Diversifying your income is a basic best practice for financial stability, but is exceptionally important if you are trying to prepare your finances for long term travel. Creating passive income disassociates your income from your time, meaning that you will have more free time to travel! It will also increase your financial stability and lower your financial risk. I have been slowing creating passive income using several different methods. By far the best method I have found for making passive income is opening a digital shop with Etsy. Here are a few things that you should know about making passive income with Etsy and how you can start making passive income with Etsy!

If youre looking for a little help starting your Etsy journey, check out the bullet journal I used to keep eveything organized.

What is Passive Income 

In short passive income is when what you earn is disassociated from the time that you put into it. You are not paid for your time, but for your actual work. Yes, that means you work exceedingly hard and not make any money. But it also means that you could do the work once and make money forever. 

Passive income is not making money without work.

This is a very common misconception. You can see it all over the internet – people complaining that real passive income doesn’t exist. Or that something like Etsy still requires ongoing maintenance so therefore it is not passive. Most passive income streams will still require some sort of maintenance, but that does not mean they are not passive. 

For example you could spend 5 hours a month responding to customer emails and make $500 dollars. That $500 probably had very little to do with you responding to those emails, but if you didn’t do that you would get bad reviews and your income would suffer. 

Why is Passive Income Important for Travel

Passive income should be a goal for pretty much everyone who strives for financial freedom and independence. Passive income diversifies your income streams and gives you stability.

It is particularly important for travellers, particularly if they plan to be gone a while. Diversifying your income should be an important part to prepare you finances for long term travel. Working and traveling at the same time is hard and having passive income means that you will have at least a little bit of income no matter what. 

How Can You Start Making Passive Income With Etsy?

Most people know Etsy as the place for labor intensive homemade goods, not as a place for passive income. Although that is what made Etsy famous, it is not the only thing you can sell on there. You can also sell digital downloads. 

You create the products, upload them to Etsy, create a listing, Etsy markets them, customers buy them and Etsy sends them an email with a link to download your product. Simple, efficient and passive. 

You can upload up to 5 different digital products up to 20 MB to the same listing. If you want to sell files larger than that you can either zip them or upload them to a hosting platform and deliver the link in the listing.

How Passive is Etsy Income?

In my experience, very, but it takes time. It took me about 6 months of relatively consistent work to make $100 in profit a month. It was also at around that point that I felt I could leave my shop alone and it would still make money. Currently I have about 150 products for sale and make a profit of about $300-$600 CAD a month for a maximum of 10 hours of work a month. 

In those ~10 hours of work a month I spend >1 hour responding to questions or messages and about 1-2 hours on Pintrest or Tailwind. The other 8-9 hours I spend creating new products. You do not necessarily need to continuously produce more products, but new products help boost your overall Etsy SEO and store. At this point in time I am still trying to expand and grow my shop, but if i was traveling I might focus more on just maintaining. That would mean ~$300-600 for ~3 hours or work a month. Not bad.  

When I studied my MBA for 18 month I took the entire time off from Etsy, I only responded to messages and did not create new product or marketing campaigns. After almost 2 years my Etsy income has slowed slightly, but it is still consistently around $300 per month. Not a crazy amount, but very passive. I am now working again to scale the store again.

Why Etsy for Passive Income? 

It Has Own Traffic 

For me this is the biggest draw of using Etsy to create passive income. IT HAS ITS OWN TRAFFIC! And a fair bit of it. You do not need to create a blog, instagram or Pinterest to drive buyers to your shop. Driving traffic takes work and time, you save both when you use Etsy. 

That being said, driving your own traffic to Etsy does increase your sales. But the point is that it is not necessary. You could make a decent amount of income off of Etsy alone. I have an Instagram and a Pinterest to drive traffic to my shop, but I only open them once I had enough monthly sales to support the cost of Tailwind. Tailwind helps automate my traffic to Etsy, but the majority of my sales are still native Etsy users. 

Reasonable Fees & Profit Margins 

Etsy does a lot of the work for you – they help market your products, drive traffic, delivery your products, help you run promotions and automate reviews and emails. So naturally they take a cut of your profit, but considering all of the work they do it is not unreasonable. These are the fees that Etsy takes…

2. Listing Fee: $0.20 per unit sold (paid upon the initial listing of the item)
3. Transaction:5% of Listing Price (paid upon selling an item)
4. Etsy Processing Fee: $0.25 Flat Fee + 3% of Total Sale Price (paid upon selling an item)

What does this mean for you? Not much, it is all down automatically. It does mean that you should consider your pricing when you pick your products. Because some of their fees are fixed it means that it will eat into your % of profits more for a cheaper item than an expensive one. 

