How To Start A Business In Etsy

Etsy has given a platform for millions of people to showcase their art and crafts to potential buyers. If you are talented individual with a vision of offering your products to customers in US and beyond, then Etsy is one of the platform for your new small business.

First let me give you some quick numbers on Etsy marketplace. Etsy boasts a whopping 46.3 million active users as of 2020. More than 2.7 millions sellers have opted to Etsy for selling their crafts. A good news is around 97% of Etsy sellers run their business from home. This article will give you a comprehensive step-by-step guide to start your own business in Etsy.

1. Determine the viability of your product:

Setting up an Etsy account doesn’t guarantee the sales. However, you can give yourself a better chance at succeeding by doing the research on your product, target audience and your competitors in Etsy.

Pricing is also one of the critical variables to run a successful Etsy shop. Make efforts to ensure that the product you are selling offers something unique at a better price.

2. Register your Business:

Before you register your business, you need to understand various business structures. The business structure you choose will affect the tax obligations, debts and formalities to register it. I strongly recommend you to get professional help before making this critical decision.

Below is an overview of popular business structures in USA :

Sole Proprietorship:

Most Etsy sellers operate as sole proprietor. Operating a business as sole proprietor does not require filling any formal documentation with state. It is the easiest option from a business compliance perspective. However, with the simplicity, there comes risk. Sole proprietorship business structure provides no barrier between the business owner and the business itself. This means, the business owners are fully responsible for any lawsuits or debts against the business.

In this business structure, business owners report and pay taxes related to business activities on their personal income tax returns. All business profits are subject to federal income tax and self-employment taxes.

Limited Liability Company(LLC):

Etsy sellers may find forming an LLC advantageous. A limited liability company(LLC) offers much of a simplicity of Sole Proprietorship while creating a legal barrier between the business and the business owner. Business owners are referred to as an LLC members. LLC members and LLC are treated as different entities. Therefore, if someone sues your business or it can not pay its debt, the LLC owner’s personal assets are always protected.

In this business structure, an LLC is treated as the same tax-paying entity as it’s members. All business tax obligations pass through the member’s individual tax returns. Keep in mind, company’s profit are also subject to self-employment tax.

C Corporation (C-Corp):

A C Corporation operates as separate legal entity from its owners. Business owners are referred to as ‘shareholders’ in C-corps. This structure has the highest level of asset protection for its shareholders.
In this business structure, the business is treated as separate tax-paying entity as it’s members. You probably have heard the term ‘double taxation’ in reference as to how C-Corps are taxed. This is because, some corporations are taxed at corporate level and shareholder level. First your company pays tax from its profit and when the dividends are distributed to the shareholders, income tax has to be paid by shareholders.

S Corporation (S-Corp):

S-Corporation is not even a business entity type. This is an extension of LLC, and corporations may choose this form if they meet IRS eligibility. The main reason for opting to register as S-corp , is usually to lower its owners self employment tax-burden. Unlike LLC, business owners are paid through company’s payroll rather than the owners draws. Therefore, instead of paying social security and Medicare taxes from all the business profit, owners only pay those employment taxes on wages and salaries they are paid from the company.

3. Open Business Bank Account:

Most banks require EIN(Employer Identification Number) to open the bank account. EIN is a unique 9 digit number used by government to identify the business as tax-paying entity.

It is super helpful to open a business bank account. It helps you separate your business and your personal financial transactions. For LLC and other corporations, it is imperative to have that barrier. A dedicated bank account for your business and maybe even a credit card account will help you draw the line between your personal and business monies.

4. Create an Etsy Account:

Creating an Etsy account is fairly simple. You need to use your account to start a business in Etsy. Therefore, make sure you upload high quality profile picture and a compelling bio to your account.

5. Setup your Etsy Shop:

Once you have created an Etsy account, you are ready to setup your shop. To set up the shop, go to Etsy’s website using a desktop web browser and click on ‘Sell on Etsy’ at top right corner. After that, choose all your preferences for you store(language, country, currency etc.) and enter your shop name.

