Category Archives: Crafting a Business 101

An Easy, Step-by-Step Guide to Downloading & Analyzing Your Etsy Shop Sales

As small business owners, we are swimming in a deep sea of numbers, stats, and financial data on a daily basis (whether you choose to ignore this sea or not is a different story!). Luckily, what you may not know is that Etsy makes it super easy for shop owners to download their sales info in order to calculate their net income in a relatively painless process.

download your etsy csv file sales

You can download your sales data from Etsy on an annual or monthly basis and quickly export this info to a spreadsheet, where it can be sorted, filtered, summed, and utilized with other data. This is a quick and easy way to calculate all sorts of helpful numbers, including your total sales and shipping, which will be especially helpful for tax time.

Here’s a step-by-step guide on how to download your sales data from Etsy, and what to do with it once you’ve got it (please note that I use Excel for my spreadsheets):

step by step guide how to download your etsy sales file

 

step by step guide how to download your etsy sales file

 

 

 

 

 

 

 

You’ll then see a screen that looks something like this:

step by step guide how to download your etsy sales file

There are lots of different things you can do from here. Etsy offers several items for download, including a spreadsheet of the listings you currently have for sale, your orders by item, your orders by total, your direct checkout payments, and your direct checkout deposits. Read the descriptions to see what else you might like to download. For now, we’re going to use the orders download to calculate our total sales.

Etsy also gives you the option of downloading any of these spreadsheets for a specific month of a year, or for an entire year. Right now, we’ll download all of our orders from last year.

step by step guide how to download your etsy sales file

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Since I’m using Windows, I’m going to open my file in Excel. From here on out I’m going to give you some step-by-step instructions on how to format and set up your sales data in Excel. You can obviously format it however you’d like, this is just what makes sense to me, and may be helpful if you’re an Excel novice.

After you’ve got your file open in Excel (should automatically open if you selected “open” in the previous step), let’s first make the column widths all pretty so we can actually read all this data.

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Now we’ll add filters so we can better analyze all this nice data.

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Etsy gives you a lot more information here than you probably need, like the names and addresses of all your customers. While the ship state might be helpful to filter for sales tax purposes, we can hide a lot of columns to make our data more manageable. If we decide we need it later, it’s easy to unhide a column.

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I like to freeze my top row so that as I scroll down I still can refer to the column header to know what I’m looking at.

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Then we format all our financial data to actually look like money rather than just a number.

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Now it’s time to use a simple formula to get some great data, like our total sales, total amount we got paid for shipping, sales taxes collected, and credit card fees.

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Excel makes it easy to use the filter function to sort by all sorts of things. Here, we can put our sales in chronological order. We could even choose to only look at one month or one quarter’s worth of sales (also helpful for quarterly tax returns or payments). We can use this function to look at only paypal sales, only international sales, only sales over or under a certain dollar amount…the possibilities are endless.

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Let the big green letters below represent the following:

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Don’t forget that your gross sales on your tax return should include everything you got paid for shipping as well. You’d report A + B as sales on your tax return. E, your credit card processing fees, would be a tax deduction.

You can copy F, your Etsy net sales, to your personal bookkeeping spreadsheet and then add in any other revenue streams and subtract all your other expenses to get your business’ true net income.

So there you go, a step-by-step guide on how to utilize this wonderful asset that Etsy provides for us! If you didn’t know this existed, I hope you found this helpful. You might also want to check out our ongoing Etsy Shop Stats series of articles to get help on another free asset that Etsy provides!

Do you have any questions on how to download and intrepret your Etsy sales spreadsheet?

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the etsy seller spreadsheet by paper + spark

Are You Using the Right Keywords? Interpreting & Utilizing Your Etsy Shop Stats, part 2

free marketing tips for creative small businessesOur latest series of Marketing Magic articles discusses how to analyze your Etsy Shop Stats to help increase your views and boost sales. Read the intro to the series here to get started.

Let’s move on now to a few quick and simple tests or processes you can perform every so often while checking out your shop stats. I try to give you some procedures to perform and things to think about that might not be as blatantly obvious as just glancing at your stats chart every few weeks.

#1. Review Your Most Popular Keywordshow to use your etsy stats tutorial

The Thought Process 

Most of your listings are probably found via search, whether on Etsy or another search engine like Google. Using smart keywords, tags, titles, and descriptions and making your shop SEO-friendly will go a long way in boosting your search page rank and thus your views. A thorough review of the keywords section of your stats will help you spot weaknesses and opportunites in your listings’ tags.

