How To Start An Etsy Shop To Build Passive Income

How To Start An Etsy Shop To Build Passive Income
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On the path to Financial Independence, you might find that you can only cut so much. Therefore, it is only natural to search for a side hustle to boost your income and savings rate.

In general, I am a big fan of finding side hustles that have a low barrier to entry but can pay big dividends if you put the time in. In particular, starting an Etsy shop selling digital downloads or printables is a smart way to find extra income now and develop passive income down the road.

The Etsy Marketplace

Etsy is one of the world’s largest online marketplaces. It is unique since unlike Amazon or eBay, the products are specifically made by the sellers. By tapping into their online platform, it is very easy to sell products that you create yourself. Don’t let the ‘create’ aspect of it deter you though, you don’t need design or manufacturing experience to create items. You just need a willingness to learn.

You can sell both physical and digital items, but there is a distinction between the two you should be aware of. In general, you should do what you enjoy most but will still sell. With that said, physical items are much more time intensive. Digital items, such as printables, are made once and can be sold an infinite amount of times. Physical items are either made in batches or per order and must be shipped in a timely manner.

From a FI perspective, digital items have the most potential to provide passive income.

Etsy’s most popular items are physical items, such as jewelry and stickers, but digital items still do very well and selling on Etsy could serve as a springboard for future opportunities.

My Etsy Experience

In March of 2018, I participated in the Etsy Mastermind held by Gwen and J from the Fire Drill Podcast. A group of us all started Etsy shops and there have been some nice success stories. Seeing what everyone put together impressed me despite a lack of background in design.

I joined for a few reasons. I had already developed some printables/digital products for my blog such as this Debt Thermometer as a way to visually track your debt payoff. It is unique because it automatically fills out the thermometer whereas other thermometers have to be filled out by hand. While I give it away for free on the blog, I knew that Etsy had a very different and much larger audience for me to sell it to along with other personal finance related printables.

I am an Architect for my day job, so I have lots of experience with Adobe products and have access for free to that software suite through my work. That would allow me to make more items too based on personal finance and goal tracking. Through Architecture, I have a design background but was never trained in graphic design. I still felt comfortable though making printables since how different was it then making a nice presentation?

My wife and I also dabble with selling on eBay and Amazon and while the extra money is nice when you get it, shipping is not so fun. By selling digital products, I saw the benefit of the income without the shipping.

So, I started Modern Printable Shop on Etsy using a cleaned up version of my debt thermometer as the only item (I now have 22). Four days later, I made my first sale at a price of $1.99.

How To Start An Etsy Shop

The best way to start an Etsy shop is to just do it. The great thing about it is that in one day you can make a product and have it listed for sale. For $0.20, which is the listing fee, you can be up and running in relatively little time. There is very little downside to giving it a shot.

Now, to start the shop, you need to have one item to list before it can go live. Therefore, the first part of opening an Etsy shop is to determine what you will sell.

There are two ways to approach this.

  1. Choose something that you have experience with such as a skill or product made elsewhere.
  2. Do research on what is selling well that you can provide value to.

Here are some ideas for what to sell but know that there are many more possibilities.

Physical Products

  • Jewelry
  • Crafts
  • Stickers
  • Planners/Journals
  • Clothing
  • Party Décor
  • Custom/Engraved Items

Digital items

Example Etsy Shops

From our mastermind, there are three shops that I want to highlight as they are successful and each uniquely different.

Good Life Printables

  • A shop specializing in funeral program templates
  • Uses Microsoft Word to make the template
  • A great example of a very niche product but one that sells and does well

Felting Nerdy and More

  • Templates for felting books with a nerdy twist
  • Uses Microsoft Word to write instructions and provide the templates which are hand drawn and scanned
  • There is no physical product, but beautiful pictures of the resulting felting books are provided for reference

The Swag Elephant

  • Bachelorette party games and décor
  • Products made in both Canva and Adobe products
  • Sells both physical and digital products in the store

None of these shop owners have design experience that I know of but they all were able to find a way to make great products that resonate with their buyers. The biggest thing is they put the time in to find products that sell well.