Paying $0.95 on a $10 product is nothing, but paying $0.50 on a $1 product is more painful. On a $10 product you make a ~90% profit, but on a $1 product you make ~50% profit. Selling 10 $1 products will make you less money then selling 1 $10 product. You can go either direction when picking your products, just make sure you know the difference.

Low to None Start Up Costs

You can start an Etsy store for almost free! To my knowledge I don’t know another system that has as big a pay off as Etsy does. You can get 40 free listing when you set up your Etsy store and by the time you reach 40 listings you will likely be making at bare minimum enough money to cover listing more products. Depending on what type of products you decide to sell on Etsy you might need to invest in some basic software or some design materials like mock ups, but those are all optional. If you are on a budget you can start an Etsy store for absolutely $0. 

There are other tools, like Redbubble, that can help make you passive income without any or low start up costs, but the return is not as big. For example both my Etsy store and my Redbubble store cost me $0-20 to start. My Etsy store now brings in $300-$600 monthly and I’m happy when my Redbubble store meets the $20 threshold for a pay out. Mind you my Etsy store is almost 8 months older than my Redbubble store, but I don’t expect that to dramatically shift. 

Flexible Payment 

Etsy does not require you to reach a minimum threshold to pay you and they will let you pick how often you want to get paid. You can get paid either daily, weekly, biweekly or monthly (for daily payment you do have to reach a minimum payout). You can also request an additional deposit at any time and it will arrive in your account ~3 days later. That means that your money is much easier to access. 

How to Start Making Passive Income With Etsy

Step 1: Optional: Decide on Products & Niche

Ok so I know that an ‘optional’ step 1 is kind of a weird place to start, but let me explain. 

There are two ways you could go about creating an Etsy shop and filling it with products. If you have something that you know you want to sell, great, do that. Pick a niche and focus your energy and products there. 

If you are more like me and you know you want to start a shop, but don’t have a particular product in mind, don’t decide right away. You can experiment a little bit when you first open your store, see what sells well then niche now. A product of interest based niche is still an important part of your Etsy store, but you can do that later. 

For example I started my store thinking I would sell wall art and prints, I launched about 50 different posters and started making ~$30 a month. Then on a whim I launched 4-5 printable games that my friends and I used to play in university. That month those 4-5 products outsold all of my posters so I switched and decided to focus there. Now my shop focuses on printable games and activities for Birthday parties, bachelorette parties and other events. 

Picking a Passive Product

When picking products keep in mind what products are passive and what would involve active involvement. For example custom logos or custom digital portraits sell quite well, but they require your action on each sale. There is a limit to the amount of custom digital portraits that you can make a day, but not to the number of landscape photos you can sell. 

If you do want to create a more active income stream, Etsy is still a great platform to do that on just make sure you know what type of income stream you are creating when you pick your product. 

If you are unsure about what products you want to sell with Etsy feel free to experiment a little. See what type of products you like to make and which of those sell well. If you are looking for a little inspiration check out my free list of digital passive income products below!

Step 2: Find 40 free listings

One of the main advantages of Etsy is that it is practically free to start because you can list 40 products for free when you set up your new shop. You just need a link from an existing shop owner – here is mine. And yes I get free listings too 🙂 

You will need at least 1 product to list in your store when you initially open it. If you picked your product in step 1 then great you can list multiple products. If you did not and have decided to experiment a little then this is the point 

Step 3: Create 1st Passive Product(s) 

In order to launch your store you will need at least one product to list, the more the better. If you did not decide on a product or niche in step one this is where you have to start picking products to experiment with. There are many apps / tools you can use for free or cheap to create your first products, here are some…

• Gimp (free)
• Scribus (free)
• Inkscape (free)
• Canva (free & paid options)

Step 4: Decide on a Etsy Shop Name 

I think this is the hardest part of setting up an Etsy shop. Seriously, I don’t know how anyone ever decides on a name. Fortunately Etsy will let you change it later, but still its good to come up with a good name to start. 

If you already picked your niche and products try to include that in your shop name. If you have not try to pick a name that is generic enough that when you eventually settle on a niche you can keep the same name if you want. 

Still stuck on a name? Here are some ideas to start your creativity… 

• Pick a language, any language, google ‘cool words in WYX language’. Find a word that sounds kind of color and means something semi-interesting. Pair that word with a generic shop description. For example ‘Apricus Printables’ which is latin for ‘full of sunlight. Yes, this is the method i used to come up with my shop name ‘Meraki Design & Prints’. Meraki is Greek for ‘to do something with love’ 

• Use a business name generator, like this one created by Shopify. 

• Pick and adjective & an animal – I like the Swag Elephant shop name

All of these names are broad enough that you can experiment with different products and you won’t have to change your branding when you settle on a niche. You will of course have to run these names through Etsy to see if they are taken already. 