The Testing Procedure 

To make things more manageable and effective, I suggest looking at your stats in chunks of at least 1 month’s time (like “last month”’s view for example) for this analysis. Take a look at your top 10 or so keywords in the “Keywords” box in your shop stats. It might even be helpful to start a spreadsheet or Word file where you make note of which keywords seem to be drawing in the most traffic over time.

Questions to Ask Yourself

  • What are my most effective keywords? Which keywords are showing up time after time?
  • Can I apply these popular keywords to more of my listings?
  • Do I have any keywords or phrases showing up here that I’m not already using as listing tags?
  • Do I have any keywords or phrases showing up that I’m not using in my titles or the beginning paragraph of my descriptions?
  • Are there any tags I’m using a lot in my listings that are rarely showing up here?

Lessons Learned

First, make sure that all applicable listings have your most popular keywords and phrases as a tag, part of the title, and somewhere in the first few sentences of your description. This ensures max SEO-ability. When I talk about tags, I mean those 13 special words you enter in the tag section when you create a listing. Tags influence where and how your items show up in an Etsy search. Good keyword usage in your title and description helps you for offsite searches, like on Google.

Second, see what keywords might be listed in your top 10 that you aren’t already using as a tag. Start using these more often in your tags, titles, and descriptions.

Finally, look at this as a sort of round-about way to figure out what tags and keywords are not working. Sometimes, using keywords that are too “generic” can be a waste of important tag space. You will likely show up on results page 100 for the keyword “purse”, but you might show up on page 2 of “leather crossbody purse”. Being more specific will also bring you viewers that are more likely to buy your product, since it’s exactly what they are looking for.

Don’t be afraid to experiment with your tags and keyword usage, especially if you are just starting out. If you have two similar listings and you’re debating how to tag them, you can use them as a testing ground. For example, if I have two pairs of crystal earrings, I might use “estate sale” type tags on one, and bridal & wedding-related tags on the other, to see which type of keywords are being searched more often.

Paying attention to your keyword stats will help you improve your listings and boost your views. Tune in for our next Marketing Magic segment for test #2 on how to effectively analyze your Etsy shop stats.

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Marketing Magic – Interpreting & Utilizing Your Etsy Shop Stats, an intro

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In this Marketing Magic segment, we’ll discuss how you can easily utilize your Etsy stats to fine-tune your keyword and tag usage and thus boost your views, favorites, and hopefully sales.

If you have an Etsy shop, you have a wealth of easily accessible and free data at your fingertips…your Etsy Shop Stats! Maybe you are a stat-junkie like myself (I check them multiple times a day), or maybe you are like, “What the heck are my shop stats”?

how to use your etsy shop stats

You can access your shop stats either via the drop down menu, as shown here (please ignore the 46 items in my cart, I’m a virtual hoarder you see) or on the left side bar under “Stats” if you are already in your shop view. A summarized version is also now available on your shop dashboard.

You can view your stats in a variety of ways…daily, weekly, monthly, yearly, or any specific set of dates…all on a handy line graph. There’s one set of datapoints that represents your shop (shown in blue) and another for your listings (shown in purple).

Your stats will include numbers for views, favorites, orders, and revenue (sales dollars, excluding shipping). There’s also a map tab that will show you where your viewers and customers are coming from geographically.

This is a lot of info to digest! If used correctly, your Etsy stats can be a great tool. There is a lot of data that can be mined from just this one page of info. On a broad scale, this data tells you what you’re doing right and what’s not working. We can find clues to make listing titles, descriptions, tags, and keywords more effective. Your Etsy stats can also help you refine your marketing and promoting efforts.

Over the next few Marketing Magic posts, I’m going to suggest a few quick and relatively painless processes you can do every so often that will help you take full advantage of the great information hidden within this data. In the meantime (if you haven’t already), I encourage you to start checking your Shop Stats regularly and get familiar with the info available to you.

UPDATE links to the rest of this series:

How do you use your Etsy Shop Stats? What questions do you have about them?

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Opening a Business Bank Account–I Have a Confession to Make…

business bank account for etsy businessSo, I’ve got a big confession to make…

After nearly 3 years in the business of being Lazy Owl, and also being a CPA, and also BLOGGING about good financial practices for small businesses…

I just now finally opened a business bank account for myself.

Yes yes, throw your stones at me now, I deserve it. Many people agree that opening a separate business checking account for your creative business should be one of the very first things you do when starting out. And I agree. But I didn’t call my business Lazy Owl for no reason people!

Honestly, there’s really nothing wrong (or like, illegal) about using your personal checking account for your business, as long as you’re operating as a sole proprietor. However, there’s (at least) two major benefits of having a separate business account for your Etsy shop or online creative business:Anyway, it’s been on my to-do list for quite some time, and now I’ve checked it off. Here are my thoughts on the process, if you are out there wondering if you need to open a separate bank account for your creative business.