This probably doesn’t need to be said, but if you are going to successful, your products need to provide value to the buyer just as you would want for any purchase you make. That doesn’t mean everything needs to be perfect though when you start. Over time, you can continually revisit your products, listings, and shop to improve it as nothing is set in stone.

If you wait until everything is perfect, then you will never open it.

Related: 15 Passive Income Ideas Guaranteed To Earn You More Money

Research Potential Products

In general, Google will be your best friend for figuring out any questions you have about Etsy or making your products.

More specifically though, search Etsy to research your competition or products you might make. If you have an idea, search it to see what is currently for sale and look for ways to improve on it.

Also, once you have a shop up and running, you can use EtsyRank to do keyword research and see what products sell well. This is a valuable tool that tells you the level of demand and competition for all items on Etsy. It is free although there is a premium version for a fee. I have only used the free portion of it though.

How To Make Digital Downloads/ Printables

Any sort of experience with Adobe products (Photoshop, InDesign, Illustrator, etc.), Microsoft Office products (Word, Excel, etc.) or other software is great. Those aren’t free though so unless you already have access to them, I don’t recommend paying for them to start your shop.

It might take some time to find items that sell so unless you have proof of concept elsewhere or other side hustle money that you want to invest in software, keep costs low in the beginning.

Find free alternatives to make your products as you start. If things go well, you can always upgrade using money made from your Etsy shop.

Here are some free options to consider that I have used or heard good things about.

  • Gimp (free Adobe Photoshop alternative)
  • Scribus (free Adobe InDesign alternative)
  • Inkscape (free Adobe Illustrator alternative)
  • Canva (free image creator)
  • Ribbet (free image creator)

You don’t need a graphic design background to make your products, but it will take practice to learn the software though if you don’t know it. You need to learn it just well enough to make your product though, and honestly, you would be surprised what you are capable of. I have been very surprised to see many people without a design background create competent and appealing digital products.

We recommend this Etsy Printables course from Gold City Ventures that can show you how to really make money in this genre.

Also, for digital products, you need to be aware of using copywritten images or fonts. Only use pictures or fonts that are available for commercial use. A simple Google search will help you find many fonts for commercial use for free. Pixabay will give you free images that you can use in a vignette for your listings. Read the terms and conditions though to verify it is acceptable to use the images and fonts the way you intend to.

How Much Does It Cost To Start An Etsy Shop

There are no general usage fees for simply having a shop open. There is a fee of $10 to use Etsy Plus but that is not required to start or operate a successful shop. Using that service has no bearing on your shop and will neither favor your items or help them sell more. I personally have not used Etsy Plus so I can’t comment on it.

There are listing, transaction, processing and advertising fees depending on how you use the service but here are the basic ones.

Listing Fee: $0.20 per unit sold (paid upon the initial listing of the item)

Transaction:5% of Listing Price (paid upon selling an item)

*Etsy Processing Fee: $0.25 Flat Fee + 3% of Total Sale Price (paid upon selling an item)

*You can also use Paypal to process your transactions, but the price is comparable and I’m not sure it is worth the hassle to incorporate a 3rd party in the process. I personally use Etsy to process payments. Also, if multiple items are included in an order, the Etsy processing fee is only charged once.

These fees are important to understand and to factor in when pricing your items. You can see that having to pay $0.45 plus 8% will have a great impact if the item price is lower.

For example, let’s look at item prices of $1.00, $3.00 and $10.00 to see how fees affect your profit. This assumes one item sold per order.

Sale Price – Listing Fees ($.20) – Transaction Fees (5%) – Processing Fees (3% + $0.25)

$1.00 – $0.20 – $0.05 – $0.28 = $0.47 PROFIT (53% Total Fee)

$3.00 – $0.20 – $0.15 – $0.34 = $2.31 PROFIT (23% Total Fee)

$10.00 – $0.20 – $0.50 – $0.55 = $8.75 PROFIT (12.5% Total Fee)

So, the higher the price, the lower the resulting fees. Selling (10) $1 items in separate orders will not give you nearly the same overall profit as selling (1) $10 item

Related: How Starting A Business Will Impact Our Finances

How Much Can You Make On Etsy Selling Printables

Obviously, results will vary but I will share my experience that might serve as a guide.

