You can definitely scale a small business on Etsy. There are several moving parts to consider. To simplify it, the first step is gaining confidence about two things:
- Know your profit margins. Just guessing can kill your dream quickly. Figure out your costs—all of them! Materials, labor (what you pay yourself and what you pay others), and overhead. (Most small startups work from home and can estimate overhead as 25% of all your other costs. As you grow you can get more precise.)
- Know your production capacity. [If you are selling digital downloads on Etsy or craft supplies that you buy wholesale and then resell, production doesn’t come into the equation.] If you are a handmaker, determine how long it takes to make an item, and then, how many can you reasonably make in a week.
Here’s an example of how this knowledge helps you grow. An artisan makes and sells a handmade item that retails for $30. When selling on Etsy she will pay 5% (or $1.50) seller fees to Etsy. She spends another $3 in packaging materials. Her total costs come to $20 each. She can confidently turn out 35 units a week.
With a margin of $10 per item, she can hire help to increase her inventory on hand. She should also have enough to pay for Etsy Promoted Listings or start selling on other markets like Amazon Handmade (where seller fees are 15%).
Paying for promotion is one way to scale. Both Etsy and Amazon allow you to run ad campaigns. You can also post images to Instagram, Facebook and Pinterest and run ad campaigns there. However, if you plan to scale via ads, run very low daily budget tests for a week and measure the sell-through. Ads may or may not be profitable for your product. Test and measure.
Another way to scale is to wholesale to stores and channeling all the sales through your Etsy shop. But check profit margins first! In the above example, there isn’t enough of a margin to sell to stores at 50% off retail. Questions I would ask her: Can you lower your production costs? Can you lower your costs of materials?
To make getting payments from stores easy, you would create a 50% off coupon for stores and then send buyers a link. You’ll also have to adjust your available inventory on Etsy in advance of sending buyers the link so as to accommodate larger orders. [Remember that Etsy will be collecting 5% on each sale!]
Of course, you don’t have to go through Etsy to process your wholesale orders. But then you will want another way to process credit card payments online.
How do you find store buyers? Wholesale buying portals. The websites below act as online portals where independent retail store buyers can purchase directly from makers. Each site has its own terms for listing products:
- Tundra | Wholesale Without the Hassle
- Faire / Wholesale Reinvented.
- IndieMe – Leading Wholesale Marketplace
- Helping makers grow their Wholesale – Wholesale In a Box
Scaling is possible. Are you ready to take it on? Is it right for your Etsy business? And finally, do you want to be a manager or a maker?
This article first appeared on: https://www.quora.com/Can-you-easily-scale-a-small-business-on-Etsy/answer/James-Dillehay