  1. You can accept and deposit checks made out to your business name, write checks in your business name, get a debit and/or credit card in your business name…and just plain do business and what not in your business name.
  2. Your personal and business cash inflows and outflows are not “comingled” for tax & financial purposes.
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personalized money clip by 3littlepixiesshoppe

First, your business checking account can be in your business’ name obviously. This is something that can’t be done with a personal account (most banks won’t let you at least). So now, if you ever get a check made out to “Lazy Owl Boutique”, you can actually deposit or cash it without the bank being all confused about it, or even worse, rejecting it outright.  This means you can also get a debit and/or credit card in your business’ name and checks with your business name on them. Fancy!

Second, trust me when I say, you have to be very diligent and organized if you are operating your business out of your personal bank account when tax time comes around… or even just to do any financial tracking for your business in the meantime. Having only one account means digging through a lot more transactions to figure out what income and expenses belonged to your business versus your personal life. This means a lot more time determining which expenses are deductible and which are not. Having an account dedicated to just your business means you don’t have that problem. You can simply copy or download all of your transactions and call it a day. This is also really good news because it means if your tax return is ever audited by the IRS, you have some really good documentation readily handy.

But really, there are lots of other intangible benefits than just the two above. Here are just a few off the top of my head…

  • I can save mucho time by downloading bank transaction data directly to my financial spreadsheet (or Quickbooks, Outright, Mint, or other financial software you might be using). With direct data download from my business bank account, Etsy account, and Paypal account, Imagine all that number-crunching analysis I’ll be able to do now without having to type transactions in one at a time!
  • I spend a lot of time during tax season finally inputting various miscellaneous expenses from the entire year that I can now stay on top of throughout the year. Since I am constantly buying jewelry supplies, having all my expenses in one place without having to filter out my groceries and what not will be splendid.
  • Here’s a great one – I will have a much better grasp on my day-to-day cash flow and income/loss than I did previously. Now I can simply check the balance of my bank account, rather than take an afternoon to update my profit spreadsheet by entering sales and expenses line-by-line.
  • I also will finally be able to have a Paypal account and debit card devoted solely to my business. Better expense tracking there as well.

Bottom line…this saves me a lot of time and energy and encourages me to actually deal with my finances, instead of pushing them aside day after day because the work is too time-consuming and tedious. If me, the accountant, has trouble finding the stamina to work on my financial paperwork, I’m sure a lot of artists out there don’t enjoy this task either!

Financial gushing aside, there are some downsides to opening a business checking account that you don’t have with personal checking accounts…mainly, fees. Most banks require a minimum monthly balance or your account will be charged $10-$15 a month. Also, if you have more than a max number of transactions each month (usually around 150-200), you are charged a fee per transaction. If you plan and monitor your account carefully though, you can usually avoid these charges, and I believe the pros outweigh the cons. Trying to avoid these extra fees has a silver lining – it encourages you to monitor your money more frequently and makes you more aware of your finances on a day-to-day basis, something a lot of us creative peeps have trouble with.

I used this helpful tool at nerdwallet.com to find a bank in my area that fit my needs the best (like a phone app for mobile check deposit, yes please!) and charged the lowest fees. I highly recommend it. There are also some online-only small business banks that you can check out, though I couldn’t find any that seemed to have solid positive reviews thus far.

  1. creative accting button copySo, there you go. Hopefully this encourages you to bite the bullet if you haven’t already gotten yourself a checking account for your creative business. It’s just another step, and one that’s not too painful, on the road to becoming a thriving creative business and a financial success.

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Planning for Positivity in 2014

crafting a business 101

Last time we discussed what we’ve accomplished in 2013. Maybe you even took the time to print out the free printable to note down all the great things you’ve done last year. If not, think about it! Before moving forward, it’s important to reflect on what your goals were in the past, what you checked off the list, and where you fell short. At least for me, it gives me a much needed kick in the pants to jump start my goal planning for the next year.

printable planner by VintPrintShop on Etsy

printable planner by VintPrintShop on Etsy

Thus, it’s time to think about 2014 (yes, I know 2014 started like…a month ago…I guess my kick in the pants wasn’t quite hard enough!). Putting your goals for the year in writing holds you accountable. It’s hard for me to remember whether I successfully met my goals if I can’t even remember them in a few months!

