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

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.

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
 

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

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?

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

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.

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

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

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

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