How to Start an Etsy Business

Last updated: March 13th, 2024

First, you must visit the Etsy website, set up your shop and customize its appearance according to your taste, upload your products, pay the listing fee, select your desired pricing, optimize your keywords, and then, of course, begin marketing to prospective buyers. You also have to take care of legal aspects and begin to figure out how to scale. We take a look at all of these more deeply below.

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Step 1: Plan your business

Etsy business, just like any other business out there, requires a very deep level of planning before you can even dream of attaining success.

Sure, the business is quite profitable and has a lot of ready demand. Still, going into it blindly without proper planning and acclimatization spells more doom for your business than otherwise, especially if you don’t have any prior experience.

So what are the things you have to get familiar with, and what do you have to plan exactly? First of all, you have to get familiar with the costs of doing business, and then the revenue you expect from it.

These are basically what determines whether or not you go ahead with the business in the first place. We discuss more on cost planning for an Etsy business below.

What are the opening costs of getting a business going on Etsy?

One of the most appealing aspects of starting an Etsy business is the fact that you don’t need much to start. All you need is a working internet connection and your shop preferences at the back of your mind.

In terms of actual costs, setting up your Etsy shop is free. You will, however, have to pay a paltry 20 cents listing fee, which will keep your item on display for four months, after which you pay another 20 cents for another 4-month renewal.

Etsy also takes 3.5% of the selling price of items sold. There may also be fees deducted to process withdrawals, depending on which payment processing method you choose to go with.

Basically, though, setting up a shop is free, and other fees involved are generally highly reasonable.

What are the recurring costs?

As mentioned above, once you’ve paid your 20 cents to set up a listing on Etsy, you have a chance to cancel the listing after four months or pay another 20 cents to keep your product listed.

Another recurring cost that may be incurred as an Etsy seller is the cost of actually making your desired product. This, of course, is entirely dependent on whatever product (s) you choose to market on Etsy.

And then you also have to consider the cost of branding, marketing, promotion, packaging, and so on, which, again, is totally up to you. As far as the platform Itself is concerned, however, 20 cents for four months is all you have to pay upfront.

Step 2: Market plans

Market planning on Etsy is not like your typical brick-and-mortar setup. Selling on a marketplace like Etsy means you will have to pay attention to things such as keyword optimization, social media marketing, and other methods which you would not necessarily have to pay much attention to with a brick and mortar store.

We discuss more on carving out successful plans for your Etsy business below.

Who is your target market?

Your target market in an Etsy business is simple – Etsy users and other people who you know will be interested in your handmade products. How to reach these people, though, is a whole different question entirely.

Thanks to the fact that you sell on Etsy, with good keyword optimization, you will have the advantage of being able to reach a niche audience already on the platform. But, if you’re going to take your business to the next level, you also have to think past just marketing on Etsy alone.

You have to consider reaching out to people on social media platforms, running paid advertisements, and even running occasional discount sales.

How exactly does a business make money on Etsy?

A business makes money on Etsy by selling handmade items, vintage goods, and craft supplies. You set up your own customized store on Etsy and customers who are interested in your product find you through the platform and make their purchases.

The platform takes a percentage and you get the bulk of the money for the sales.

It pays to get as familiar with the platform as you can before starting your Etsy journey. This, along with taking the proper time to set up your shop, can go a long way in determining how successful your business on the platform will be.

How much do you charge customers?

How much you charge customers on your Etsy shop is all dependent on you. Choosing a perfect pricing strategy is one of the hardest parts of running a craft business,  but once you have the costs of your raw materials in mind, it becomes easier to set a retail price.

It is also highly advisable to do some research on similar stores selling similar products to get an idea of how much the average established market price is.

A general formula most Etsy marketers use to determine their prices involve multiplying the cost of labor and materials by two, to get the wholesale price. And multiplying the wholesale price by two to determine the retail price.

How much profit can an Etsy business make

A lot of businesses have been known to have found great success on Etsy. The profit potential is virtually endless and all dependent on you. As mentioned earlier, you could easily be making double, or even quadruple the costs of production on retail sales.

Once you identify the cost of raw materials and set an hourly wage for yourself (to determine Labor costs) you can easily fix your selling price at a level where you make a maximal profit.

What are the costs of scaling?

The costs of scaling an Etsy business involve putting in more time, hiring more labor, injecting more funds into marketing, promotion, and other forms of advertisements.

Scaling an Etsy business can either involve diversifying your shop or diverting more resources into the same product(s).

In the end how you scale, and how much you scale, is all up to you.

Now that you’re done with the planning and research aspect, another aspect just as important to focus on is the legal and technical aspects, where you handle all government requirements and compliance regulations for running a business.

Since your business is mostly online, you may choose to run it as a personal affair. But to be more professional, to remove personal liability, and for neater tax filings, it is advisable that you register your business as a legal entity with the appropriate bodies.

Before submitting your articles of organization to the state, however, you have to name your business.

Naming your business

The very first aspect to ensuring your company/business becomes recognizable, and the legal, entity is to find a proper name for it. This name, mind you, must also be unique, and as such you will have to carry out a name availability search on your state registration portal to ensure that your desired name hasn’t been taken.

You may also ensure to choose a name that is available for a federal trademark.

