How to Start a Bank: The Complete 7 Step Guide (2024)
February 11, 2021
It’s likely no surprise to learn that one of the most profitable businesses around is banking. The United States alone has the largest financial marketplace, and according to a report by SelectUSA., the financial services industry (which includes banks, investment services firms, and insurers) represents 7.4 percent, or 1.5 trillion dollars, of the U.S. gross domestic product. For those who are willing to scale significant barriers to entry, the rewards for opening a bank are great.
Regulations and capital are the two biggest hurdles to jump, and to be clear, starting a bank is not an easy endeavor, particularly for those unfamiliar with the industry. But with a solid, well-devised business plan and strategy, a pile of sweat equity, plentiful stores of patience, and a dash of good fortune, starting your own bank is possible.
This article will show you the necessary steps to opening your own bank. We’ll explore how to determine a need and a target market, detail the elements of a good business plan that will provide the platform for your success, show you the regulations you’ll need to comply with and how to meet them, and outline the staff you’ll need to hire to provide excellent customer service and build your bank’s reputation.
Case example: Bank of America
Bank of America is a global giant with 66 million customers and operations in 35 countries worldwide. But like most multinational corporations, BoA’s story of success began with a single founder with a vision.
Bank of America actually started life as the “Bank of Italy” (surprisingly enough) when Italian immigrant Amadeo Giannini founded the bank in San Francisco in 1904. Giannini’s objective was to offer banking services to other Italian immigrants and to middle-class Americans who were often denied accounts by the larger financial institutions of that time.
Providing banking for customers who didn’t already have it was the need that Giannini’s new bank met, and he quickly gained customers from all ethnic backgrounds. His clientele mirrored the “melting pot” of early 20th century America, and so it was appropriate for him to rename his bank “Bank of America”.
It was also a bold vision that eventually became reality. Through mergers and acquisitions, Giannini’s humble bank became the U.S.’s largest bank and a global financial powerhouse in under a century. If you aspire to build such an impressive bank, start by learning to develop a business mindset.
Your startup bank may never reach those heights, but the Bank of America story is proof that a broad, bold vision backed up with excellent customer service and exemplary corporate management can help a new bank transcend humble origins and become a dominant industry player.
You can write your own success story in banking by following these steps.
Step 1: Know the Business
Most of us are familiar with banking on some level, whether it be through checking and savings accounts, mortgages or loans, credit cards, retirement accounts, or insurance policies. But behind the ATM machine or the drive-thru window are a whole host of complicated transactions that in aggregate ensure that the bank not only has money for you to withdraw, but that as a business entity, it is making a profit.
If you haven’t worked in some level of the financial services industry, it’s important to get some industry experience, some specific education in finance, business, or both, and some expert guidance and advice.
There’s no better resource than UpFlip business courses taught by successful business owners.
How do banks make money?
Very simply, banks make money off of the money that their customers deposit into it. Banks take deposits and loan the money out to customers, charging interest on these loans.
Banks also typically pay depositors a small amount of interest for their deposits (and will pay higher amounts of interest for long-term deposits, such as a certificate of deposit (CD)).
The difference between the higher rates of interest charged to borrowers and the lower rates of interest paid to depositors is known as the interest spread, and this is the major component of bank profits.
Governments often incentivize loans to certain groups, like loans to women-owned businesses.
Other sources of profits include fees charged for various services and ancillary financial services like retirement accounts and insurance policies.
More and more banks are offering a full menu of financial services because they are a good source of revenue and profits with little risk.
Fractional reserve banking
The overwhelming majority of banks in the U.S. operate as fractional-reserve banks. This means that at any one given time, 10% of the bank’s deposits must be available for withdrawal.
This 10% of the deposit revenues is known as the fractional reserve. For instance, for every $100 that a customer deposits, the bank may use $90 to lend out to other customers (or to you, for that matter).
Low fractional reserves allow the circulation of money throughout the economy as measured by a factor called the economic multiplier, and since low fractional reserves open the money supply available to borrowers for things such as homes and cars, they are seen as instruments to maintain prosperity and a healthy national economy.
In fact, to maintain a healthy economy in response to the coronavirus pandemic, the Federal Reserve took the unprecedented step to reduce the fractional reserve requirement to zero on March 26, 2020.
The concept of fractional reserve means that banks are counting on depositors holding the majority of their funds in their accounts and not withdrawing them all at once.
Most of the time, this is what happens. But when depositors start to withdraw from their accounts in response to a financial crisis or panic, this is known as a bank run, and they can cause the bank to become insolvent and go out of business.
Creation of the FDIC
Bank runs happened at the start of the Great Depression in the U.S., and as a result, the federal government instituted a number of regulations and insurance requirements through the Banking Act of 1933, signed into law by President Franklin D. Roosevelt.
The Banking Act of 1933 created the Federal Deposit Insurance Corporation (FDIC), which is the regulator for the U.S. banking industry, and it guarantees consumers’ checking and savings accounts up to $250,000 in the event of bank insolvency.
Banks spread out their risk of bank runs by accumulating large numbers of depositors. Low or non-existent fractional reserve requirements have fueled the growth of large national or multinational banks.
Again, this is mostly a good thing for the economy, but for a smaller community-based bank, particularly in a location with a single dominant industry or employer, the risks of a bank run and the ensuing insolvency and failure are much greater. This is definitely something to consider as you start your new bank.
De novo banks
Start-up banks in their first five years of operation are known as de novo banks, from the Latin word for “new”.
In addition to the economy of scale advantages that large banks enjoy, there are a couple of significant barriers to entry that new bank entrepreneurs must scale. These are 1) regulation, and 2) capitalization.
Regulation
Banking is the most regulated business in the United States. According to independent banker, before the 2008 financial crisis, an average of 172 de novo banks opened each year. Since that watershed year, the number dwindled to almost nothing. A large reason for this is the greater number of regulations that banks must comply with to even open for business.
The FDIC is the regulatory agency for all banks in the United States, and their website provides information and the necessary forms that de novo banks must submit.
Once the application is in place, expect to wait anywhere from one year to eighteen months for approval.
Capitalization
The FDIC requires that de novo banks have anywhere from 12-20 million dollars in startup capital. The bank must prove that it can withstand initial losses and economic downturns and that it will operate ethically.
Underfunded de novo banks are more prone to cutting corners, and so the more startup capital you can bring to the table, the more likely it will be that the FDIC approves the bank’s application.
Can I start a bank with no money?
In theory, yes, but you’d better have friends with deep pockets and in high places. Because of the lofty capitalization requirements, most banks are formed as corporations run by a board of directors, whose investors are often local business or community leaders.
Another source of startup capital is from venture capitalists, who will invest in the bank for a share of its profits.
Step 2: Write a business plan
As the saying goes, if you fail to plan, you plan to fail.
For a business like banking that involves such high regulatory and capital hurdles, a well-devised plan of action that addresses all the salient aspects of the business is essential for its success.
The document that details this plan of action is the business plan, and once you have some knowledge of and experience in the banking industry, writing your de novo bank’s business plan is the next big, critical step to take.
Your business plan is your venture’s founding document, like a constitution or the Bible, and it will be the reference point for all business decisions moving forward. For this reason, it’s important to spend great time and effort composing the business plan, and a well-written one will make business success much more likely.
Luckily, there are some good resources for entrepreneurs who are writing their own business plan, and perhaps the best one out there is the Small Business Association (SBA) of the federal government, who have their own step-by-step guide to writing your business plan.
Bank of America has their own guide to writing a business plan, with an emphasis on the financials, as you might expect.
Chron has a step-by-step guide to writing a business plan for a bank, and banking software company BMA Banking Systems also has a comprehensive guide to writing a plan for a de novo bank.
And business writer and startup guru Jeff Haden has his own excellent guide to writing a comprehensive business plan at Inc.magazine.
Trust and reputation are important for a bank, and these can be difficult to build when you’re starting from scratch. One option is to buy an existing bank that’s already built a reputation in the community.
When you apply for FDIC approval and insurance, they will examine your business plan closely, to make sure you will meet regulations and follow banking industry best practices.
Here are elements that your plan should address:
How will it make money?
We’ve discussed the two primary ways banks make money: through the interest spread, and through fees charged to customers. But as also discussed, there are products like investments and insurance that are becoming a part of the menu of offerings of more and more banks.
Whether you put all of your eggs in the basket of traditional services like checking and savings accounts and loans, or whether you offer a broader financial services portfolio, most banks yield about 10-15% net profit, with 7-10% return on investment or equity.
As a de novo bank, you are not likely to achieve these levels until you’ve been in business for a few years, which is one reason the FDIC requires sufficient capitalization.
What is the target market?
Your target market is an important consideration for your new bank, and it’s related to your scope of business. For instance, if you’re targeting a younger generation of customers, you’ll need to have a big online presence and mobile banking capability.
If you’re targeting older customers, perhaps retirees, mobile banking may be less of a consideration, but convenient branch locations with easy access and plentiful parking become critical.
Another consideration to make is whether you want to target small business firms by offering business banking, or whether you want to focus more, or solely, on consumer banking.
It can be hard to accurately describe your market, but it’s a critical assessment to make. Market research firms can gather data that either confirm or deny your own intuitions and can help prevent you from making poor decisions early on. For these reasons, it’s worth considering hiring one.
You can find a guide to market research for new businesses at Entrepreneur. And Joe Gardiner, CEO of VentureDevs, has a complete guide to market research at Forbes.
Brick-and-mortar or online-only?
Banks that are online-only, such as Chime and Ally, are a growing presence in the banking and financial services industry.