Over the life of my shop, about ten months, I have made $4,286 gross revenue as of writing this. About $3,375 is net profit so my total fees (including advertising) have been about 22%.

In my first month, I made $12.95 in gross revenue (honestly very good) and the next month I made $131.47 gross. Those were my lowest months. Things started to work well for me quick, but I don’t think it is common to have that much in sales out of the gate, but it is possible.

Modern Printable Shop Total Sales

I spent three months building the shop, from March to June, and my last item I listed was a personal finance bundle of my most popular items. That was a game changer since it has been priced at about $8-$10. Before that, all my items were priced at $2-$4. Based on the fee structure above, you can see why the prices matter, especially if you are making printables which commonly are lower priced. I was making sales, but my profits weren’t great.

During those three months of building the shop, I made $450 of gross revenue with about $275 of actual profit.

Since then, June of 2018 to mid-January 2019, I added no items, but the shop was able to coast provided I stayed on top of any customer service. During that time, I made an additional $3,836 gross in large part due to the personal finance bundle which included that original debt thermometer I made on day one. I also reduced my fees a bit with the pricing and contents of the bundle.

Your products will also go through seasonal swings too so keep that in mind.

How To Build Passive Income With Etsy

Once you have a shop up and running, the best thing to do is continually work on it to see what works for you or doesn’t.

If the dream of passive income is to make money while sleeping, I have woken up many times to see my products were purchased while I was sleeping.

One aspect of selling on Etsy though, for both physical or digital items, is customer service. Beyond shipping, you will get questions about your products or orders that need attention within 24 hours. It isn’t a daily thing, but it can come at any time.

Selling digital products are very close to passive once your store is built up, but you still have the customer service component to handle.

If you want it to be truly passive, you can pay a Virtual Assistant (VA) to handle your customers for you. Obviously, you would need to trust them and know they have good judgment when dealing with customers but outsourcing that aspect would make it passive at that point.

You can also hire VA’s to make your printables too. That is something we are actively looking into so that we can add more items to our shop without diverting too much attention from other side hustles. I still handle all customer service activities with my shop and don’t plan to outsource that any time soon.

For physical products, you could outsource the whole process. That still seems much more involved, so you can see why I favor digital products so much if this is a side hustle. It just depends on the economic model of your products and looking at the fee structure, it would probably need to be a higher-priced item to pay for the overhead of the labor and manufacturing.

Related: Make Money With Your Car (Without Driving)

Start Listing

The worst thing that can happen is you start a shop, spend a few days making listings, and no one buys anything. Let’s say you listed 10 items and paid the $0.20 fee for each one resulting in $2.00 lost.

That is your worst-case scenario.

The good news is that you learned what doesn’t sell. You can take that knowledge and any skills you learned in the process and apply that to the next side hustle, Etsy or not.

Best case scenario is that you find a new passive income source that can fund savings accounts or even supplement your income. Based on my earnings, with a bit more work, I could have a shop that fully funds a Roth IRA each year for minimal work. Think about how that can compound over the years.

Also, these items aren’t exclusive to Etsy. I can sell them elsewhere or use them as a springboard to other products. In the beginning, you’re just tapping into the Etsy platform, but you aren’t limited to it in the end.

Whether Etsy is for you or not, it is worth considering as it is a viable platform to start your next side hustle.

Kevin Jones is the co-founder of Debt Free Happens where he and his wife share their story of debt freedom paying off $107K of debt in 33 months. Along with his Etsy shop, Modern Printable Shop, they share their resources, tips, and motivation to help others save money and pay off debt.

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How To Start An Etsy Shop To Build Passive Income

ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers.
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