How to Start an Etsy Business

Etsy has opened up the world of creativity and ecommerce to a whole new generation of entrepreneurs. They make it easy for artisans and crafters to create innovative, curious, beautiful products and share them with the world. What used to be the purview of craft fairs and market stands can now easily be sold online to a whole new audience.

If you want to be a successful Etsy entrepreneur, you need a strong, robust plan for your new business. There’s plenty of competition in the Etsy marketplace, so having a novel approach, creating origina designs and getting proper business discipline in place is essential.

In this guide we’ll explore everything you need to do to set up your Etsy business and maximize your chances for success. We’ll cover:

set up an etsy shop
  • Understanding the world of Etsy
  • Deciding if you’re ready to start an Etsy business
  • Planning out your Etsy business
  • Determining the best legal structure for your new organization
  • Following various rules and regulations
  • Paying taxes for your Etsy business
  • Hiring employees, managing finances and administering your Etsy business
  • Locating other resources for your Etsy business
  • And much more

How to Make Money on Etsy

Key Background Stats for Etsy Businesses

The size and opportunity in the Etsy marketplace might surprise you:


Sellers on Etsy in 2016, making on average $1,800 each


People purchased goods on Etsy in 2016, spending an average of around $100 each


Worth of goods were sold through Etsy in 2016

etsy sales breakdown
  • Over 80 percent of Etsy sellers are women
  • Over 70 percent of sales on Etsy are repeat purchases
  • Etsy is in the top 10 most popular e-commerce websites in the U.S.
  • Nearly 55 million people use the platform
  • There are around 50 million products listed for sale on Etsy
This all points to Etsy being ripe with new opportunities for focused entrepreneurs, so now might be the perfect time to dive into starting your Etsy business. Incfile is here to help you form your Etsy business and understand the ins and outs of owning a company.

The Keys to Success: What Etsy Customers Want

With nearly 2 million sellers and 50 million products already in the Etsy marketplace, you need to stand out from the crowd if you want your Etsy business to be a success. This means understanding what your Etsy customers want from your products. We recommend focusing on several areas:


Create beautiful, original designs that showcase your skills and talents. Use your unique creativity and flair to build a “wow” factor into the items you craft — products that your potential customers won’t be able to find anywhere else.


Showcase your products in the best possible way. This means using expert photography, good lighting, great backgrounds and the right categories and keywords. Search is one of the main ways customers find items on Etsy, so ensure your descriptions are keyword rich.


Although customers realize they may need to pay a little more for quality, they’re still looking for a bargain. Make sure you price your products well with enough of a profit margin that you can grow your business, but keep prices low enough that you’re competitive with similar sellers.


Finding the right niche to grow your business in is essential. Your niche will largely be dictated by your own crafting skills, with the most popular categories being jewelry, stickers, clothing, craft supplies, bridal goods and baby shower decorations.

If you can combine these four areas together, you’ll have the perfect ingredients for a successful Etsy business.

Main Priorities for an Etsy Seller

With sellers earning an average of under $2,000 on Etsy in a year, it’s clear that for many people Etsy just provides some side income. If you want to make Etsy a major revenue stream for you, that needs some strong focus and a disciplined approach. Here are the challenges and advantages you need to be aware of.

  • Competition: Search locally, nationally or internationally. There are several in-depth market research reports available for the etsy business in the U.S. You will also want to research demographics in your proposed area — you’re looking for densely-populated areas with lots of renters or students.
  • Branding: Although your Etsy shop will be under Etsy’s own branding, you still have the opportunity to create an identity for your business. Look at what other sellers are doing and try to create a brand that stands out from the crowd. With most Etsy users being female, you will want a brand that’s friendly and approachable that speaks to their needs and life circumstances.
  • Discipline: You need to think of your Etsy shop as an independent business with all the focus that one requires. You should have proper plans and processes in place, practice strong financial management and have an in-depth understanding of your costs, sales prices, revenue and profit margins. Bear in mind that there are fees you need to pay to Etsy, as follows:
    • Listing fee of 20 cents per item, payable every four months
    • Commission of 3.5 percent of the selling price of each product
    • Payment processing fee of 3 percent of the item selling price plus 20 cents
  • Marketing: Finally, marketing will play a key role in the success of your Etsy business. You will need to develop a strong marketing plan that combines various channels to give you the most visibility and reach. Look into advertising on Etsy itself, organic SEO, paid search marketing, social media marketing and various other digital marketing opportunities. Make sure you can track your return on marketing investment.
main priorities for an etsy seller

Developing a Plan for Your Etsy Business

Before you start your business, there are a few key areas you need to focus on. You will need to establish whether there’s a demand for your Etsy products, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.

In short, you need a business plan — here’s how to think about your business idea.

Do Market Research and Validate Your Etsy Products and Services

Before you launch your Etsy business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:

  • Look at who your competitors are in the space: Carefully review all the possible Etsy sellers who will be competing by selling similar products to you. Look at how they structure their shops, products and pricing. Think about what you could do differently.
  • Talk to clients: Speak with potential customers to understand what they want from your Etsy products. See if you can identify new trends that you could take advantage of. Get involved in forums where your likely customers are hanging out.
  • Identify your business’s unique selling points (USPs): These are the areas that will set you apart from competitors and encourage customers to come to you. You might have better pricing, a higher-quality service, faster delivery, unique products or some other special feature. Be sure to bring this out in what you do.
  • Validate your products and services: Test whether people will commit to spending real money on what you’re offering before over-committing. Create prototypes of key products and test them in the marketplace to see if they generate interest and sales.
  • Get involved with business communities and discussion groups: Ask questions about Etsy businesses. You can find links to some excellent discussion groups later in the article.
What Are the Main Challenges for an Amazon Seller Entrepreneur?