Most banks are a combination of brick-and-mortar branches with an online banking counterpart, but the extent to which each element is promoted depends on the banking habits of your customer base.
Online-only banks save on infrastructure costs, but when starting your online bank, don’t forget to consider the enhanced cybersecurity costs you’ll incur.
And if you think that by opening a bank as an online-only business you’ll escape the regulatory scrutiny that brick-and-mortar banks endure, think again. The same charter and regulatory code that storefront banks operate under also applies to online banks.
In addition to these laws, you’ll also have to comply with other regulations designed specifically for online banking. These regulations were devised by an organization called the Federal Financial Institutions Examination Council (FFIEC), and are listed in this guide to online banking.
Define your business structure
Because in almost all cases your bank startup costs will be underwritten by a team of investors, the corporation is the prevailing business structure in the banking industry.
You’ll need to register with your state’s corporation commission or board, but beyond this, you’ll need to consider how the initial board of directors is chosen, what their terms of engagement will be, their compensation (if any), and how often they will meet (your state may mandate a minimum number of yearly meetings).
You might want to hire a law firm to form your corporation because it’s easier to head off any problems as the business is formed than it is to go back and change your founding documents or business protocols once issues arise.
Choose your name
Your bank name can reflect your geographic origins, or it can be more abstract, or even the name of one of its founders. An example of the former is Bank of America, and an example of the latter is Chase.
Choosing your bank name is an important consideration that can affect both the present and future of financial institutions.
For example, naming your bank the Bank of North Carolina may attract customers in your home state that want to do business with local financial institutions, but it may also hinder your expansion if you want to open branches in, say, Florida. Choose wisely.
For some help with choosing a name for your business, Forbes has a guide, as does The Balance. Shopify even has a tool that will generate a business name and claim the domain for you.
Once you’ve determined your bank name, run searches at your state corporation’s website and also do a WHOIS domain name search via a service like ICANN. The latter is critically important for online banking because having your bank name and website different can be devastating for business.
ICANN can also tell you if somebody currently owns the domain name you seek and what they will charge to sell it to your business.
Address start-up and operations costs
Your plan should outline the source(s) of your capital and how and when these investors will be paid back. Your operations costs must also be carefully outlined, and the FDIC will look at your plan to ensure that operations costs are realistic and not underestimated. For a bank, there are three main sources of operations costs:
1) Regulatory/legal compliance
Almost all established banks have attorneys on staff to assist with legal and regulatory compliance, and even as a de novo bank, you should enlist the services of a lawyer.
The fines for non-compliance can be severe and far exceed legal fees. Non-compliance can also place the bank’s future in jeopardy.
KYC and AML compliance
KYC (Know Your Customer) and AML (Anti Money Laundering) regulations exist to make sure that banks are doing business with legitimate entities, and not criminal organizations.
In essence, AML mandates KYC, which is verified through having account holders submit documentation before opening accounts.
KYC and AML protect the banks from criminal liability, but adherence to these regulations isn’t cheap. “A key part of starting any financial institution is ensuring you have proper procedures set up to meet KYC and AML compliance obligations,” says Greg Pinn, Sr. Director of Merlon, which produces automated systems for regulation compliance.
“Banks can spend as much as 2.5% of their operating expenses on AML compliance, a huge expense for any bank starting out. Setting up these programs correctly can reduce that expense by a significant amount,” he says.
KYC3 has a helpful guide to understanding KYC and AML compliance and the implications for startup banks.
2) Security
A brick and mortar bank branch needs a secure vault, security protocols for armored car cash deliveries, electronic security systems for the building, and sometimes armed guards on site.
Given these costly measures, it might seem like online banks have it easier in terms of security costs.
This isn’t necessarily the case, however: A 2017 survey conducted by Kaspersky Labs and B2B International found that a cybersecurity incident that involves online banking services costs a bank 1.75 million dollars on average.
The American Banker’s Association has some information about cybersecurity risks and some helpful links to resources for cybersecurity for small businesses in general and banks in particular.
3) Staff
No bank can be a sole proprietorship. Even a small bank requires a minimum of ten employees, and most banks have more than 20 full-time employees working for them. Among the types of employees banks require are:
- Bank managers
- Bank Tellers
- Loan Sales
- Personal Bankers
- Investment Consultants
- Accountants
- Auditors
Beyond the operations staff you’ll need for day-to-day operations, you’ll need to carefully select a management team of individuals that includes women and minority representation. This management team will be carefully scrutinized by the FDIC during the approval process, and all the members should share vast knowledge and experience in the banking and financial services industry.
Hiring competent and experienced staff that share your vision is a critical step to take, and one that requires significant thought, time, and energy.
Chinese business magnate Jack Ma writes, “You’ve got to make your team have value, innovation, and vision.”
McKinsey and Company, as well as the American Bankers Association, both offer helpful guidelines for selecting your management team and employees.
How much does a bank owner make?
According to CareerTrend, a president/owner of a small bank of less than 200 employees earns between $96,000 and $194,000 per year. This compensation is normally a combination of a base salary, profit-sharing, sales commissions, and bonuses.
Step 3: Raise capital
After knowledge and experience has been gained, and a solid plan for the business has been developed and written down, it’s time to start putting the pieces together.
The hardest step is usually coming up with the capital that the FDIC requires.
As for most businesses, adequate capital keeps the bank afloat during crises and hard times, and somewhere between 20-40 million dollars of capitalization is normally required just to get out of the gate and start doing business. More is better.
Most individual entrepreneurs don’t have access to this kind of capital, so you’re going to need to build a team of investors.
If you’ve had a career working for another bank, you may know colleagues who have expressed an interest in starting their own bank, so reach out to these people (but also be aware of non-competitive clauses in their current employment contracts).
Community leaders
If your bank will be serving a particular community or business/industry, reach out to community leaders and business owners.
If you know these leaders from your previous career working for an established bank, they will be more willing to work with you because they know your personal qualities, integrity, and excellent reputation.
Community leaders in particular may be interested in creating a bank that is headquartered locally and which specifically serves local customers.
Even in the 21st century, this sort of provincialism attracts new account holders and drives customer loyalty.
But if these sources of investors don’t yield the capital that you’ll need for your new bank, you’re going to have to approach venture capitalists.
Venture Capitalists
The good news is that due to the regulatory scrutiny that banks face just to open their doors, the banking industry is a relatively low-risk investment for venture capitalists.
The flip side is that you’ll have to share the profits of your bank for many years to come with your investors, but banking is also, in general, a high-yield business, so you won’t have to take an oath of poverty while paying back venture capitalists.
For an excellent overview of how venture capitalists work, read this article in the Harvard Business Review. Oracle NetSuite also offers a comprehensive guide to attracting venture capitalists that includes a downloadable e-book.
Step 4: Get a charter
According to the Federal Reserve, a de novo bank must operate under either a federal or state charter. A charter is a legal document that authorizes the bank to conduct business.
A charter includes the bank’s articles of incorporation and certificate of incorporation, which is usually issued by the state corporation commission.
Charters can be issued at the federal level by the Office of the Comptroller of the Currency (OCC), or by the state (and including the District of Columbia, Guam, Puerto Rico, and the Virgin Islands) in which the bank is incorporated, usually through its banking commission.
As with the FDIC application, federal and state charter offices will carefully evaluate the bank’s business plan, executive team, board of directors, and capitalization amount.
Step 5: Apply for FDIC approval
The Federal Deposit Insurance Corporation (FDIC) evaluates, and upon approval, insures and sanctions every new bank in the United States. Required elements of the application and necessary forms are available at the FDIC website. These are the necessary elements:
- Mission Statement
- Business Plan
- Financial projections for a minimum of three years
- Policy descriptions for loans, investments, and insurance
Obtaining both the bank charter and FDIC approval takes some time—a minimum of 12 months, and as much as 24 months. While you are waiting for approval to come through, you can move on to address the succeeding steps.
Step 6: Check for any other necessary permits
Most bank charters are a sanction for the bank to conduct business, but there may be additional necessary permits or local zoning laws to comply with. The Small Business Association’s website offers easy ways to check for required state and local licenses and permits for your business:
- State – You’ll need to visit your state’s website for specific information on what permits you’ll need to start a bank there. Almost all states will require a charter, and even if it is a national charter, you’ll likely have to apply for a license through the state agency that issues bank charters. If you have some flexibility where to locate your new bank, you can visit a page at the SBA site that gives some helpful tips on how to choose where to locate your business.
- Local – Again, localities vary widely with the number of regulations that all new businesses, and especially banks, require. The general rule of thumb is that the larger the population and the amount of businesses in your location, the more permits and paperwork are required. If you have a local SBA office, visit them for advice and assistance.
If you are opening a brick-and-mortar bank, you’ll often need to acquire a Certificate of Occupancy. The CO certifies that all local zoning laws and building codes have been followed.
If you are renting a building, the landlord is usually responsible for the CO.
Step 7: Get customers
With all the regulatory compliance that starting a bank involves, it’s easy to lose sight of the end goal of any business: attracting and retaining new customers.
Getting customers through your new bank’s doors (or to its website) requires differentiating yourself from your competition.
Create your brand
One of the best ways to attract new customers is by creating a memorable brand image through an effective branding campaign.
Branding is the process through which a company’s mission, values, and image enters the public consciousness.
Get a good logo
Successful branding begins with a good logo that represents the company effectively and in a simple, easily memorable manner.
Getting the logo right is an important step towards corporate success, and if you are not a natural artist or computer graphics expert, plenty of firms offer logo design for reasonable rates. It’s a worthy investment of resources towards a bright future for your new bank.