To get the juices flowing, here are some pointers to think about regarding your creative business’ goals:

  • Start with your business’ finances – When we think about business goals, the first thing most of our minds go to is probably the dollar signs. It’s easiest to start b examining the dollar signs from last year and making goals related to your business’ finances, and most likely and specifically, your sales. Think about how much money you’d like to make with your small business in 2014 and go from there (but make it realistic yall!). That being said, don’t forget your expenses. The sales side is important, but if you spend a boatload on supplies, shipping stuff, or advertising, then all that cash outflow is going to negate your cash inflow. Think about how you will control expenses this year, and plan accordingly. Think you can reduce shipping expenses by buying mailers in bulk twice a year instead of running to the post office every week?
  • Next, look at your non-financial numbers  – Facebook fans, repeat customers, Instagram followers, Etsy shop stats, whatever applies to you. How can you boost these numbers?
  • Come up with action items for all these numeric goals. If your plan is to increase revenue, what will you do to increase those sales dollars? Will you advertise in a new venue? Will you offer a new line of products? Create gift sets at a higher price point? If your goal is to encourage repeat customers, how will you entice them? Offer coupon codes with a purchase? Send a personalized note or free gift? Explore all your options. The more doable actionable items you can think of for each goal, the higher your chance of accomplishing it. As I said last year, don’t set yourself up for failure. Examine what you achieved in 2013 and be realistic about 2014. What were your sales, expenses, and profit like last year?  If you plan on tripling revenue this year, you best have a plan to get there! You can’t just make it a goal to triple your sales, your revenue, or your facebook fans (that’s called wishing, not planning) without thinking about how. If those are your goals, come up with some concrete, doable action items that will help you get there.
  • Again, your goals should be specific and measurable. Don’t just say “I want to increase sales”. Come up with an actual benchmark dollar amount (like “I want to make $5000 in sales.” or “I want to average $2000 in sales per month.”). Giving yourself specific benchmarks will increase your motivation to reach them. Plus, they make it easier to measure whether or not you were successful.
  • Don’t forget about business-related goals that might not be apparent right away just because they aren’t related to sales or numbers. Do you need to simplify or get organized? Keep better records? Do you want to acquire a new skill, like take better product photos, learn Photoshop, or write blog articles? For example, my business goals will include sorting through and re-organizing all my jewelry-making supplies and cleaning up my inventory tracking spreadsheets. I also want to get better at continuously and consistently listing new items in my Etsy shop. Meeting these goals will make my life easier and my business more organized, and thus will indirectly improve my sales and boost my business!

Here’s a basic four-page worksheet to record your 2014 goals. Feel free to print and include in your creative business binder. There’s a space at the top to include your business name. I split the worksheet into four categories of business goals, and each table has space for you to write your specific goal, how you will measure your success, the goal’s deadline, and any action items you can do to achieve it. Click here- 2014 Goals Worksheet – My Creative Business or on the pictures to download the free 4-page printable.

business goals planning worksheet  2014 review3

2014 review2

2014 review4Your goals should be very specific to your business needs, but to get the wheels turning, here are some examples of goals (repasting from last year):

Sales goals:

  • Increase sales revenue
  • Increase number of sales
  • Increase sales on particular venues (Etsy, shopify, own website, offline, craft show, local, etc.)
  • Increase average revenue per order
  • Increase orders of multiple items
  • Begin selling in X amount of boutiques or shops
  • Participate in X number of craft shows
  • Financial goals:
    • Increase profit (net income = sales revenue less expenses)
    • Decrease expenses
    • Keep better inventory records
    • Consistently track expenses, sales, inventory, supplies, etc.
    • Improve records for tax purposes
    • Improve pricing formula
    • Boost profit margin
  • Marketing goals:
    • Increase facebook fans or twitter followers
    • Increase Etsy views, hearts, etc.
    • Increase blog/website/e-newsletter subscribers or views
    • Increase number of blog posts/facebook posts/tweets each week or month
    • Develop your own website/blog/e-newsletter/direct mailing list
    • Make the frontpage of Etsy X times
    • Get published in a print or e-magainze
    • Guest post on other blogs
    • Participate more in Etsy teams or other forums
    • Make X amount of Etsy treasuries
    • Get featured on a specific relevant website
    • Leave business materials in X amount of local businesses
  • Other Business Goals:
    • List X amount of new items on Etsy each week/month
    • Develop X amount of new product lines this year
    • Revamp your logo, brand, website, shop, etc.
    • Redesign or develop your business cards, custom catalog, etc.
    • Learn more about specific business topics, like SEO, HTML, product photography, bookkeeping, etc.
    • Complete your creative business plan.

Write your goals down and keep them in a visible place. Throughout the year, you should take time once a month or once a quarter to review your goals, determine your progress, and adjust as needed. Seeing your goals will give you the kick in the pants you might need every now and then to get back on track.

