Fourscore and about a year ago, I went to an Etsy meetup. It was in a huge auditorium, and they were taking questions from the audience. How cool is this?? I thought. I’m going to get my questions answered by the actual people who run Etsy!
I waited patiently for my turn. “What should Etsy sellers do about taxes?”
A hush fell over the room. It was as if I had invoked the devil himself. (And then asked him to dance around the room naked with a bottle of gin).
The answer I received was nearly as shocking as the question itself. “Well, um. We don’t actually have any advice we can give you about taxes. It’s different in every country. We just recommend you save a portion of your income to pay taxes each month.”
And that pretty much sums up how the entire Etsy community treats anything financial.
That wasn’t good enough for me. After all, any small business owner will tell you that bad bookkeeping is the kiss of death. So I decided to do an experiment. For the first 6 months my shop was open, I kept a money diary.
For those of you who aren’t familiar with money diaries, it’s basically a journal detailing exactly what you bought (and why). You also keep track of the money you make.
I know, I know, doesn’t exactly sound like a bestseller. But it’s surprisingly fun to keep one.
A money diary gives you a window into how much your Etsy shop is really making. Because as you’ve probably figured out: you don’t get to keep all that money Etsy sends you. There are bills to pay. And supplies to buy.
I started my money diary on good old fashioned pen and paper, but I realized pretty quickly that wasn’t going to work. So I found an application that did it for me:
My first 6 months – immortalized in a money diary.
My money diary app is called Wave Accounting. I just hooked wave up to my bank account. Then I watched it
track all my expenses for me.
My money diary was such a success I got completely hooked. The more numbers I saw, the more insight I got into my business. And the better it started to do.
It’s pretty eye opening to see your finances plain as day like this. The coolest part was the little pie chart I got at the end of each month:
This little gem shows you exactly where your business is leaking money.
When I first started, shipping costs were 47% of my pie chart. I felt like that was pretty ridiculous. So I called the post office. They sent me a little postage machine. Now postage is less than a quarter of my expenses (19.5%), because I get a business discount.
In case you’re keeping score, that’s:
Money Diary – 1
Post Office – 0
Awesome sidenote: it was right around this time that I figured out how to start paying myself a salary. Wave told me exactly what I was spending on supplies each month, which meant I could calculate my profit to the penny. So get this:
Total $$ Made – Total Cost of Supplies = Your Salary Before Taxes (aka your Etsy Salary!)
To save for taxes:
Etsy Salary x 0.3 = Exact Amount You Should Save Each Month
This “0.3” number accounts for 30% of your income. This amount covers your taxes and
gives you some extra padding (I use it for savings).
At this point, I was hooked! I had to find more ways to use my shop data! I began trying other tools. I did the online business trackers. I paid a monthly fee for accounting software that turned out to be useless. And I realized that none of that worked for my business.
But Wave wasn’t giving me everything – there were still a ton of problems left unsolved.
Every time I added a product to Etsy, an avalanche of questions came rushing in:
- Am I underpricing my products?
- How do people do wholesale? I can barely afford the price I’m selling at now!
- Why am I losing money from…I honestly don’t know where?
- Am I wasting money on all this inventory?
- Can I afford to make this new product?
- What’s going to happen when I have to file taxes for all of this???
So what do you do when none of the traditional tools work for your business?
You make your own.
And that’s exactly what I did.
It took me about two months to get my act together, but I created a single, 2 page document that solved all those problems.
I call it my “Magic Etsy Spreadsheet”.
While a spreadsheet might not sound like much, this one is going to blow you away. Not only is it dead simple to use (you just enter the number of items you sell each day), but it’s going to tell you everything you need to know about your business on two easy pages.
When I first started my business, I was skeptical of spreadsheets. I thought they were an old fashioned way of doing something an app could easily do for me.
The major issue with apps is that they’re so niche. They only do one thing. And when you’re running a business, you don’t have time to switch back and forth between 50 tools.
You just need to Get. It. Done.
So I created myself a simple system that takes 5 minutes each day. And it does basically everything. Here’s the breakdown:
- Helps you instantly price your products like a pro.
- Automatically tracks your expenses and profit.
- Tells you exactly what to pay yourself each week.
- Shows you how to laser focus your shop for profit.
- Makes tax season look like child’s play.
A lot of people think that getting your finances under control is only for professional accountants. But I think the lack of financial support Etsy gives us is an invitation to do better. And it’s a lot easier than you think.
The day after I started using my magic Etsy spreadsheet, I woke up feeling lighter. My business was suddenly transparent. I knew what was going on where. There was no more guessing how much I made that day, or whether I could afford to replenish supplies.
For the first time in weeks, I felt like I wasn’t flying by the seat of my pants.
And it was almost embarrassingly easy. All I had to do was enter the number of sales I made each day. The spreadsheet does everything else for me.
It’s nearly a year later, and I’m dying to share my favorite resource with you. I created a no-nonsense course that will show you exactly how I did it. You’ll get my magic Etsy spreadsheet, the easy guide to taxes, and clear video tutorials showing you exactly how to replicate my results.
Want to see what it can do for your business? Get a good look at the entire course here.
Jenni Waldrop is the owner of Fuzzy and Birch, a sarcastic home décor shop that took off after only 9 months. She blogs about how she found success on Etsy and loves nothing more than helping other sellers quit their day jobs, once and for all!