Advertise your brand
Successful advertising happens in both traditional and social media.
The correct answer to which media you advertise in is “all of them,” but the target audience that you defined in your business plan will dictate which media forms you focus your advertising budget on.
Gain a social media presence
Younger consumers will tend to favor social media. Ellen McGovern, chief marketing officer at Massachusetts-based Clinton Savings Bank, explains the need to be on social media to attract and retain younger customers in an article at American Banker:
Many financial institutions have what the industry refers to as an aging customer base,” she said. “We need to continue to develop ways to attract this younger demographic.
One of the most effective networks of promotion for this younger generation of customers is social media influencers.
In the same article, Molly Young, product marketing manager at partnership automation company Impact, explains the marketing power of influencers:
Banking and finances can sometimes be opaque to would-be participants. By sharing their experiences, modeling their usage, and infusing a brand’s message with their own relatability, influencers can break down barriers.
Don’t neglect traditional forms of advertising
If the newer generation of bank customers prefers the influencer network, then older consumers choose traditional media like newspapers and TV, and you certainly can’t afford to alienate this important market segment. So a full portfolio of a combination of new and traditional media is in order.
The best way to determine which media reach your targeted audience is to request a media kit from prominent local media outlets.
The best media kits will offer detailed audience information that will allow you to select those outlets whose audience most closely matches your target consumer base.
Determine your competitive advantage
Branding and advertising can all be for naught if your bank’s competitive advantage is not clearly defined. A competitive advantage is a unique service, perk, or reward that differentiates your business from others.
Banking is a very competitive industry with large players that have thousands of branches across the country and an economy of scale that allows large banks to waive many fees and offer higher interest yields on checking and savings accounts.
If you can’t match the large banks on price, then perhaps your small, community-based bank can offer personalized, custom accounts to meet individual consumers’ needs, or offer free financial literacy classes for their account holders.
Links to resources about business marketing
Several other articles couple be written about marketing, advertising, and PR for your new bank, but there are a couple of excellent articles that focus specifically on getting customers. Forbes offers ten ways to get customers to your new small business, and Inc. offers the same, with a focus on also increasing your sales.
For a good primer on using influencer marketing, check out this article from The Financial Brand.
Once you have customers, the competition in the financial industry means that pleasing and keeping your base of customers is also essential for success.
Jim Marous, Co-Publisher of The Financial Brand says, “Bottom line, having a customer-centric culture is more than just a good thing—it’s become a matter of survival.”
Business/Fintech influencers to follow on social media:
Video Resources
- Khan Academy’s Introduction to Banking
- Building a Bank by MIT Bootcamps
- Banking Explained – Money and Credit
- How to Write a Business Plan by Young Entrepreneurs Forum
- How to Start a Business by Sir Richard Branson
Conclusion
Starting a bank requires a high level of knowledge, a good amount of industry experience, and a lot of patience and determination to deal with the charter and FDIC approval process. It also requires an enormous amount of capital.
For these reasons, starting a bank is not recommended as your first entrepreneurial venture, but more as a capstone to a successful career in banking and financial services.
For those who successfully scale the formidable barriers to entry, the financial rewards can be great. But for many community bank owners, the real reward is in providing an essential institution that ensures the financial well-being of their community.
British business titan Sir Richard Branson sums up the essential purpose of any business: “A business is simply an idea to make other people’s lives better.”
Author
Matthew Butterman
Related articles
Marketing is essential for any small business that wants to grow and succeed. We surveyed our large audience and analyzed over a dozen high-impact reports to establish how small businesses approach their marketing.
Our original surveys were presented as multiple-choice questions; each received a minimum of 500 unique responses.
[su_note note_color="#dbeafc"] Table of Contents
- Top Marketing Budget Statistics
- Average American Marketing Spend
- Marketing Budgets Broken Down
- Where Most Companies Draw the Line
- Social Media Marketing
- The Effectiveness of Content Marketing
- Preferred Ad Platforms
- Online vs. Traditional Businesses
- Return on Ad Spend Distribution
- A Reduction in Long-Term Marketing
- Marketing Goods vs. Marketing Services
- B2C vs. B2B
- Methodology [/su_note]
Top Marketing Budget Statistics
- On average, each American business spends $14,575 on marketing per year—$481 billion in total. But 66.3% of small business owners spend less than $1,000 on marketing each year.
- Major outliers drive that average up. The majority of marketing spending is done by just 14.9% to 18% of all businesses.
- 60% of business owners consider social media their best marketing strategy, but 24% are disappointed with its returns.
- Less than 6% of small business owners consider content marketing their best marketing strategy, but 93% of business owners who invest in content marketing are satisfied with their results.
- Marketing a service costs 36.5% more than marketing consumer goods.
- Business-to-consumer (B2C) companies spend 52% to 71% more to earn the same revenue as business-to-business (B2B) companies.
Keep reading for more high-impact marketing statistics, plus cutting-edge marketing strategies you can implement right now.
Average American Marketing Spend
There are over 33 million businesses in the U.S., and they spend a combined $481 billion a year on marketing. This means the average American business spends $14,575 on marketing annually.
But this is a top-heavy figure. Most marketing spending comes from 14.9% to 18% of all businesses (from sole proprietorships to publicly held companies). By comparison, 63.4% of small businesses spend less than $1,000 annually.
The average business spends 12.3% percent of revenue on marketing, with the median rate coming in at 10%.
Marketing Budgets Broken Down
On average, companies spend 53.4% of marketing dollars on their digital marketing budget. Small businesses spend 46.6% of marketing budgets on traditional advertising.
Here's a breakdown by industry:
- Educational companies spend 75.5% of their marketing budget on digital marketing.
- Technology companies spend 65.7% of their marketing budget on digital marketing.
- Healthcare companies spend 64.6% of their marketing budgets on digital marketing.
- Banking, finance, and insurance companies spend 60.7% of their marketing budgets on traditional marketing.
- Real estate companies spend 60% of their marketing budget on traditional marketing.
- Manufacturers spend 56% of their marketing budgets on traditional marketing.
Research-Based Recommendation: Companies should spend between 39.3% and 75.5% of their marketing budgets on digital marketing and 24.5% to 60.7% on traditional marketing, depending on their industry.
Professional marketers who responded to Gartner's 2023 CMO Spend and Strategy Survey intended to spend approximately equal portions of their marketing budgets on labor, paid media, technology, and outsourcing, as seen below:
Paid media spending makes up the largest portion of marketing budgets, with 25.6%, but even the smallest portion is only 2.3% behind.
Where Most Companies Draw the Line
We surveyed 1,800 UpFlip viewers about how much they spend on marketing per year.
- 66.3% of small business owners spend less than $1,000 on marketing each year.
- 15% of small businesses spend over $10K annually on marketing.
- 19% of small business owners spend between $1K and $10K on marketing each year.
That 85.1% of businesses spend less than $10,000 on marketing isn't surprising. According to the U.S. Small Business Administration's Office of Advocacy, 99.99% of U.S. businesses qualify as small businesses.
Research Opportunity: Further research should be done to determine 1) How marketing expenditure correlates to revenue and 2) How marketing expenditure impacts revenue per employee.
Social Media Marketing
Social media marketing uses a combination of organic marketing strategies and paid marketing strategies to build relationships with customers on platforms like Facebook, Instagram, and TikTok.
Our survey found that 60% of small business owners prefer social media marketing over Google Ads, SEO/SEM, print advertising, and content marketing.
While social media marketing dominates the battle of preference, 24% of small business owners say that it's their least successful marketing strategy.
Research Opportunity: Further research should be performed to find what sets successful social media campaigns apart from unsuccessful campaigns.
The Effectiveness of Content Marketing
Content marketing is a strategy that involves creating and sharing blogs, videos, and other useful content to drive awareness of products and services. This strategy can be highly successful because it helps develop authority with both potential customers and search engines.
Just 6% of businesses surveyed use content marketing, but only 7% of businesses surveyed found content marketing to be unsuccessful.
These numbers indicate that small business owners can benefit tremendously by focusing on producing new content.
Research-Based Recommendation: We suggest spending at least a couple of days each month creating new content and scheduling social media posts. If you aren’t confident doing this yourself and don’t have an employee you can assign it to, consider contracting a freelance content creator.
Preferred Ad Platforms
Business owners can choose numerous forms of paid advertisement, but some platforms drive results better than others.
44% of small business owners prefer using Google Ads over Facebook/Instagram ads (32%), YouTube ads (13%), or TikTok ads (11%).
17% of small business owners prefer Google Ads over other forms of marketing, and only 13% of small businesses are not satisfied with the performance of Google Ads.
Research-Based Recommendation: Start by spending your ad budget on Google Ads, then learn how to optimize other ad platforms.
Specific Marketing Campaign Costs
Small business owners need to break their marketing budgets down by campaign. These numbers will help you get a feel for the real-world cost of different marketing tactics and tools.
- Content marketing budget: Expect to spend a minimum of $29 per piece, but know that some of the best content creators have content marketing budgets that cost up to $1,000 per piece. You may also find content creators that charge $.05 to $1 per word.
- Paid digital advertising budget: Small businesses should expect to spend $2.59 per click, $3.12 per 1,000 impressions, $0.66 to $1.23 on remarketing, $15 to $800 on tools, and a minimum of $350 per month on paid digital advertising.
- Monitor ad budget: To pay someone to monitor ads for your small business, include a marketing spend of $350 to $5K per month or 12% to 30% of monthly ad spend—whichever is more.