Once you set up your shop form a desktop browser, you will be able to fine tune it from Etsy’s mobile app.

Keep in mind, Etsy charges sellers a variety of fees. I have highlighted a few of them below:

Listing Fee : This fee is charged to sellers when they list a product ($0.2 per listing). You have to pay this fee whether or not a sale occurs.

Multiple Quantity Fee : This fee is charged to sellers when selling multiple quantities of a listing in a same transaction ($0.20 per additional item). Keep in mind, only additional quantities sold in the transaction is subject to this fee.

Transaction Fees : This fee is charged to sellers whenever they make a sale. The fee is 5% of the total transaction amount.

Payment Processor Fees : This fee is also charged to sellers to process the payment form your customer’s credit card. Currently, US rate is 3% of the total sale value and an additional $0.25 per order.

6. Adding Products to your Shop:

To add the products in your Etsy shop, go to your Etsy Account and select the Shop manager. Then choose ‘Your shop’ if you’re a new seller. If you already have items in your shop, you can add new listings by selecting ’listings’. The guide below will help with to fill out necessary information about your product.

Product Photos :

The larger the image, the better the buyer will be able to zoom in to see your products up close. Therefore it is highly recommended to upload images no less than 2000 pixel wide. Etsy recommends seller to upload 5 different images of the product from different angles. You should also choose one of the images to be the thumbnail, that’s the one the buyer will see in your shop’s homepage.

Videos :

Uploading product videos are optional but a well edited and shot video is a better way to showcase your ideas. Video should be 5 to 15 seconds long and the ideal resolution is at least 1080p. Please note that the listing videos does not contain audio, therefore sound is removed from the video when you upload it.

Listing Details :

This information will decide how your product is categorised in Etsy. Categorising your product is essential to getting your product found. Make sure you give your listing a descriptive title and also complete ‘About the listing’ section to let your customers know what the item is, who made it, when was it made, and whether your item is handmade, vintage or a craft supply.

Listing Description :

Listing description is nothing but the description of your product. When describing your product consider using titles and tags to help people find your product when they are looking for an item like those you sell. Also, it would be really advantageous to learn some SEO basics to improve your shop’s visibility in Etsy Search.

Pricing and Inventory :

Price your products fairly and make sure you show the real quantity of items in stock. I would strongly recommend you to use SKU(Stock Keeping Unit) numbers, to track your inventory.

Shipping :

You need to set up shipping profiles for your shop in-order to create a shipping option for your listing.

7. Selecting Payment Systems:

Etsy requires its sellers to receive payments from buyers through Etsy Payments. For sellers who are from countries not eligible for Etsy Payments, payments may be accepted through PayPal, Checks, Money orders or another method requested by seller, if approved by Etsy.

8. Publishing your Shop:

After you finish playing around and setting up your shop, there is one more step to officially open your Etsy shop to customers. To publish your shop online, click ‘Open your Shop’. You can always make changes to your shop even after you’ve opened it.

Your shop can be found at these URLS’s:

Replace ‘youshopname’ to the actual name of your shop.

9. Marketing your Shop:

No matter how amazing your shop is and how great your products are, you need to put the time and effort to be seen by your potential customers. These are few popular marketing strategies:

Social Media:

Social medias like Facebook, Instagram, Pinterest and TikTok can be great tools to generate awareness about your brand and to attract potential customers. As you list a new product on the shop, let your followers know about it in your social medias. Keep posting content and interacting with your audience; and you will be surprised on how many customers these posts can bring you.

Not only you can use Instagram to drive traffic to your store but you can also make money on Instagram as a side hustle.

Live Events:

Live Events is a great way to build your brand awareness in communities. Take your Etsy shop offline by attending events such as art and craft fairs, where you can showcase your products.

Etsy Advertisements:

One of the best ways to market your shop is using Etsy Ads. I would strongly recommend putting aside a small amount of money for advertisements for your shop. The best thing about Etsy Ads is that you can monitor your ad campaigns and set daily budget to it. This makes keeping your costs in check super effective. Etsy ad shows up throughout the Etsy website and Etsy app.