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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:

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.

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.

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.

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.

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.

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.

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:


An executive summary with the most important points from your business plan


Your goals and what you hope to achieve with your Etsy business


A description of your business, background information and context


A market analysis and likely demand


An overview of how your business is structured


Your business model


How you will market and sell your offerings


Financial projections, revenue and profitability



We’ve got the perfect guide to writing your business plan.

Do I Need an LLC to Sell on Etsy?

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:

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 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

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

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

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 Bizee 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.com. 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:

The Complete "Start Your Business" Checklist

A Clear and Comprehensive Guide to Starting Your Business the Right Way

The Complete Start Your Business Checklist

Hire Employees for Your Etsy Business

If you’re just running your Etsy business solo, you don’t need to worry about employees. If you are hiring people to work for you, you will need to know what to do.

Get an Employer Identification Number (EIN)

Contact the IRS and let them know you will need an EIN for your Etsy business. This is a number you will use to file and pay your taxes. We put together this guide to getting your EIN. You need this even if you don’t plan to hire employees.

Make Sure Your Employees Can Work in the U.S.

Your employees must be legally able to work here. Carry out background checks and ensure they have all necessary legal documentation.

Report Employees as “New Hires”

In most cases you will need to report the hiring of employees to your state.

Learn About Legal Requirements and Responsibilities to Employees

You do have certain responsibilities and requirements for hiring employees. In addition to getting a proper employment contract in place with them, you have a duty to provide them with a safe working environment, proper training, regular pay and certain other criteria. OSHA covers your health and safety requirements, while the U.S. Department of Labor provides information on other responsibilities.

Get Workers’ Compensation Insurance in Place

As listed above, you will need to make sure you have proper workers’ compensation insurance to cover injuries, illness, medical costs and the like.

Pay Employees on a Regular Basis

You will need to run payroll and compensate your employees on a regular frequency. Your state may mandate how often employees need to be paid.

Withhold Income and Payroll Taxes

You will need to calculate and keep back income tax so you can pay the appropriate bodies. You will also need to pay the employer portion of the payroll tax.

Social Media and Discussion Groups for Your Etsy Business

Connecting with other business owners in your industry can be incredibly helpful. Here are some of the best social media and discussion groups:

The Etsy Forums

Easily the best place to start, the Etsy forums are hosted by Etsy and contain a wealth of information, advice and discussion points for all Etsy entrepreneurs

Etsy Sellers United (Facebook)

A discussion group for Etsy Sellers to network together and discuss new ideas, share photos, share shop items and more

Etsy Sellers and Buyers! (Facebook)

A place for Etsy sellers to showcase their items and Etsy buyers to share the items they love

Etsy Subreddit (Reddit)

A discussion group for all things Etsy

Useful Online Tools for Your Etsy Business

Here are some really great online tools for managing your Etsy business. They will reduce the time you spend on administration, help you collaborate with others and free up your time to grow and manage your new venture.

Please note: This page contains affiliate links and we may receive a commission if you make a purchase using these links.


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.