- Email marketing budget: Your email marketing budget will vary based on the number of email addresses on your list and the features you need, but you should expect to spend around $18 per month for up to 1,000 people on your email list. As you grow, costs may increase up to $540 per month plus related labor expenses.
- Social media marketing budget: Social media marketing in 2023 was expected to reach $72.33 billion, or $2,178.62 per business (calculated by dividing $72.33B by the number of U.S. businesses).
- Sales funnel automation budget: Automations are part of a marketing budget that will fluctuate depending on the number of automations included in your email marketing, social media marketing, and other marketing tactics.
- Marketing tools and software: You might include these in other categories or you might include them in a separate category. Depending on the size of your company and number of customers, you may need a budget ranging from free tools to thousands of dollars per month.
- Traditional advertising budget: Traditional marketing budgets are expected to decrease by 2.6% according to The CMO Survey. This includes print ads, outdoor advertising, radio, and more.
For social media, paid ads, and traditional advertising, you may want to break the marketing budget into specific marketing channels. We recommend utilizing this marketing budget template.
Online vs. Traditional Businesses
Our surveys found that online businesses are 75% more likely to increase their marketing budgets.
- 70.6% of online businesses are either increasing their marketing budgets or keeping them at the same level this year.
- 40% of businesses with less than 10% of revenue from online sales have flat or increasing marketing spending.
- 60% of businesses with less than 10% of revenue from online sales are decreasing their marketing spending.
This is consistent with consumer trends, as online sales are increasing their overall percentage of sales by approximately 1% per year.
Research-Based Recommendation: Even if you’re saving money by decreasing your digital marketing budget, foregoing an online marketing strategy may mean poor performance in the future. We recommend maintaining a digital marketing budget comparable to industry benchmarks.
Return on Ad Spend Distribution
One of the metrics small businesses use is return on ad spend (ROAS), which is defined as revenue from ads divided by cost of ads, but many business owners implement a modified ROAS calculation that uses this formula:
(Revenue - Cost of Good Sold)/Cost of Ads
893 people responded to our questions about their ROAS. Here’s what the survey showed…
- 67% of small business respondents make less than $3 for every dollar spent on ads.
- 14% of small business respondents make $3 to $6 for every dollar spent on ads.
- 3% of small business respondents make $6 to $9 for every dollar spent on ads.
- 15% of small business respondents make less than $3 for every dollar spent on ads.
Numbers From Real Business Owners
Some of our original survey respondents provided more detailed information that you can use to determine what you might aim to spend in your industry.
eCommerce
As stated earlier, 70.6% of online businesses are either increasing their marketing budgets or keeping them at the same level, while 60% of businesses with less than 10% of revenue from online sales are decreasing their marketing spending.
@bobsimpson9228 told us:
[su_quote][We are in] Ecommerce and average about 3-4 ROAS) with a break-even [point] of 2.2 [ROAS].[/su_quote]
Learn more about how small business owners start online businesses.
Car Detailing
@josh3.064 gave an example of what to expect in car detailing:
[su_quote]I detail cars and I average about $5-8 [in revenue] per ad [at the moment][/su_quote]
Want to learn more about car detailing? See our comprehensive blog and YouTube video.
Automotive Repair
@allaboutdiy1375 provided information about car shops:
[su_quote]I don’t advertise at all with my Mercedes Benz repair shop. It turns out that if you are honest, fair, and have integrity, word of mouth and reputation is all you need. I’ve got more work than I can even get done in five, 9 hour days.[/su_quote]
Want to know more about automotive repair? Check out our how-to blog and in-depth interview.
House Painting Business Marketing
@kdp9607 had the best performance with a nearly 22x return on ad spend in the painting industry.
[su_quote]Housepainting business here. I spent $1.5k on Google ads this year. The return is between 35 / 40k gross profit.[/su_quote]
Coffee Shop Advertising
@stoneroastery disclosed:
[su_quote]I’m in the hole. Lost money[/su_quote]
Coffee mogul Wes Herman confessed that 19-location Woods Coffee doesn’t actually spend a lot on marketing. Read about how he runs his coffee shops.
A Reduction in Long-Term Marketing
Growth in customer relationship management, customer experience spending, and brand building is expected to slow by 50% in the next year.
There are some exceptions:
- Communications companies expect to increase their spending on customer relationship management, customer experience spending, and brand building by 19.1%.
- Pharmaceutical and biotech companies expect to increase their spending on customer relationship management, customer experience spending, and brand building by 13.4%.
- Professional service companies expect to increase their spending on customer relationship management, customer experience spending, and brand building by 10.3%.
These three industries are spending nearly double what other industries are spending.
Marketing Goods vs. Marketing Services
Interestingly, marketing consumer goods costs 36.5% less than marketing services.
As such, the U.S. Small Business Administration (SBA) suggests different marketing budgets for different types of small businesses.
- Business-to-business (B2B) companies spend 6.3% of revenue on marketing if they offer a product.
- A good marketing budget for B2B service companies is 6.9% of revenue.
- Consumer product companies spend 9.6% of revenue on marketing.
- B2C service companies spend 11.8% on marketing.
- B2B companies spend 9.5% more to market a service than a product.
- B2C companies spend 36.5% more to market a service than a product.
Research-Based Recommendation: Effectively, this shows that small business owners should expect to spend between 10% and 40% more when they are selling services instead of a product.
B2C vs. B2B
Business-to-consumer companies spend 52% to 71% more to earn the same revenue as B2B companies.
This may be because since the 1970s, productivity has grown eight times as fast as wages. GDP has increased by a multiple of 8.7x before inflation.
Businesses have more spending power today than they did in the past, but consumers have similar spending power than they did in 1979.
Research-Based Recommendation: Marketing a B2B product is the least costly form of marketing. If you’re trying to decide on a type of business to start or exploring new ways to increase revenue, consider selling products to companies instead of individual consumers to maximize your marketing effectiveness.
Methodology
These statistics were gathered by reviewing literature, surveying our audience, and using the combined statistics to help small business owners understand the marketing landscape and highlight opportunities to improve their marketing results.
Literature Review
We studied numerous reports and blogs on marketing statistics, marketing budgets, and other economic data to gather statistics obtained and published by other companies and organizations.
We used these statistics to better understand how UpFlippers' survey responses compare to the findings of larger companies and organizations regularly published in annual reports and other research.
UpFlip Surveys
UpFlip surveys were conducted on our YouTube channel. Due to the limited nature of YouTube surveys, it is impossible to tie every answer to a specific respondent unless they leave additional comments.
Nor could we establish whether there were correlations between ad spending and successful results with each type of marketing expense. In the future, we will update this piece with long-form surveys that will provide additional insights into how small businesses use their marketing.
Combining Statistics
In some scenarios, we compared two statistics to gain more insight into a subject. Combining two statistics was useful for gaining insights about content marketing being underutilized, selling products requiring less marketing than selling services, and B2B marketing being more cost-effective than marketing to consumers.
Operating based on these conclusions may have different results for different companies, and they should always use metrics to measure the success of their results.
Closing
These small business marketing budget statistics can help small business owners create an informed marketing budget, especially when you keep in mind that online marketing is steadily gaining traction over traditional marketing channels like print and radio advertising.
Whether you’re a small business owner or work with them, you can use the information in this report and our marketing budget template to create a balanced small business budget. What’s the biggest pain point in creating your marketing budget breakdown, and what new marketing strategy are you going to try next?
Cash is not king. Creativity is. Have you ever wanted to start your own Etsy shop? Vlad Kuksenko started TagPup and in 18 months became the top pet product seller. You can do it, too!
We sat down with Vlad and learned how he loved art but earning a living as an artist wasn’t an option until graphic design became a major field. Today, he creates personalized dog collars, leashes, and bandanas that fill the number one pet products shop on Etsy.
[su_note note_color="#dbeafc"]
We’ll share the tips and strategies he used to become number one in his category. (Click the links below to jump to the sections that interest you most.)
-
- What is Etsy?
- What to do before opening an Etsy shop
- How to start an Etsy shop
- Sign up or log in to Etsy
- Open your shop
- Choose your shop preferences
- Name your shop
- Stock your shop
- Add clear photos
- Set your prices
- Choose your payment methods
- Establish shop policies
- Calculate shipping costs
- Promote your shop
- Fulfill orders promptly
- Provide excellent customer service
- Monitor your shop
- Consider Etsy ads
- Stay compliant with Etsy policies
- Reinvest in your business
- Selling on Etsy FAQ
- Learn more about Etsy businesses
- Start your own Etsy shop
[/su_note]
- What is Etsy?
Get ready to become your own Etsy shop manager.
What is Etsy?
Etsy is an online marketplace where shop owners can sell products to Etsy’s 82 million buyers looking for handmade and vintage products. Etsy listings fall into eight major categories:
- Jewelry & Accessories
- Clothing & Shoes
- Home & Living
- Wedding & Party
- Toys & Entertainment
- Art & Collectibles
- Craft Supplies
- Seasonal Offerings (think Valentine’s Day, Veterans, Memorial, and Labor Days, 4th of July, Halloween, Thanksgiving, and Christmas)
Keep reading for things to sell on Etsy.
What to do before opening an Etsy shop
Before you sell items on Etsy, there are a few things you should do, including answering:
- What to sell on Etsy?
- What is the industry outlook?
- Who are the major players on Etsy?
- What will my Etsy business plan be?
What to sell on Etsy?
