I know that a lot of my blog readers and twitter followers are Etsians or Folksy-folk, so bringing some business-related topics into my blog seems like quite a good idea. I’ve enjoyed learning a lot from the Etsy Storque and other sources over the past few years and hope to be able to share some of my experiences, both good and bad, with readers.
When people start off on the handmade marketplaces we all love, starting a business may be both the first thing, and last thing, on your mind. When I started my jewellery shop in 2008, I really did begin by accident. It seems, in my experience, the things that fall together or happen by accident are usually the best kind of things. It was months before I had my first jewellery sale and to be honest, when it happened, I’d forgotten all about my Etsy shop until I received the transaction email. Over the next year, I sold quite a few pieces of jewellery and became much more involved in the Etsy community. The Quit Your Day Job articles always gave me hope that my little hobby could grow into much more. While I was hopeful that it could become a business opportunity, I also always thought “it could never happen to me”.
Two years later and I’ve swapped the beads for recycled card and spend my days running Ruby Wren Designs, a greeting and gift business. This all started with my Etsy shop and it went from a hobby to a business very quickly. If you’re reading this as an Etsy seller, the chances are you are in the same situation I was in last year, dreaming of launching a business from my hobby, or where I am now, running a business that developed from that hobby on Etsy. The Etsy marketplace (and others, such as Folksy) is often the place where businesses begin by accident. It allows you to sell things you make as a hobby and if you have a good product, you can be running your own one-person business before you even know it!
If this is the case, be prepared! As soon as I started making regular sales on Etsy, I registered for a Business Bank Account. This is important if you’re really considering your Etsy shop as a business. It’s also very important if you’re looking for any funding, be it loans or grants as many organisations will only give a business loan or grant to someone with proof of having a business account set up to receive it. Having a seperate bank account will really help you focus and see what’s going on with your Etsy/Folksy shop more clearly. A seperate bank account will allow you to see where your money is coming in from and where your money is going. If you’re using your own personal or family bank account to pay your Etsy bills, buy supplies, etc. you won’t be able to determine how much you’re spending in certain areas and it will make planning and budgeting much harder. If your revenue is coming into your personal bank account, then it’s likely to disappear into your existing money or income, making it harder to reinvest into your business or determine if you’re making a profit.
I found once I set up my business bank account I could see exactly what I was earning from each of the places where I was actively selling and know what was really working for Ruby Wren. I could also see my profit clearly and know it’s there waiting for me when I next need to order supplies or invest in advertising. I think most business banking accounts will give you your own business Debit Card for you and any employees, making it much easier to purchase supplies or pay business bills. Having all this happening in a seperate account meant it was much easier to know what was going on with my money.
In the early days, I was using my own money to purchase supplies and invest in opportunities. This made my personal finances a nightmare as all my money was being spent on “boring” things like glue, card, office furniture and it was a real struggle to know what I had left for myself each month. Now, I have two seperate accounts – personal and business. Inconveniently, with two seperate banks, which makes transfering money between to two a new nightmare, but still better than before! Having a business account means I have funds available to me to invest in my business that came from my business. There are things I’d like to expand into and opportunities I’d like to take advantage of over the short and mid-term of my business, such as advertising in certain publications and attendance at trade fairs. Having a seperate “Ruby Wren” account will allow me to keep investment money aside and use it when I feel I need to, rather than borrowing from my personal account. Of course, when running a business, even if an Etsy shop, it’s important to remember to pay yourself a wage when you are able to.
If you are considering a Business Bank Account, take advantage of ‘Free Banking’ offers and read the terms carefully. With business accounts, many banks charge a monthly fee so look out for these! Many of the better options for us small business owners are those who advertise “Free Banking for Life”, as those who appear to do Free Banking only do not charge for the first year or two depending on which bank you choose. The banks which are completely free will usually make a big statement about this, so they’re not hard to spot. It’s very important to read what is included in your ‘Free Banking’ account as even the lifetime free banking will have limits on how many cheques you can cash or direct debits per month and they will charge you a fee if you go over this.
Ruby Wren is currently banking with an Abbey Business Account (now Santander). Despite waiting a very long time (about 2 months!) for the bank accounts to be set up, they’ve been a very good choice and their call centre customer service is great. We have free business banking for life, with monthly limits like I mentioned previously, but have never had a problem with charges or going beyond those limits. We have two linked accounts – a current account and a savings account, allowing me to put aside money into a savings account for that dreaded tax return. We also requested a cheque book – despite cheques becoming more and more obsolete, a cheque book might come in handy for paying for any craft fairs we might book. I’ve also heard that the Co-Op Bank is also a very good option for their Business Bank Account.
It may seem like a daunting task but if you want your hobby to be more than just that, it’s important to set up a business account as early as you can. It’s also important to keep your receipts and a record of what your income and expenses for both the taxman and your own analysis. Once you have a business bank account, you’ll find it easier to focus on what you may need to buy for your business and feel a sense of acomplishment as you see your profit growing. I, myself, feel that setting up my Ruby Wren account was one of the main things that signified the change from a hobby to a business and changed how I viewed what was going on with my venture.
Good Luck!