What are some of your goals for your creative business in 2014?

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2013: A Year in Review

Happy Holidays! Whew! I apologize for my radio silence for the majority of this year. I promise 2014 will be back on track around here!

I think I had a pretty good excuse for my distraction. You see, in 2013, we had a little baby owlette! Being pregnant and having a newborn kept me pretty busy!

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baby girl hazel

Now, I know this isn’t meant to be a lifestyle blog, so I will keep my gripes about being preggo and gushing about our new little hazelnut to a minimum. I’m now running Lazy Owl Boutique (the business and the blog) as a full-time stay-at-home-mom of a 3-month old (that was a lot of hyphens).

Business aside, 2013 was a great year for Lazy Owl, and I hope it was a record year for your creative business as well. I’ve revisited my blog posts from the end of last year, Planning for Positivity and a Year in Reflection. The lessons from these articles can easily be re-applied to this year. First, let’s review what we’ve accomplished in 2013!

Positive notes for me and my creative venture in 2013:

  • Continued to generate new content for this blog over the first quarter of the year, gaining new followers and ever-increasing stats (even without updates, the hits keep coming! make a website yall!)
  • Maintained steady sales orders and revenue over on Etsy
  • Became a vendor at a new local shop in Houston for handcrafted goods, The Tinderbox
  • Sold for the first time at Pop Shop Houston, a handmade holiday market, and it was AMAZING!
  • Got a new camera, learned to (sort of) use it, and upped my listing photography skills
  • Continued to re-do my branding and imagery (I updated my banner, Facebook look, and business cards so far), and learned how to use Photoshop to do so on my own
  • Experimented with some new product line ideas, and figured out what did and did not work (like I am never going to be good at calligraphy haha)

That was the good stuff. Considering all that happened for me personally in 2013 (mostly baby stuff), I’m glad I was able to accomplish anything business-wise. I will admit that my sales did not increase nearly as much as I had hoped for this year, but the limiting factor in that equation was myself. I just did not have the time or energy to put as much effort into Lazy Owl as I had planned, and without constant effort, you’re not going to get the bigger payoff. However, I think that’s what’s so great about being a creative entrepreneur…you’re in charge of your destiny. The business is here when you need it, and if you need to step back for a while to focus on other things, you have the flexibility to do so.

I’m re-posting the same free printable I posted last year, but with a few new tweaks to really get you thinking about what you accomplished this year and ramp up your planning for the next. I added the “Personal” section, along with a capstone question – What did you learn this year about your business and yourself as an entrepreneur? If you had to sum up 2013 as one big lesson to lend toward your success next year, what would you say? For me, I’d say that in 2013 I learned that Lazy Owl can only be as successful as I’m willing to make it. I can only make so much money and generate a certain level of success by letting it (and myself) coast along. It really is important for me to do a little something to benefit my business everyday if I truly want to reach the goals I have in the near future.

Here’s the downloadable printable in all its glory. Click to download and dig deep into what you’ve accomplished this year. Even if you’re just starting out, it’s important to give yourself a pat on the back for what you’ve gotten done thus far!

free printable

SIDE NOTE! I just have to use this venue as my free plug for shopping Lazy Owl for the holidays. There’s still a few days left to order some fun handcrafted jewelry in time for Christmas! If you use code OWLBLOG you can get $5 off any order $15 or more!

Up next, we’ll discuss planning for positivity and growth in 2014!

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A Brief Intro to Taxes for your Creative Business

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Cue the happy music…it’s the most wonderful tiiiime of the year…do do do. No, not really. It’s tax season! If you have the pleasure of knowing a tax accountant, you probably won’t see them much between now and April 15th.

That’s right ladies and gents, it’s time to do your taxes! As an entrepreneur, you now have the responsibility to not only report your own personal income and expenses (and possibly your family’s), but also the income and expenses of your business.

First and foremost, you and your business are likely responsible for two types of taxes:

  1. Sales taxes paid to your state
  2. Income taxes paid to the federal government, and possibly also your state

When you first go into business, one of the first things you should do is get a state sales tax permit. This process will depend on your state, but it is usually a relatively painless and luckily, free, process. In Texas, it costs no money and you can easily apply online.

This is the gist of sales taxes – every time you sell an item, even if it’s an online sale, to another person in your state, you are responsible for charging them your state (and possibly city/county) sales tax percentage rate. The customer pays that extra tax money over to you, and you hold onto it until it’s time to pass it on to your state government tax agency. You’ll be responsible for paying your sales taxes on either a monthly, quarterly, or annual basis. They aren’t really an expense to you, more so just a “pass through” in and out amount.