If you’re wondering what sells best on Etsy, check out the Etsy best sellers list. The best-performing segments according to Etsy’s 3rd Quarter 2021 Earnings Presentation are:
1. Homewares & Home Furnishings: $4.2 billion
2. Jewelry and Personal Accessories: $2.1 billion
3. Craft Supplies: $1.4 billion
4. Apparel: $1.4 billion
5. Paper & Party Supplies: $600 million
6. Beauty & Personal Care: $300 million
Many of these are vintage items, handmade goods, or personalized items that do particularly well with Etsy shoppers. Vintage items are classified as over 20 years old, while handmade means that each is unique.
Vlad spent a lot of time talking about the decision-making process of what to sell in an Etsy shop. He explained:
[su_quote]Etsy is a want-based business. If you can personalize it, you can sell it.[/su_quote]
He went on to explain:
[su_quote]You need a keyword to be able to sell it. If there is no keyword people are searching, you can’t sell it.[/su_quote]
He suggests using eRank to help with your search engine optimization (SEO). eRank has various tools to help small business owners come up with product ideas, optimize their listings, and track their shop page against the best Etsy shops.
Vlad described his product development process as:
- Research what has a high search volume using eRank.
- Input the term you are targeting into the Etsy search bar.
- Look for products with at least one review per day because that means they are selling at least 5 to 10 per day.
- Review the listing to establish:
- What is frequently favorited?
- What do the favorited items have in common?
- Design your offerings based on this search.
Vlad gave two additional pieces of advice that small business owners should follow when wondering how to start an Etsy shop:
- “You need multiple products that work well together. Carrying a single product doesn’t do as well.”
- Be aware of seasonality. For instance, items like planners, weight loss tools, and wall hangings tend to do better at the beginning of the year.
Now that you understand how to decide what to sell on Etsy, you’ll want to know the differences between Etsy and other major players in the industry. Let’s take a look.
What is the industry outlook?
According to eMarketer, U.S. eCommerce sales are expected to grow by 10 to 15% per year and total over $1.6 trillion by 2025. Most of the earnings will be from top players like Amazon and Walmart.
Etsy had an industry-leading 107% increase in Gross Merchandise Sales, which means if you meet the requirements to start an Etsy shop, it is the place to be.
Now that you know where the industry is going, keep reading to learn how to start an Etsy shop.
Who are the major Etsy sellers?
Etsy doesn’t share each company’s revenue, but they share the number of transactions for each Etsy shop and the number of followers. Some of the most prominent players are:
- Planner Kate: An organization shop with 1.8 million transactions and 60K followers
- Bead Boat: Craft supply shop with 1.4 million transactions and 57K followers
- ModParty: A bridal shop with over 1.22 million transactions and 113K followers
- Peggy Sue Leather: Leather supply shop with almost 790K transactions and 25K followers
Pro Tip: See more top sellers on Practical eCommerce’s blog 20 Top Selling Shops on Etsy.
Etsy offers plenty of opportunities for shop owners to make a great living. Here are a few business owners that we’ve interviewed who run businesses similar to Etsy sellers:
- Urbanity: $102K per month in revenue selling clothes
- Portland Gear: $120K per month in revenue selling Portland-themed clothes
- Check out our interview with Marcus.
- Blk Sunflower: $180K per year selling homemade candles.
- TagPup: The Etsy seller we’re featuring in this article. Check out our first of two videos with him below.
Write an Etsy business plan
You don’t need a business plan for an Etsy shop, but it will be much easier to start an Etsy shop if you start by writing a business plan. A business plan is something we recommend for every new business.
Your Etsy business plan should include:
- Your business name, idea, and goals
- Industry and competitor research
- Market research
- Size of market
- Gaps in market
- Whether Etsy is the best place to reach your market
- Financial estimates and budgeting
- Are there gaps between the money you have and the money you need? How will you solve them?
- Marketing goals and processes.
- The path to achieving your set goals
Check out our interview with Mike Andes on how to write a business plan.
[su_youtube url="https://www.youtube.com/watch?v=C8MyjkibCxk"]We’ve gathered some templates and resources for you to make creating a business plan for an Etsy shop easier. Check them out below.
Etsy Business Plan Templates
We’ve gathered templates to help you develop your business plan. Here are some of the best:
- UpFlip business plan template
- One-page business plan
- U.S. Small Business Administration (SBA) Business Guide
- Get help writing a business plan.
EXCITING ANNOUNCEMENT: Stop guessing and gambling with your time and money on Etsy. Discover Vlad’s Secrets to building a $3.2M Etsy business. Start boosting your success and stop making costly mistakes with a 30% discount on his course.
How to start an Etsy shop
Starting an Etsy shop can be a great way to sell handmade, vintage, or unique items. Here are step-by-step instructions on how to get started:
- Sign up or log in to Etsy
- Open your shop
- Choose your shop preferences
- Name your shop
- Stock your shop
- Add clear photos
- Set your prices
- Choose your payment methods
- Establish shop policies
- Calculate shipping costs
- Promote your shop
- Fulfill orders promptly
- Provide excellent customer service
- Monitor your shop
- Consider Etsy advertising
- Stay compliant with Etsy policies
- Reinvest in your business
Let’s start by opening getting an Etsy account.
Sign up or log in to Etsy
If you don’t already have an Etsy account, you’ll need to create one. If you do, log in.
Open your shop
Click on “Sell on Etsy” in the top right corner of the Etsy homepage.
To create an Etsy shop, you’ll need to go to the Etsy official site and create an account. You can use Etsy sign-in through Google or Facebook to make it easy. After you have created an Etsy account, you’ll want to go to etsy.com/sell. Review everything and click “Open your Etsy Shop.”
Choose your shop preferences
It will take you to a “shop preferences” page that asks for your shop language, shop country, and shop currency. You can change these with the drop-down menu.
It also asks, “Which of these best describes you?” and gives the following options:
- Selling is my full-time job.
- I sell part-time but hope to sell full-time.
- I sell part-time, and that’s how I like it.
- Other
All the answers on the shop preferences page have default answers already added. If you wish to change the answers, do so, then click “Save and Continue.”
Name your shop
In this step, you’ll choose a unique shop name for your new Etsy shop. The shop name needs to meet the following guidelines:
- Shop Name Length: Include a maximum of 20 characters, only Roman letters and numbers, no spaces or punctuation.
- Shop Name Availability: Push “Check availability” to verify whether the name is available.
- Descriptive: Does it describe what you sell?
- Memorable: Is it easy to remember?
- Available in other places: Is the name available as a domain, social media, and trademark?
- Use our business name generator to verify the name is available as a domain.
- Search “[your location] business license search” to check availability in your location.
- Use uspto.gov to check trademark availability.
Once you’ve settled on a great name, enter it then click “Save and continue” to proceed to the next page, where you will create listings.
Want to hear more about Vlad’s TagPup success? Listen to his podcast episode below.
Stock your shop
On this page, you’ll want to add all your listings. You’ll click the blue box that says “+ Add Listing,” which will take you to the “Add a new listing” page. This page is relatively long, so we’ve broken it into sections to make it easier to follow.
- Photos
- Videos
- Listing Details
- Inventory and Pricing
- Variations
- Personalizations
- Shipping
What should I include in my Etsy listing details?
You’ll want to include the following information in the listing details:
- Title: What you call the product, no more than 140 characters
- Example from one of my hoodies: “Unisex Shaded Hands Heart Hoodie- Artwork by Daisy Gray”
- About this Listing: Three questions
- Who made it? Me, member of my shop, or another company or person
- What is it? Finished product or supplies and tools
- When was it made? Made to order (use this for print-on-demand), Recent (choose dates between 2003 and today), Vintage (Pre-2003)
- Category: Search for and select your product type
- Sizes and Colors: Select the option that describes it best, or select “multiple” to create variations.
- Optional classifications for Etsy search: Holiday, occasion, style, and graphic
- There are a lot of attributes, and they change based on the category. Review them and select whatever fits best as they can help with search results.
- Optional for clothing: Sleeve length, closure, and clothing style
- Renewal: Auto or manual
- Type of Product: Physical or digital
- Description: Describe your product, 1,100-character maximum
- Read Etsy’s tips on product descriptions.
- Preview the description on Google straight from the listing page.
Vlad told us:
[su_quote]Read your competitors’ descriptions. Use graphics as opposed to descriptions when possible. For instance, take the dog collars and a ruler to show the different sizes.[/su_quote]
- Production Partners: Asks for information about any outside partners, including the following:
- Partner name
- Location
- Additional information
- Why you work with them, your role, and their role
- Tags: Keywords you want your product to show up for, maximum of 13 tags
- Materials: Type of raw materials. For instance, cotton and polyester.
The tags are the key to getting your shop name in front of your target audience. Don’t forget to use eRank to help with the tag selection.
We asked Vlad, “What Etsy tags should I use?”
Vlad told us:
[su_quote]When creating tags, think about ‘Where should I show this product?’
If you’re creating t-shirts, you don’t need the word ‘t-shirt’ in each one. Just include it in the first three, and use other tags that will put it in front of other people.[/su_quote]
To do this section right, expect to spend an hour per product or more.
Example of tags
Given Vlad’s suggestion, you may want to use the following tags if you have a Taylor Swift shirt (which is one of the trending topics for t-shirts this year):
- Taylor Swift tour shirt
- Taylor Swift Eras shirt
- Eras tour shirt
- Taylor Swift tour
- Taylor Swift Eras
- Eras tour
- Taylor Swift outfit
- Taylor Swift merch
- Red Taylor Swift
- 1989 shirt
- Lover shirt
- 1989 Taylor Swift
- 1989
How to set up an Etsy shop video
Etsy recommends creating a product video. They give you instructions on how to take listing videos in the Etsy Seller Handbook. If you add product videos, they should meet the following qualifications:
- 1080p or higher resolution
- 5-15 seconds long
- Less than 100 MB file size
- 30 frames per second
- Don’t edit the video before loading it into Etsy. (If you edit the video from standard video sizing to a 1:1 height-to-width ratio, you may have issues uploading from an iPhone.)