Understand Your Etsy Business Model and Financial Projections

All businesses need a business model, which is how you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.

You will also need to look at financial projections for your Etsy business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself? If you can, try to plan your revenue for the next month, three months, year and two years.

What Are the Main Challenges for an Amazon Seller Entrepreneur?

Write a Business Plan for Your Etsy Business

Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:

  • 1 An executive summary with the most important points from your business plan
  • 2 Your goals and what you hope to achieve with your Etsy business
  • 3 A description of your business, background information and context
  • 4 A market analysis and likely demand
  • 5 An overview of how your business is structured
  • 6 Your business model
  • 7 How you will market and sell your offerings
  • 8 Financial projections, revenue and profitability
  • 9 Appendices

Do I Need an LLC to Sell on Etsy?

Now that you have all the background information for your Etsy business, it’s time to legally form your business entity. Many people wonder if they should have an LLC for their Etsy business, or if you can run your Etsy shop as a sole proprietor. In most cases, our recommendation is to set up an LLC so you can separate your business and personal assets—but the right business structure for you depends on your business needs. In the U.S., there are five main business structures. They are:

Choose the Right Business Structure and Register Your Amazon Business

Sole Proprietorship

This is the "default" business
structure and is what your
business will be if you decide
not to create a more formal
structure. We don't
recommend this type of
business as it doesn't give
you the legal protections you need.

Limited Liability

Limited Liability
Company or LLC

The most common type of business entity. An LLC is fast, simple and inexpensive to setup and maintain. It protects your personal finances and assets and keeps them separate from those of your business.

Series LLC

Series LLC

This is a special type of LLC entity that's only available in certain states. It allows you to create "mini" LLCs, each with their own limited liability and separate assets, under the umbrella of a master LLC.

S Corporation

S Corporation

This is a more complex type of
business and isn't generally
recommended for smaller

C Corporation

C Corporation

These are the largest and most
complex types of businesses
and are far more than the
average entrepreneur or
business owner will need.

If you've still got questions about different types of business entities, check out our in-depth guide, or hear our answers to the most common questions about LLCs vs. corporations.

If you're ready to start your Etsy LLC, you can check out our LLC formation guide for your state, or have Incfile take care of all the paperwork for you.

Setting Up Your Etsy Shop

Once you've legally created your Etsy business, you’ll need to get some other things in place. The most obvious first step is to create your Etsy seller account at Etsy will walk you through creating a seller profile, adding your products, and creating store policies, like those for returns and exchanges and customer service. You'll want to have attractive product photos and descriptive listings to help people find your products.

There are other logistical matters you'll need to consider in order to get your Etsy shop up and running. These include:

etsy business
Location of your workshop

Where are you going to create your products and run your business from? Some crafters may have a workshop at home, but remember you will need to store inventory and manage shipping. This can take up a lot of space. As your business grows, you might think about getting a more professional crafting space, complete with an area that's well lit for product photos.


What equipment do you need to manage your Etsy business? You will need a computer and smartphone at minimum, but you will also require crafting tools, machinery and raw materials. Make sure you account for likely demand and possible waste. Understand exactly what you need to spend so you can write it off against business expenses.

etsy business
etsy business
Marketing on Etsy

You will need to develop a brand and use digital marketing channels to drive traffic to your Etsy shop. This can include using keyword optimization in your Etsy listings so you show up in results, or it could include email and social media marketing. You also might want to consider paying for Etsy ads to get your listings more views. You'll find lots of great advice on these topics in the "Etsy Business Resources" later in this guide.


Make sure you have the right processes in place to understand what your most popular products are and analytics on how your business is doing. Etsy has some built-in analytics that will help you here, but you'll want to make sure you know how to get these reports and that you look at them regularly. Again, you'll find helpful advice on developing these processes in the "Etsy Business Resources" later in this guide.

You'll also want to find ways to manage your finances carefully and create your products in a cost-effective manner. Sometimes this can mean searching out cheaper resources for your raw materials, or cutting down on the time it takes to craft each individual item.

Software that Integrates with Etsy

Is there software that can help you manage and market your Etsy business? Some tools integrate with Etsy to help you manage your orders, estimate profits, create email campaigns, manage social media posts, or take better photos. There are also software platforms that help you cross-sell on other platforms, like Facebook. Explore whether these tools can help you run your business more effectively.


Do you need to hire employees to help you? More on that below.

permit & license
Permits and licenses

Running an Etsy business comes with certain rules, regulations and legalities you need to be aware of. Incfile offers a Business License Research Package for you or you can take the time to do the research yourself.

Finances and taxes

What kind of bank account will you get? Do you need a business credit card? How will you pay your business taxes? These are important questions to consider so your Etsy business stays in the green. Here at Incfile, we can even help you file your taxes.

finance & taxes
business maintenance
Business maintenance

Most states require businesses to file an Annual Report once a year. You will also be expected to pay estimated taxes on what you plan to earn in the current business year. Your federal, state, regional and city business licenses and permits may need to be renewed on a regular basis, typically once a year.

Our Start a Business Checklist will get your Etsy business going in the best possible way.


Etsy is a very empowering marketplace. In particular it’s a great way for female entrepreneurs to get started and with the right approach and discipline, it can grow from being a side project to becoming a powerful revenue stream. Follow the advice in this Etsy guide, and you’ll be able to create an Etsy business selling beautiful and amazing crafted products to the world.