Income taxes are a different beast. These are the taxes you’re charged on all the money you make each year, whether it be your personal wages, investment dividends, or small business income.

Now we could talk about business income taxes for days on end (sounds thrilling right?), but today we’ll just leave it to a brief overview to get the wheels turning. First, I’m going to assume that your business is considered a “sole proprietorship”. This means your business is not a corporation, a partnership, an LLC, or any other separate legal entity. If you’ve never filed separate paperwork to incorporate your business (excluding your sales tax permit and your DBA license), chances are you are a sole proprietorship.

Your business’ legal status matters because it determines on which form you are reporting your income and expenses. For a sole proprietorship, you will report your business stuff on a special form called Schedule C, which is attached to your regular personal 1040 return. Some of the data from your Schedule C will actually end up flowing onto page 1 of your 1040.

Here is the IRS webpage for both the Schedule C AND the all important Schedule C instructions.

schedule c

just a little snippet of the Schedule C from 2011

Above is what part of page 1 of the 2011 Schedule C looked like. On the two pages of the Schedule C, you’ll have space to enter your business info, all your sales, and all the expenses and deductions related to your business. At the bottom of page 1, you will get the final number for your business’ taxable net profit or net loss, and this number then travels over to page 1 of your personal 1040. If you have net profit, that money will increase your taxes owed this year. If you have a net loss, it’s possible this money can decrease the amount of taxes you will owe.

So you can see, it’s really important to track all your expenses and deductions over the year. In reality, you of course want your busy to be profitable and have a net profit, but for tax purposes, the lower your net profit, the smaller the amount of taxes you will owe. That’s why having a good handle on your expenses helps.

Go ahead and take some time to get familiar with both the Schedule C and the Schedule C instructions; these instructions are particularly helpful since they go through each item on both pages of the Schedule C line by line with definitions. Even if you use a program like Turbo Tax to do your taxes, these instructions can offer some extra guidance.

I’d love to hear from you! Are you doing the taxes for your small business this year or consulting a tax professional?

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What is overhead and why do I need to know about it for my creative small business?

accounting for small business owners, etsy business

Last time in our Creative Accounting series, we discussed how important it is to keep track of every expense related to your creative small business. Today, we’ll zoom in on a particular category of your expenses, called “overhead”.

No, I’m not talking about you buying an overhead projector. Overhead is a term used in cost or manufacturing accounting (sounds scary? it is!). Your overhead expenses are all the expenses you incur to design, create, or manufacture your product, but they are not directly traceable to an individual product.

If you were running a giant factory and creating widgets, your overhead expenses would be things like the rent, utilities, wages to pay your factory workers, insurance, marketing fees, advertising, tools, machines, and indirect materials. These are all costs that are vital to keeping your business running. Without them, you would not be in operation, but you can’t exactly trace them to your finished products…like how much of your electricity bill helped generate that one widget? I’m sure with some complicated formula we could figure that out, but we don’t have time for that. We’ve got stuff to make!

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expenses_28sept2009_0522 (Photo credit: patrick h. lauke)

Your handcrafted small business has overhead expenses too. You probably spend money on lots of things that keep your business running smoothly, yet these expenses are not directly, easily traceable to every item you create. If you go back to the last post about your business’ expenses, the expense categories like indirect supplies and materials costs, tools, machines and other items used, and all of the non-product costs should be considered overhead expenses for your business.

In my humble opinion, one of the biggest mistakes Etsy entrepreneurs make is not taking these overhead expenses into account when pricing their goods. Like we mentioned in the past post, most of these expenses are deductible for tax purposes, but you should also try to recoup a little piece of your overhead expenses in every sale you make. I’m not going to talk about pricing formulas and those specifics today, but the point is you need to be thinking of the most sensible way to include a tiny portion of your overhead expenses in the price of each and every item you list for sale.

How do you go about doing that? Well, I’d start by tallying your estimated overhead expenses, either on a monthly or annual basis, whatever is easiest for you. That includes the following types of expenses:

accounting help for creative entrepreneurs

just a few examples of the overhead expenses your etsy business may incur

Once you get to an annual estimated total of these expenses, you need to find a way to work backwards to include a piece of this total sum in your pricing formula. There are lots of ways to do this. Here are just a few possibilities:

  • Estimate how many products you will create this year. Take your total overhead expense number and divide it by the number of items. Add that number to the sales price of each item you list for sale. For example, $1000 in annual overhead divided by making 350 items this year means I need to increase the price of each item by $2.85 or so to recoup a chunk of overhead in every sale I make.
  • Same method as above, but instead of estimating your total items produced, estimate the total number of items you hope to sell this year. That way you are getting closer to truly recouping that overhead expense back with each and every sale.
  • Instead of adding a flat “fixed” overhead dollar amount to each sale price, you can use a percentage markup instead. Once you know the cost of direct materials and labor that went into creating a specific product, you might multiply that total by a specific overhead percentage (determined based on what feels sensible to you). For example, if these earrings cost me $6 to create and my overhead percentage is 20%, then I’m saying that product required about $1.20 of overhead expense to make, and really cost me $7.20 in total to create.