You can make a video with a 1:1 ratio after adding the video to Etsy by using the editing tools on their site.
Now that you know how to add a video to your Etsy listing page, let’s look at the other information covered in Etsy listing details.
Add clear photos
High-quality images are crucial to start selling. Take well-lit, clear photos that accurately represent your items.
Etsy allows you to add up to ten photos on the website. Want some tips on how to create great product images? Check out the list below.
- Use natural light and no flash. Late afternoon is the best time to photograph.
- Include a common object for scale, or use a ruler if needed.
- Show the item being held, worn, or used.
- Shoot against a clean, simple background. Most platforms require white backgrounds for the primary photo, so it’s best to have at least one that shows the image on a pure white background because you’ll probably sell on other platforms too.
- Add photos of your variations so buyers can see all their options.
- Set the pixels per inch to 72 and 2000 x 2000 pixels.
- Verify that the combined photo image sizing is no larger than 1 MB total. Otherwise, it slows pages on mobile devices not connected to WiFi.
After you add photos, remember to edit the meta description to help with search engines by hovering over the image and clicking on the pencil. You can also crop or delete the image in the hover menu. If you click and hold onto an image, you can change its placement.
Set your prices
Consider the cost of materials, time, and any fees when setting your prices. Be competitive but also make sure you’ll make a profit. The pricing should be high enough to cover the following:
- The cost of the goods
- Your time
- Etsy’s $.20 listing fee
- Etsy transaction fees of 5% of the product price plus shipping price
- The Etsy payment processing fee of 3% + $.25 in the U.S. (varies by country)
- Etsy’s 15% off-site marketing fee, which is charged every time Etsy randomly places your product in an off-site ad that results in a purchase
- Cost of shipping labels ($6.99 at the time of writing; learn more about shipping labels in Etsy’s Seller Handbook)
- Any other costs associated with your Etsy shop
How to start an Etsy shop with no money
You can open an Etsy shop without money, but the Etsy platform requires a $.20 per item listing fee that you’ll have to pay when the product sells. If your items are not made-to-order, Etsy shop owners can get started for free. This is especially true if you can start selling vintage goods you already own as you won’t have to buy new materials.
Now that you know how to start an Etsy shop, let’s look at Etsy payments.
Choose your payment methods
Set up your preferred payment method. Etsy Payments is a commonly used option that allows buyers to pay for a physical or digital product assuming your payment account settings allow each of the options as Etsy payments:
- Credit cards
- Debit/bank cards
- Etsy Gift Cards and Etsy Credits
- Apple Pay
- Google Pay
- PayPal
- Klarna Financing (U.S. only)
- Klarna installment payments (Australia, Canada, Spain, UK, U.S.)
Establish shop policies
Define your shop policies regarding shipping, returns, and exchanges. This helps set clear expectations for your customers. You’ll have to follow Etsy’s policies, but as a shop owner, you can also define your own about subjects like returns, exchanges, and cancellations. Printify goes into more detail about Etsy store policies.
Calculate shipping costs
Etsy offers a free shipping option, and I highly recommend using it. While Vlad didn’t specifically mention offering free shipping, he offers it on many of his products, and considering how much we love free shipping, we assume that’s part of TagPup’s success! He made some comments that suggest including the shipping in the price of the goods:
[su_quote]Be very clear in what they are buying to get better reviews.[/su_quote]
and
[su_quote] Don’t trick people.[/su_quote]
Additional shipping charges can be tricky at times, so I (the author) suggest using the free shipping feature. It is straightforward; they’ll ask you a couple of questions, including:
• Origin zip code: Where it’s mailed from
• Processing time: How long it takes from when the customer orders until when it ships
• Where I’ll ship: Continents or specific countries
• Shipping services: Your offerings for shipping
• Free shipping: Domestic or international (I would discourage offering free international shipping unless you are well-versed in shipping and pricing costs)
Then you’ll have an option to add shipping to the price of the product. Review Etsy pricing strategies to include free shipping and learn how to include the pricing in the product cost.
In addition to specifying shipping options, remember to establish and post a very clear return policy that details:
- When you accept returns (standardized product, within 90 days, not-made-to-order, manufacturer error)
- When you will not accept returns (damaged after shipping, custom made, after 90 days)
- Time frame to return the product
- Who pays for return shipping
Promote your shop
Marketing is the trick to growing any business. You have to get your business and products in front of people to sell them. Fortunately, Etsy makes it pretty easy for a small business to sell on its marketplace.
If you don’t have much experience with marketing, it starts with market research. Mike Andes goes into great detail about market research, including identifying potential customers, target markets, and demographics. Check out our interview with him below:
[su_youtube url="https://www.youtube.com/watch?v=7dqHBHA4AmU"]Vlad had a lot of input on how to sell on Etsy. He emphasized the importance of product design:
[su_quote]Art ought to communicate to [potential customers]. If it doesn’t communicate, it’s not art and won’t sell.[/su_quote]
He also told us you should “price your products based on the middle of the pack” because Etsy customers aren’t looking for items they need but that they want. They will go for the one that meets their desires the best.
He also shared this advice:
[su_quote] Don’t race to the bottom and satisfy the keyword.[/su_quote]
His strategies for becoming one of the best Etsy shops for pet products are also used by retail giants, and you can leverage them, too. As you start marketing your Etsy shop:
- Create a loss leader: This is a pricing strategy that intentionally takes a loss on a product to gain market share. Vlad uses this with new products to gain traction on the Etsy website.
- Vlad told us: Underbid, rank, then raise the price.
- Use Etsy promotional pricing.
- Utilize Etsy free shipping: Everyone loves something free. With the success of Amazon Prime, online shoppers expect every online marketplace to offer free shipping.
- Gather data and improve: While underbidding, he’s able to gather data.
He told us:
[su_quote] I’ll take a loss to gather data and improve my knowledge about whether it performs, then introduce new keywords.[/su_quote]
Vlad also suggested:
[su_quote]Use the sales and coupons. I’ll set the product to the original price, then discount it heavily. I also match products together to create packages people love. Always create sales for holidays.[/su_quote]
He also said that he throws in a small gift for repeat customers occasionally, but he doesn’t do it all the time.
For more on TagPup’s winning formula, watch our second video with Vlad here.
[su_youtube url="https://www.youtube.com/watch?v=7dqHBHA4AmU"]Helpful marketing tools
There are some useful marketing tools that small business owners use to market their companies:
- Canva: Simplify graphic design with Canva. Get access to thousands of templates for websites and social media for as low as $4.99 per month.
- SurferSEO: Write blog content faster and rank higher on search engines with SurferSEO.
- MailChimp: Email and SMS marketing automation is one of the keys to success that many small business owners mention. Get started with Mailchimp.
Fulfill orders promptly
Ship orders as soon as possible after they’re placed. This will help you provide excellent customer service. You can use Etsy shipping labels to save up to 30% on your shipping cost. Learn more about shipping label fees on Etsy.
You can also provide tracking information by using Etsy tracking labels or providing the tracking codes to the customer by other means. You’ll need to check Etsy and your preferred shipping provider to figure out the best way to handle shipping.
Provide excellent customer service
Respond to customer inquiries and concerns in a timely and friendly manner. The service you provide both before and after a purchase will impact customer satisfaction, whether they return to your shop, and whether they review and suggest your shop to other people.
According to inc.com, it takes 40 positive reviews to fix the damage done by a single negative review. When someone is upset, take the time to solve their problem politely. Vlad told us:
[su_quote]I work with customers on returns as long as they are less than 90 days. After that, we don’t. I just try to make them happy.[/su_quote]
The process I (the author) have found works wonders for dealing with unsatisfied customers is:
- Apologize for the inconvenience they are experiencing.
- Ask what you can do to fix it.
- Listen to their answer.
- Gather information about whether it was your error or theirs.
- Do exactly what they asked unless it is unachievable.
This can be a challenge because it may result in a single order resulting in a loss, but it’s far less costly than a bad review.
Monitor your shop
Vlad discusses his workflow at the 35-minute mark of UpFlip podcast episode 10. If you haven’t already listened to it, check it out now.
He told us:
[su_quote]Review your store and each item for week-over-week growth. If that section of the pie doesn’t grow, stop. If the reviews for it aren’t good, consider discontinuing the product.[/su_quote]
Consider Etsy ads
Etsy has a built-in ad feature where you can specify your daily ad spend limit, and they promote your products accordingly. The Etsy Seller Handbook answers how Etsy Ads work in more detail, but you basically create a budget of between $1 and $1,000 a day.
Vlad told us:
[su_quote]I typically spend between $300 and $1,000 per day on ads. Etsy really creates a level playing field, so going higher doesn’t mean it all gets spent.[/su_quote]
He went on to tell us the best way to use ads is to utilize keyword research.
[su_quote]Find the most creative way to make the ad as quick as possible to make it where the ad budget goes as far as possible.[/su_quote]
Stay compliant with Etsy policies
Familiarize yourself with Etsy’s policies to ensure you’re abiding by their rules and regulations.
