When you open an online shop, your responsibilities begin with creating and listing products for sale—but that’s not where they end. Owning a shop means that you must track your expenses and profits. If you don’t pay attention to the money flowing in and out of your shop, you may run into issues from a lack of working capital to pay your expenses to potential problems with the Internal Revenue Service.
Managing the money aspects of your shop doesn’t need to be complicated. With that in mind, here are some tips to help you keep track of your money.
Pay Attention to Fees
The first thing you’ll need to do is pay attention to fees. Unless you’re selling products only on your own website, you’re paying fees to somebody for hosting your shop. You may have a shop on Etsy, Teachers Pay Teachers, or Amazon, and each has its own fee structure.
It’s important to note that fees can change. In early 2022, Etsy announced that they would be increasing the per-transaction fee from 5% to 6.5%. While Etsy referred to the increase as incremental, many sellers were upset, pointing out that the change represented a 30% increase in fees and would have a significant impact on their overhead.
Calculate Your Expenses
It can be easy to underestimate your expenses, especially if the products you’re selling are digital. With no raw materials to purchase or inventory to store, you may think that your expenses are low and not charge enough for your products.
For a digital product, your expenses should include your time, research, the cost of any images or fonts used to make your product, and the power used to create them. With physical products, you’ll need to include the cost of raw materials, storage, and shipping—unless you’re charging your customers for shipping costs.
Charge Enough to Pay Yourself
One of the challenges that a lot of new online sellers face is knowing what to charge for their products. Many new sellers set their prices too low. The result is that they don’t have enough money to pay for their overhead expenses or to earn income.
When fees change, you may need to raise your prices to accommodate them. You need to be sure that you are charging enough to pay for your time and for supplies if you are selling physical products. My full guide to pricing printable products has information and tips to help you make sure your prices are high enough.
Pay Your Taxes
If you earn a significant amount of money online, then you will need to report your earnings to the Internal Revenue Service and pay your taxes. Failure to do so can lead to expensive late charges and penalties that can negatively impact your personal finances.
Reporting is easy if you sell on Etsy or any other online marketplace that reports income to the IRS. For example, Etsy reports earnings for all sellers who make more than $600 in any tax year using Form
1099-K. However, even if you don’t receive a 1099 from Etsy or another marketplace, you still have a legal obligation to report your earnings and pay your taxes.
If you are selling on Etsy, you will not need to worry about sales tax because Etsy collects and remits all sales taxeson behalf of sellers. However, you will be responsible for sales tax if you sell on a website you own. Before setting up shop with any online site, you should make sure you understand your tax obligations.
Track Your Work Time
When you’re selling any online product, your time may be your largest expense. For example, if you’re selling on Etsy, you may spend time doing all the following things.
- Searching for digital assets to use in your products
- Reviewing and trying tools to use in product creation
- Researching popular products to determine what sells
- Conceptualizing products
- Creating products
- Creating your online shop
- Taking pictures or creating mockups of your products
- Creating product listings
- Responding to customer questions
- Tracking your statistics
- Marketing your shop
That sounds like a lot because it is a lot! Your prices need to reflect the time and effort you put into creating your products and managing your store.
It’s easy to lose track of time when you’re doing research, which is why I recommend using the stopwatch on your phone to measure your time and get a handle on how much time you spend creating products and handling customer queries. You can use this information to be sure your prices are high enough to pay for the work you do.
Review Your Expenses Regularly
After you’re confident that you have a handle on how much to charge for your products, you can relax—for a while. However, I do recommend that you revisit your prices regularly to ensure that you’re not selling yourself or your products short.
Here are a few reasons why it’s important to conduct regular financial reviews.
- You get better at creating products. The products you create after you have some experience may be worth more than those you created when you were just starting out.
- Inflation may impact your profitability. As costs increase, your income should increase too to accommodate a higher cost of living.
- You want to fully replace your income with online sales. Some people start selling digital products for fun and to earn a little extra money to supplement their income. If you want to make your online shop your primary source of income, you may need to adjust your prices accordingly.
- Your competitive research is out of date. It’s important to keep your prices in the same general range as your competitors’ prices.
My recommendation is that you review your prices every six months. Doing so will ensure that you’re not charging too little and that you have the money you need to take care of your obligations.
Running an online printables shop is a good way to earn money. It’s essential to keep track of your expenses and profits, do research when it’s needed, and review your prices regularly to ensure that you’re not undercharging for the work you do.
Do you need help setting up or managing your online printables shop? Click here to learn how to work directly with me!