All overhead methods have their pros and cons. Using a fixed flat overhead rate is easiest, but using the same rate across the board for every product you make might not be best representing your true overhead costs per product. On the other hand, the percentage method allows you to add more overhead costs to your more expensive or time-consuming products, which probably really do use more overhead expenses. It all depends on what makes sense to you. The important thing is that you try to do something to include these costs somewhere in your pricing formula. If you don’t, you are much less likely to ever recover those expenses, and at the end of the day, your business is making less real profit than you might think. So get cracking on thinking about overhead!

I’d love to hear from you! What do you think is the most challenging part about bookkeeping for your handmade business?

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Using Google Analytics & Adding Google Analytics to your Etsy site

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Before we really delve into methods of marketing and spreading the word about your shop, let’s take a look at one of the sources you can utilize to evaluate the success of your future marketing efforts: Google Analytics. It’s a good idea to set up (or revisit your existing) Google Analytics account now, so that once you begin trying different marketing techniques, you can see if they’re making a difference.

Google Analytics (GA) is a metrics-tracking tool that gives the owner of a URL all sorts of interesting information about their site’s visitors, views, and more. Signing up for GA is 100% free! To link your Etsy shop URL to Google Analytics, keep the following tips in mind:

  • Use your etsy shop’s main web address, http:// shopname .etsy. com (without the spaces), as the account name or default URL. Google will automatically capture the activity on both your shop page itself and all the little sub-pages for each of your listings.
  • Once you’re done with set up, GA should take you to your “Account Overview” page. Click the “Tracking Info” tab to find your Tracking ID. You can copy and paste this ID on Etsy to link the two accounts. You do NOT need to worry about pasting any HTML or javascript info to link your shop to your GA. That’s for non-Etsy stuff.
  • On the Etsy side, click “Your Shop” in the upper right corner, then scroll down and click “Options”, then click the “Web Analytics” tab. You can paste your GA tracking ID into the “Web Analytics” box here. It make take up to 24 hours for your GA account to begin working.
  • Check out the Etsy help page for more detailed info.

Now the fun begins! Your default GA landing page gives you a brief overview of the audience of your Etsy shop over the last month. If you scroll down, you’ll see a bunch of nifty percentages and even a pie chart of your repeat vs. new visitors. Hover your mouse over any of the stats to get a definition of that item.

To get more specific detail, check out the side bar on the left side of your screen. It could take you hours to examine all the juicy info under each of these items! Under “Audience”, you can find out what countries your visitors are visiting from, how many pages on your shop they’re checking out, and how long each visitor stays on your site on average.

“Traffic Sources” will tell you how people are finding your shop – via search terms, directly, or from other websites. You can even compare which source is giving you the highest rate of new visitors or which visitors spend the most time browsing your shop. This info helps you determine where your marketing time is most well spent; for example, I might notice that I’m getting lots of visitors from my Wanelo page, but those visitors spent an average of 50 seconds on my site and my bounce rate is in the 90s. Sounds like it’s not really worth my time to market there, and I might chose a source that has visitors with longer visitation lengths and lower bounce rates.

My favorite part of GA is the “Real Time” page. This page actually tells you how many visitors are currently on your page, where they’re coming from, and what they’re looking at during this very minute. You might think it’s a little creepy to cyber-spy on shoppers, but this is your chance to get some immediate feedback on how people are interacting with your shop! Next time you’re bored, go visit your Real Time page and watch what your next Etsy visitor does!

This is just barely skimming the iceberg of everything GA offers. The important part is to get set up and familiar with your stats as they are right now. It’s a good idea to record your current bounce rate and pages per visit. After you begin to put new marketing or advertising measures in place, GA will help you determine the effectiveness of your efforts! So get accustomed to your metrics now, and let’s work on getting them to improve!

Are you a stats junkie like me? Are you excited or intimidated by Google Analytics?

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Related Articles:

Financial Records for My Creative Business: Keeping Track of Expenses

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Last week, we talked about how important record-keeping or bookkeeping is for your crafty business.

