Etsy store?

The NAICS code for a freelance writing business is 454110, which is classified under Online Stores.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

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