If you’re selling on Etsy, even if you consider it a hobby, although my guess is that if you’re reading this you consider your Etsy shop a business (or at least you want to work towards that)… Then listen up…
If you’re in business to be in business, then you need to know your numbers.
What numbers you ask? Well, I’m so glad you did… 🙂 But first, a disclaimer:
I am not an accountant.
What I am sharing with you is just general information and is therefore not intended to be construed as tax advice.
So, let’s begin…
You need to know what’s going out and what’s coming in (dollar-wise) of your Etsy business.
It’s the only way you’ll be able to tell if selling on Etsy is just costing you money or if you’re actually making any money.
Making a sale does not necessarily equate to making an actual profit.
The other good thing about keeping track of your numbers is that when you know them, you can see where you need to make changes to get you on the road to becoming more profitable in your Etsy business.
So… What numbers do you need to know? Here are some you should start off with…
- COGS (Cost of Goods Sold) – you start here… How much does each product you sell cost you? You’ll need to include the cost of your raw materials and crafting supplies used to make each item in this number. I know this number can get a little tricky for crafters and handmade artisans because sometimes it’s just not easy to estimate the actual cost of a supply you use partially and for multiple items… Try and ballpark it or use a rough estimate, but you need a number for this.
- Total Sales – a.k.a your gross sales, this is the total amount of money you made in sales. Its easiest to start by recording each sale you make by month so that all you need to do is tally them up once a month and then once a year (to get your gross income for the year). You’ll need to subtract fees you incur… More on that below.
- To get a rough idea of the margin of income you’re bringing in, subtract your Total Sales from your COGS i.e. Total Sales minus COGS = Gross Margin
- Operational Costs of Doing Business – these will include all those other “little things” you spend money on for your business, such as:
- Advertising: do you run Etsy Promoted Listings, Pinterest ads, Facebook ads, etc.?
- Shipping supplies: if you’re not recycling boxes you received from Amazon (or wherever…), how much are you spending on the supplies you use to package and ship your products?
- Etsy fees: low as they may be (well, depending on your sales volume), you must take these fees into account as they are definitely a source of expenses you’re incurring for operating your Etsy business. Don’t forget that these fees include both your listing fees as well as your final sales value fees
- Office/studio space and/or equipment: you may be working out of your home office or studio so a portion of your rent or mortgage will be wrapped up in here. What equipment and tools did you have to purchase to make and sell what you make and sell? Are there any recurring or maintenance fees associated with them…?
By keeping track of all these numbers you can actually get to a more profitable place in your business because you’ll be able to see more clearly where you need to cut back and when, and where you need to invest more and when.
And to find out what your net income actually is you’ll need to subtract everything that’ went out from what came in i.e.
Total sales minus (Operational costs + COGS + Other expenses I didn’t mention but that you may incur) = Net income
Tips for selling on Etsy
Tools to help you keep track of your numbers:
- Excel or Open Office – a simple spreadsheet works perfectly well, especially if you’re bootstrapping your business right now
- QuickBooks – more advanced, but there is an online application so you can access it from anywhere; depending on the package you sign up for you might be able to link the data to your tax filing info
- WaveApps – I haven’t used them myself but you can start off with a free trial to check it out
- Outright.com – I used to use them in the past and I was happy with them. The company is now owned by GoDaddy so they are pretty stable and well-funded.
- Bookkeeper or Accountant – of course you, if you have the budget for it, you can also hire an actual bookkeeper or accountant to help you get your accounting and your books in order. Ask trusted friends and family for good referrals.
And of course if you want to help keep it in the Etsy family and support other Etsy sellers (plus, they most likely understand things from a uniquely “Etsy-ian” point of view) here are some Etsy shops that offer products to help you with your accounting and bookkeeping:
- JJM Finance – this shop is run by Jason Malinak, he’s a CPA and author of the best-selling book Etsy-preneurship
- Express Excel
- Paper and Spark – shop is run by Janet LeBlanc and her About page states she’s a former accountant
More Tips For Selling on Etsy
- Shop stats
- Customer service and Up-selling
- Connecting with bloggers
- Connecting with your buyers
Connect With Me:
- Twitter: Follow @ConvoMePodcast
- Facebook Group: Etsy Conversations – This is where I’m connecting with you after the podcast. Lots of fun convos here too!
- Facebook: Like the Etsy Conversations Podcast Facebook Page
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- Email: Use the Contact Form OR interview [at] convome [dot] com