Register for taxes

This is the part where you obtain your employer identification number (EIN) which is a unique number assigned to your business for tax recognition purposes. It is quite easy to get this number on the IRS website.

You should also ensure to check in with the state to get familiar with other state requirements, if any, for tax purposes.

Open a business bank account

The primary purpose of a business bank account is to provide a much-needed degree of separation between your personal finances and your business. This helps you keep track of your spending and income generated, and also goes a long way in giving you a good deal of convenience when filing taxes and evaluating growth.

Step 4: Business accounting

Having a bank account to separate your finances is one thing. Keeping proper records of your spending and income is another. They are both highly important practices.

In this stage, you have to ensure to keep adequate written records on how your money is earned, from which sources, and of course how it is spent.

Step 5: Permits and licenses

Here again is where you check in with the appropriate state bodies regarding the needed permits and Licenses necessary for running a yard sign business. Like most regulatory activities in the United States, there seems to be some difference in requirements as you move from state to state.

Failure to obtain these permits may lead to hefty fines or a complete shutdown of your business

Step 6: Business insurance

Business insurance keeps you safe from unforeseen accidents. While it is an absolute no-brainer for some businesses to get insured, it may not seem so at first for a business that involves selling products on Etsy.

Not getting an insurance policy for your Etsy business, though, is an absolute mistake. Having an extra layer of protection never hurts. And if you happen to perform extensive research and choose an insurance package well-fitting for you, the whole process will end up being super convenient and well worth it.

Step 7: Defining your brand

Branding, on a general level, is like a constant supply of oxygen for a business. It helps your business to not only survive, but to thrive on a much deeper level, and what’s more, as your brand becomes stronger and more popular, your business starts to propel itself with minimal effort on your part.

This is why branding is so important, and one of the key elements to starting a business. You earn more trust, more recognition, and most importantly, you stand out from the competition.

Branding an Etsy business

Now that you understand the value of branding, it is natural to wonder whether or not it is so important for an Etsy business. I mean, after all this isn’t a fashion line or anything, right?

Well, I’d like to have you know that branding your Etsy business is just as important as branding a clothing line. From the very moment you set up your shop on Etsy, you should have a logo already, along with a tagline, and signature colors.

All of these are important aspects of branding an Etsy business and go a long way in separating your business from the pack.

Promotion and marketing

Promoting and marketing your Etsy product starts right from the very moment you put your shop online. It starts with choosing the right, descriptive keywords to identify your products so that they are easier to locate by interested shoppers, and taking captivating product photos that leave them enthralled and wanting more.

Social media and online platforms are other places where you can divert traffic to your Etsy business, and of course, paid advertisements are another option to consider.

Customer retention

Customer Retention on Etsy is all about providing high-quality products. This not only ensures that you have great reviews and customers who keep coming back, but it will also help propel existing customers to act as marketers on your behalf by referring friends and families to your store.

Once you have good products that are of the highest quality, all you have to do is put in the work at the start, and as time goes on they will practically market themselves and your customer retention will be off the charts.

Online presence

A key part of marketing nowadays is shifting from focusing solely on offline tactics and propelling your business to an online audience. This, you do by building a strong online presence for your business. And this is where Etsy comes into play.

Luckily Etsy is already your link towards a host of potential customers, but you can take it even farther by creating your own social media pages, from which you can then drive even more traffic to your Etsy page.

Step 8: What is the growth potential of an Etsy business?

The growth potential of an Etsy business, as mentioned earlier, is pretty much limitless. You can go from Etsy to having a nationwide store if you please. So long as you provide high-quality products and are willing to put in the work to get your store moving, there is practically nothing you can’t achieve.

A mistake to be on the lookout for, however, is trying to grow your business too fast. As with all things, patience is key in your Etsy business, and it is much more advisable to put in the time to perfect your product and satisfy existing customers than to rush to appeal to new customers while reducing the quality of your craft in the process.

Who is an Etsy business suitable For?

Etsy is suitable for anybody who has a particular affinity for creating handmade and hand-woven objects. Or even anyone with an entrepreneurial mind who happens to have access to people who have a knack for making arts and crafts.

You could simply partner up and form a team where you run the actual online marketing on Etsy and your partner(s) do the handmade creation.

Skills and experiences

Are there particular skills and experience needed for successfully running an Etsy business? Absolutely not. That’s one of the beauties of this industry, is the fact that pretty much anyone with a sense of organization, creativity, and entrepreneurship can enter into it and run it successfully, with a proper plan and a good deal of research beforehand.

Of course, having prior experience with this kind of creative and online marketing endeavor doesn’t hurt, and will certainly increase your chances compared to people who are just starting out from scratch. Still, it is by no means absolutely necessary.

A typical Etsy business day

A typical Etsy business day involves waking up, logging in to your store, checking out previous sales, looking over the stats so far, and probably updating a few key aspects here and there.

You then proceed to check in on your social pages and other online presence, before retreating back to your workspace and getting some actual physical work done.

Find a business mentor

A key to success with any business is to find a business mentor who can help guide you through rough patches and majorly serve as a source of inspiration. Ideally, this should be someone in the same industry as you, who is known not only for charm and charisma but for having actually found success in your desired field.

Build a team

One of the most important aspects of scaling any business is building a team of experts so that the business can run even more smoothly and reach a lot more people. For the yard sign business, things are no different.

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