Reinvest in your business
You’ll want to reinvest in your business to help it grow and get more customers. Vlad told us:
[su_quote]Margins are 50-60% if you don’t reinvest in the business, but we tend to reinvest in machinery.[/su_quote]
In addition to adding machinery, you can create new products or increase marketing to expand your business. Once you earn more income consider opening a retail location or hiring more employees to help.
Selling on Etsy FAQ
Where to buy materials and equipment for an Etsy store
You can purchase materials from a variety of places. Some of the places to buy when you first start are:
- A brick-and-mortar store: JOANN Fabric and Michaels are two that offer lots of selections for craft businesses.
- Etsy Craft Supplies: Find craft supplies you know are selling well on Etsy.
- Amazon: Craft supplies and tools can come directly to your home from the number one online retailer.
- Alibaba: Get bulk orders from overseas (allow weeks to months for shipping).
If you’re looking for equipment, Amazon and Alibaba might have it, but you can also check places like:
Vlad told us:
[su_quote]You can spend 200 bucks at JOANN and customize mugs with vinyl. The materials and equipment costs depend on what you’re making and what machines you need.[/su_quote]
He also told us:
[su_quote]Inventory is such a big issue. Sometimes I spend $5,000 on shipping to get $10,000 of product. One of the ways to fix that is to pay half up front and half on delivery.[/su_quote]
Do I need a business license to sell on Etsy?
Etsy does not require a business license to start listing physical or digital product, but the government might if you make more than $600 from your Etsy shop. In addition, a business bank account, reseller’s license, and business credit card will all require a business license.
Each city, state, and country have different licenses, permits, and tax forms required. Refer to the SBA License and Permits page to identify what your Etsy shop needs.
Learn more about Etsy businesses
Vlad suggested reading the book E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. You can get it through our Amazon shop.
- Check out Vlad’s YouTube, TalkShop.
- Save 30% on Vlad’s course.
- Etsy has 2 YouTube channels:
- Nancy Badillo, a highly successful Etsy seller, has almost as many followers as Etsy’s channels combined.
Start your own Etsy shop
We’ve explained the market outlook for eCommerce, how to start an Etsy shop, licensing requirements in case you want to make your shop a formal business, and marketing strategies to improve your business results.
If you’d like to consider other business ideas, check out our blog about the 30 best businesses to start for under $10,000.
Etsy can be an extremely satisfying way to earn a living. What kind of products are you thinking about listing on Etsy?
Have you ever wondered how to start a cleaning company? Cleaning businesses are some of the easiest businesses to start, but some people would prefer to just manage the business, not do the actual cleaning. Here, we explain how to start a remote house cleaning business without needing to do any cleaning yourself.
We talked to Neel Parekh, who started MaidThis in 2013. He built his remote cleaning concept into a company that makes over $166K per month and offers franchises to help small business owners do the same. The best part? He did this while traveling for 5+ years and to over 50 countries.
We’ll share his story about how to start a remote cleaning company, plus tons of great marketing tips and systems advice.
[su_note note_color="#dbeafc"]
You’ll learn everything you need to know about starting a remote service business, including:
Get ready to learn how to start a remote cleaning business.
What is a remote cleaning business?
A remote cleaning business is a cleaning company where the owner performs marketing, human resources, and administrative functions of the business from anywhere in the world while outsourcing or hiring local workers to perform the cleaning for customers.
Effectively, you’ll start a cleaning business without cleaning.
What businesses can be remote?
Three criteria have to be met for any business to be run remotely:
- The staff have to go to a service location. For example, gyms won’t work, but cleaning companies do.
- The small business should have low overhead. You can’t hold a lot of supplies or inventory.
- Management tasks need to be done remotely.
Neel told us:
[su_quote] This makes service businesses ideal for remote jobs.[/su_quote]
Check out our interview with Neel to learn about remote business success stories.
[su_youtube url="https://www.youtube.com/watch?v=kVyLriqFVdc&t=860s"]He has a special offer for UpFlip members to get $6,000 in credit when they start a MaidThis franchise.
Keep reading to get great remote business ideas.
Remote business ideas
Remote businesses normally fall into two categories:
- Online businesses
- Local service businesses
Best online business ideas
A successful online business can be created using online business ideas like an:
- Online store: Sell online using dropshipping or Fulfillment by Amazon to make money from people who are online shopping.
- Podcast: Talk about subjects that interest you and earn a living from ads and sponsorships with this online business idea. Learn more about podcasting.
- YouTube creator: Learn how to start an online business by creating YouTube videos.
- Online tutoring business: Start your own online tutoring business or use a tutoring and test prep platform like TutorMe, Skooli, or Wyzant.
- Freelancing: Most freelancers work remotely using platforms like Fiverr and Upwork.
- Online courses: Course creation is a great option for remote businesses because you create the course and can consult from anywhere in the world.
In addition to a remote cleaning business, you might consider other popular remote businesses like eCommerce, human resources, and accounting.
Check out our blog about online businesses for more remote business ideas.
Local service businesses can be remote businesses
You can use Neel’s strategies for service businesses like:
- Cleaning: Neel chose a cleaning business because it is the easiest of the service businesses to apply his techniques. There’s a large pool of qualified employees and lots of places that need cleaning. Plus, everyone has the supplies they need.
- Locksmith: Most of the parts in locks are interchangeable, which means these same strategies could be applied to create a remote locksmith business.
- Painting: A small business painting homes and businesses could be run remotely. You might need AI that pulls up the design documents and calculates the total square feet that need painting, but it can also be calculated using other means.
- Pressure washing: The challenge with pressure washing may be the equipment. You would probably want your remote business to focus on providing referrals to other businesses to remove this challenge.
- HVAC: Heating, ventilation, and air conditioning companies can provide services like preventive maintenance, fan repairs, and filter changes without needing a lot of inventory. You’ll probably want a referral partner for larger fixes, though.
Learn about other service business ideas.
How to start a remote cleaning business
Starting remote businesses is all about creating systems that make it easier for you to run your own business from anywhere in the world. The process of starting a remote cleaning business will include:
- Perform market research.
- Write a business plan.
- Create a website and CRM.
- Set up a payment processor.
- Create your business structure.
- Get remote cleaning business insurance.
- Create cleaning contracts.
- Find cleaners.
- Market your remote business.
Neel told us:
[su_quote]I didn’t have a mentor, so I was scared to quit my day job when I hit my freedom number. I cushioned my bank account and wish I had just dove in faster.[/su_quote]
Keep reading for more information about creating a remote business model.
Perform market research
There are plenty of people who have business ideas but never turn them into a profitable business. Your chances of success are much higher if you research what other businesses in the industry do and where there are gaps in the industry.
A remote cleaning business might want to use social media and Google to find locations that have higher population-to-cleaning business ratios.
In our research about the best small-town businesses, we found that locations with more than 416 people per cleaning business tend to be the best places to open a cleaning company.
You also want to understand what marketing strategy, pricing, and services competitors offer. Learn more about market research.
Write a business plan
Every successful business idea needs a business plan. Given we’re talking about a business model that can be run from anywhere in the world, you need to focus on systems.
You’ll want to include the answers to questions like:
What is the cost of starting a remote cleaning business?
Neel told us a remote cleaning business has low startup costs.
[su_quote]I probably spent under $1,000. You just need internet connection, a WordPress website, and a computer. You can grow from there.[/su_quote]
Pro Tip: If you want to grow faster, consider joining a system where a lot of the work is already done for you, like MaidThis Franchise.
What systems do I need for a fully remote business?
You’ll need some systems to run a successful remote business including a(n):
- 24/7 remote call service or VoIP provider (Neel uses DialPad)
- SMS + email automation system (at UpFlip we use MailChimp)
- Online booking system like Launch27 or Booking Koala
- Human resources for your remote business
- Slack
Neel told us:
[su_quote]Basically anything you don’t want to do, or don’t know how to, outsource it.[/su_quote]
You might need translation services if your internet business idea involves providing services in a foreign country or contracting or hiring cleaners whose first language is different than yours.
The best thing about a MaidThis franchise is that they provide aspiring entrepreneurs with everything they need to run a fully remote business.
Create a website and CRM
You’ll need a website and customer relationship management system to operate any remote business. Neel told us:
[su_quote]Just get a $100 WordPress template and then build from there when you first start.[/su_quote]
Website
At a minimum, your remote cleaning business website will need to include:
- Home page
- Booking page
- Services page (include pricing)
- About us page
- Locations page
Check out the MaidThis website for more information on how they approach each of these.
Website building resources
Some useful resources for building a remote cleaning business website include:
- GoDaddy: Get website hosting, domain names, and email marketing automation through GoDaddy.
- NameCheap: Get domains, email accounts, WordPress hosting, and other services from NameCheap.
- Build a website: Learn how to build a website.
- Creating a brand: Get tips on building a brand.
CRM
Your customer relationship management system is a database and interface that helps you easily manage everything going on with your company. Each CRM works slightly differently, but you’ll need a CRM that either includes or connects to your:
- Online booking system
- Call support system
- SMS and email marketing systems
- Payroll and accounting system
- Dispatch system
- Invoicing and payment processing
Many systems include easy integrations with commonly used providers.
CRM resources
- GBG Marketing: Neel and his franchise use a CRM created by GBG Marketing that automates follow-ups and puts booking on autopilot.
- Housecall Pro: Simplify your workflows and grow your business with the easiest-to-use CRM. Get a 14-day trial from Housecall Pro.
- monday.com: One of the most commonly used CRM and project management tools is monday.com. Check out our monday.com review.
- Jobber: This CRM focuses on making service businesses easier to run. It’s fairly intuitive to use. Check out Jobber.