Today, let’s talk about what sort of information you should be keeping track of in your new “books”. The rule of thumb is that when it comes to recording your financial info, you basically can’t record too much. Everything is important, whether for tax purposes or for your own calculations.

The biggest category of info that you will spend your time recording will be your business’ expenses. You might not realize it, but your business probably has lots and lots of expenses. Let’s divide our expenses into two categories, product-related and non-product-related.

Product-related expenses:

  • Direct supplies and material costs – these are the items that directly go into your sellable products. For a sewist, that’d be fabric, elastic, or ribbon. These are probably the most obvious expenses, and not too difficult to keep track of.
  • Indirect supplies and material costs – these are items that go into making a product, but we can’t necessarily track exactly how much of it goes into each item because it’s either impossible or cost-prohibitive. These are things like glue or thread. I know I used thread to make that purse, but I can’t tell you exactly how many inches or feet went into each one. I know I used glue to make my yarn wreath, but there’s no way for me to be totally sure how many ounces or what-nots of glue went into it.
  • Tools, machines, and other items used to create your sellable products – they aren’t literally a part of your product, but you couldn’t make it without them. Examples are your sewing machine, scissors, pliers, or a cutting mat.
  • Expenses related to putting your products up for sale and selling them – all those little fees and charges you pay to list your products online or accept payment for a sale, like Etsy listing fees, Etsy’s cut of your sale, Paypal charges, credit card fees, etc.
  • Shipping and Packaging costs – including boxes, mailers, labels, envelopes, a postage scale, and decorative packaging items. This also obviously includes the actual price of postage.

Non-Product Expenses:

  • Craft show registration fees
  • Startup and legal fees for licenses, permits, etc.
  • Display expenses, like jewelry stands, tags, earring cards, racks, tables, pop-up tent, etc.
  • Photography expenses, like a light box, new camera, props, editing software
  • Promotional material costs (like printing) for business cards, postcards, stationery, custom stamps, labels, etc.
  • Advertising expenses
  • Design and web development costs for your website, web hosting, logo, banner, etc.
  • Research and development expenses for product research, prototyping, business education classes or e-courses, consulting services, books, etc.
  • The cost of gas for driving to the post office, craft store, craft fair, business meeting, etc., and lodging for staying overnight for any of these reasons.

I divide your expenses into these two categories mainly for pricing reasons, which we’ll discuss in the future. Let’s just sum it up by saying all your product-related expenses (and possibly even some of your non-product-related expenses) should be considered when it comes time to price your product. A lot of beginning crafters make the mistake of only considering direct materials expenses when pricing their product and then end up grossly under-pricing themselves; look how many expenses they’re forgetting about!

The main point is that your business can have a lot of different expenses. And you need to be recording them all! Thorough expense-tracking serves two main purposes:

  1. You’ll get a better picture about whether your business is actually making a profit or not, and
  2. You’ll be able to use most of these expenses as deductions when tax time comes around.

About #1, are you really making money at the end of the day? When you make sales, it might feel like you’re raking in the cash. If you’re only subtracting the cost of your supplies from that revenue, you may feel like you’re really successful, and then wonder why your bank account doesn’t reflect that. If you are truly tracking all of your expenses, you can get a good grasp on whether your business is profitable, how much so, and adjust accordingly. You will also get a better idea of where you’re spending too much money and where you can cut back, and whether your pricing formula needs adjusting or not.

As far as #2 goes, the important thing to remember is that you need to keep proof of all your expenses. Save those receipts, yall! Or star your emails and file them away. Just don’t expect the IRS to be cool with hundreds of dollars of expenses with no support.

Whew! That was a lot of ground to cover. You may be left wondering about the best way to organize all these expense types. That answer all depends on what works best for you. An accounting-based program like Quickbooks or Outright.com will sort your expenses into nifty little accounts for you.

If you use the spreadsheet method (like myself), create a tab for each category or subcategory. For example, I have separate tabs for my main jewelry supply components (crystals, beads, buttons, earwires, etc.), a tab just for shipping costs, one for jewelry tools, and the list goes on. I then have a summary tab where I can use formulas to capture all these different expenses in one place, to see my total spending. The easier your system allows you to capture all your expenses in appropriate categories, the better.

That’s enough left-brain for today. Time to take a break and give yourself a pat on the back for paying attention through this entire post. It wasn’t too painful, was it? Check back next time for more accounting tips for creative businesses!

If you found this post helpful, I recommend you read my post about overhead expenses, which can also help you accurately price your goods for profit, and my post about getting your creative business ready for tax season.

I’d love to hear from you! What do you think is the most challenging part about bookkeeping for your handmade business?

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