Step 5: Create Your Etsy Shop Branding 

Etsy’s audience generally cares a lot about aesthetics, a lot more than if you were selling on a platform like ebay. That means your store front needs to look decent. You don’t have to win any design awards for it, particularly not at the start, but create a basic logo and banner.

A lot of people will put example products in their banner, but if you are still experimenting try to go for something a little more generic, but still pleasing to the eyes. A nice stock image can do the job, maybe put a logo, a slogan or list of product types over it. Mine is a stock image overlaid with the definition of Meraki. You can use tools like Canva to help create a decent looking logo. Your branding also included your About section, again don’t overthink this. Keep it simple and just do it. 

Your shop branding is something that I think you should be continuously improving as you grow, but you still need to cover the basics when you first set up your shop. 

Step 6: Set up automatic email & encourage reviews 

Etsy will take car of the delivery of your digital products for you, but you still need to set up an automatic ‘Thank You’ email to send with the download. You can do this my going to your shop manager page -> Settings -> Info & Appearance. In your thank you email make sure that you ask for reviews. 

Speaking of reviews, they’re great. Reviews will help you get badges like ‘Bestseller’ or “Customers are Raving’. WHen you are first setting up your shop I recommend trying to get at least 1 review from friends or families on one of your products. It will help give customers a little more trust in your new store. 

Step 7: Launch 25+ Passive Products

Congratulations your shop is now open! Unless you uploaded all 40 listings when you opened your shop you probably don’t have that many products for sale. Now is the time to start experimenting, both within your niche if you have one, between different niche or with different products if you don’t have one. Each new listing is a chance for a sale, it ups your overall shop SEO and exposes to more keywords. 

Now I think a little expectation setting is important here. If you have 1 product listing you may never sell anything. The only time I have ever seen shops do well with just 1 or 2 listings are if they are shops that are heavily driving traffic from other sources. Most often these are bloggers who are using Etsy to fulfil their orders, but don’t actually rely on Etsy traffic or search for their sales. 

If you are planning on passively getting visits from Etsy SEO and search Etsy needs to see that you are a real shop with multiple options for buyers. If you have not sold anything you probably do not have enough listings. 

Etsy is a great passive income source, but it takes time. You can’t just build a shop in a day and expect it to start producing income the next day. Steadily list new products over time and you will see sales.

Generally first sales start at around 25 different listings. You can expective consistent passive sales at around 100 listings. Obviously that is different for every niche, product and store, but that should give you a good idea of where you stand and how far you have to go.

Remember to pace yourself and not to burn out, more consistent work will benefit you and yout Etsy shop more. 25 new listing over 25 days in better than listing 25 new products in one day.

A few notes on creating listings that sell…

Product photos 

As mentioned, Etsy shoppers are visual shoppers and that extends to your product photos. There are different ways to make and different standards for  product photos. If you are selling wedding invites your product photos will be VERY important, weddings are all about aesthetics. If you are selling a product like budgeting worksheets your product photos are less important, but you can not neglect them completely. 

Etsy SEO

Etsy SEO is the most important thing to help you create passive income on Etsy. If you are not planning on manually driving traffic from other sources Etsy search will rule you. Make sure you crush it! The less work you have to put into driving traffic, the more passive income your Etsy shop will make. This really deserves an entire post in itself which I will make some day, but some tips to get you started….

• Title – use the space provided. Some people will key word drop in their title, i prefer to make longer sentences like titles. From an SEO perspective it doesn’t matter, just make sure their are keywords there. 

• Description – You can create a default description and copy it to all of your product which speeds up your process significantly. However make sure you update it on every listing so your main keyword appears at the start of the description. 

• Tags, tags, tags, – you get 13 of them, use them all. If you get stuck look at other best selling products in your niche and copy their tags. You can only rank on the first page of Etsy for a particular key word once. So if you have 100 products with the key word ‘digital art’ only the best one will appear on the first page so diversify your tags.

• Photo names – When you upload your product photos name the uploaded jpg. Your main keyword for the product 

Step 8: Improve & Grow  

This is arguably the most important step on here. Even though you are building an Etsy store to create passive income does not mean that you can ignore it once it starts making a few sales. Look at your traffic sources, where are they coming from? Improve your store branding. Experiment with different price points or bundles of your products. Look at what products are selling well and which ones aren’t. Try switching up the keywords or tags on the ones that aren’t selling well. If a product is selling well, make more like it, make it in a different color. This is where you can niche down if you decided to experiment with different products and niche at the start. 

To really improve you need to be able to see your metrics. Etsy has some data within the system and does a pretty good job at telling you what listings are selling well, where your traffic is coming from and your SEO data. However it does not do a great job at keeping track of your profits. I recommend tracking your profits so you can compare month to month what made you more money and what didn’t. Continuously tracking and improving your Etsy shop will help you increase your passive income, and more passive income is what we are all about! 🙂