- ClickUp: We use ClickUp at UpFlip. It’s a great system that lets you monitor and control your workflows at a reasonable cost.
- HubSpot: HubSpot is one of the most amazing programs I have ever seen, but the coolest features are complex. Compare HubSpot’s pricing options. I’d suggest starting with the Starter CRM.
Any of these should provide the functionality you need, but each works differently, so check out the demos to decide which you like best.
Set up a payment processor
You’ll need a payment processor to charge your cleaning customers and pay cleaners. Most businesses use Stripe because it is easy to use and integrations are normally built into other software.
Payment processors normally charge a fee based on the value of the transaction PLUS a per-transaction fee. In addition, they may also charge a monthly fee.
You might also consider options like:
- Helcim
- Square
- Stax by Fattmerchant
View the table below for a quick overview of the differences between each.
| Company Name | Percentage | Per-Transaction Fee | Other Fees |
| Stripe | 2.9% | 30 cents | Additional fees depending on services |
| Helcim | Interchange Plus (Normally 1.94% to 2.51%) | Interchange Plus
(Normally 8 to 25 cents) |
Each card provider has their own fees they charge for in-person or keyed payments. |
| Square | 2.9% (2.6% with higher plans) | 30 cents online or 10 cents in person | The $79 monthly plan will save your online business money if you make over $27K per month, but Helcim and Stax are still less expensive. |
| Stax | Interchange | Interchange | $99 a month |
As you can see, there are some details that make it harder to compare payment processors than some other systems, but in most scenarios, Helcim will save you money.
If the vast majority of your payments are in-person Visa payments and your transactions amount to almost exactly $250K or $500K per year, you may be able to save even more with Stax tiered plans.
Pro Tip: One money-saving trick is to make sure that your online business uses technologies to qualify for lower “card-present” fees.
Make your online cleaning business legal
You’ll need to create a business structure, get any business licenses you need, and get a business bank account to run a remote business idea legally. Let’s look at how to accomplish each of these.
Choose a business structure
Small business ideas can make up to $600 before you need to start reporting the income on your taxes. Most business owners start a Limited Liability Company (LLC) and file taxes as an S-Corp.
First, you’ll need to check the USPTO and the Secretary of State website in the location you want to register to make sure the name for your remote business is available. If the name is available, apply for an Employer Identification Number (EIN) and save it somewhere safe.
Then apply for an LLC on your Secretary of State website. We walk you through an example of what the application looks like in this blog.
Next you’ll need to fill out Form 8832 and Form 2553 with the IRS to opt into the S-Corp tax structure, which provides benefits to LLCs like:
- Potentially reduced taxes
- No double taxation
- Wages paid to owners
- Dividends paid with profits
There are plenty of other business structures for online business ideas, but this is one of the best.
Get business licenses and permits for your remote business
You will probably need business licenses in the location(s) where you operate your remote business. This could include tax permits, local business licenses, and other requirements.
Make sure to check with your local authorities or a business law attorney to ensure you comply with all local laws. Each location is different, so you may need someone who has familiarity with multiple locations or specializes in helping unique online businesses.
Don’t forget a business bank account
You’ll need a business bank account to make your remote business easier to manage. In addition, a business bank account protects the limited liability status of a company because it keeps personal and business finances separate.
There are many available business bank accounts, and which one you choose will depend on your small business needs and structure. At the time of writing, I recommend Live Oak Bank because it
- Uses IntraFi Cash Service to provide FDIC insurance up to $10 million
- Was the 2022 leader in SBA loans
- Offers 4.0% interest on its savings accounts
Learn more about opening a business bank account.
Get remote cleaning business insurance
You’ll need small business insurance coverage in case anything goes wrong on the job. You’ll want to consider getting a Business Owners Policy (BOP) that covers:
- General Liability Insurance: Covers liability claims and lawsuits
- Commercial Property Insurance: Protects buildings, inventory, and equipment
- Additional Riders: Covers other business scenarios like shutdowns, errors and omissions (E&O), workers’ compensation, and commercial automobile insurance
Check out Simply Business to get quotes from 16 of America’s best business insurance companies.
Create cleaning contracts
You’ll need to have some contracts prepared before you hire cleaners to work for your remote cleaning business. You’ll need an employment agreement that covers:
- The relationship between your company and the cleaner
- Noncompete terms
- Payment structure
- Property damages
Let’s look at each of these in more detail to help you understand how to manage employee or contractor relationships.
Company and cleaner relationship
You’ll want to define whether the cleaners you hire are employees or subcontractors. Many remote businesses will consider all people who work with them as subcontractors, but you have to be careful.
Cristobal Mondragon classified all his employees as independent contractors and that resulted in a hefty fine.
Ultimately, your remote house cleaning business is a digital marketing business that provides cleaners. That means the maids and housekeepers count as independent contractors, but the IRS suggests requesting a ruling for positions you routinely need to fill to verify if the workers are actually employees or subcontractors.
Try out our cleaning business course
Want to get all the templates, workflows, and systems that Chris uses to make $5,800 per day? Check out our free cleaning business course!
Noncompete term
A remote cleaning business start-up will probably want noncompete clauses when they hire employees or subcontractors. Remote working may need terms like:
“The subcontractor/employee agrees that all clients are clients of [Company Name]. Performing any work for the clients except through [Company Name] is a violation of the services agreement and will result in the termination of the contract and pursuit of loss income at the rate of $[Amount].”
The paragraph above is just an example. Consult with an attorney or human resource specialist to get a noncompete agreement that is legal in each location where your business operates.
Payment structure
You’ll want to specify how you will pay your cleaning people. Many business owners find that pay-for-performance is the best business model to align unique online business ideas with the employees’ interests. This payment model may mean paying them:
- A percentage of each job
- Incentives for performing certain tasks
Neel told us:
[su_quote]I pay my cleaners $25 for each person who provides a review after they cleaned their house. This encourages them to ask for reviews and helps us build faster business growth.[/su_quote]
Property damage
Your virtual business should add terms that protect against items broken or otherwise damaged by your employees. These terms may require subcontractors to carry small business insurance or specify that employees may be responsible for the cost of the replacement up to a certain amount.
Make sure to get legal advice to establish what is legal in the locations you serve.
In addition, you’ll need cleaning contracts for your clients. Many residential home cleaners do not use contracts, but Airbnb cleaners may.
Find cleaners
Neel explained how he finds remote employees:
[su_quote] I’m looking for three main things when hiring people:
- Good reliability
- Good communication
- Good attitude[/su_quote]
He went on to explain that Facebook Marketplace and Craigslist are great places to find employees without spending a lot on hiring. Once you have eligible candidates, Neel told us:
[su_quote]We use an automated five-step recruiting process. That includes:
- Initial screening call that asks questions like do they have business insurance and licenses.
- Then we conduct a second Zoom call to see if they show up and how they interact.
- Send them on a test job.
- Officially onboard.
- Monitor what they do.[/su_quote]
One of the benefits of buying a MaidThis franchise is you get to skip a lot of the mistakes most people experience as they learn how to build a remote cleaning business.
In addition to all the other support and resources, you’ll get access to MaidThis’s detailed standard operating procedures, which are over 1,000 pages long. Find out why in the video below.
Conduct background checks
In-person businesses like cleaning companies rely on customer service from remote teams. You’ll want to make sure every in-person worker has a clean background. That means you’ll need to conduct a background check.
You can consider companies like
- Crtain: Crtain is used by Tesla, Shopify, and Deloitte to get up to 80% faster criminal background checks.
- Checkr: One of the biggest background check companies but sometimes the checks take too long. Issues normally arise when people have criminal backgrounds or have lived in multiple jurisdictions in the last seven years.
UpFlip Cautionary Tale
I have a lot of experience with Checkr background checks because they were run on me for multiple employers. I used to move approximately once per year to go experience new places.
My background checks would ALWAYS take at least a week because they had to check seven jurisdictions. Meanwhile, my significant other’s background checks almost always come back instantaneously.
The other scenario that commonly holds up background checks is criminal charges that don’t necessarily convert easily from one state to another. For instance, Nevada gross misdemeanors are often considered felonies because other states don’t have gross misdemeanors, and they are only available as plea bargains in Nevada.
If you need someone fast, ask screening questions like:
- How many locations have you lived in the last seven years?
- Have you ever been charged with a felony?
These two questions will let you know if screening the applicant will take longer than normal.
Fill out HR paperwork
You’ll need to provide new hire paperwork before managing remote employees in the U.S.
- W-4 Form: This document lets you know how much to deduct for taxes. States that have income tax will also require a state form.
- I-9 Form: This is a proof of identity form that is required to work in the U.S.
- Offer of Employment: This document details exactly what you are offering the new hire.
- Employment Contract: This document details the terms of the employment and goes into more detail than the original offer.
- Emergency Contact Info: You’ll need this document to contact the next of kin if your employee is injured, gets sick, or dies on the job.
- Employee Handbook: Let the employee know what is expected of them, including values, policies, dress codes or uniforms, and other behavior. You need a page for them to sign to document receipt of and agreement with the handbook.
- Payroll and Benefits: Documents like a direct deposit form and any other benefit forms the company offers.
Remote work in other countries may have different requirements. When working remotely, always consult with someone familiar with the laws in the country where the remote team works. Learn more about hiring.
Hiring resources
Some resources that you can use for hiring include:
- Trello: Neel uses Trello to manage the onboarding of remote employees.
- QuickBooks Payroll: Handle your payroll and accounting with QuickBooks.
Market your cleaning business
A remote cleaning business will need to use a combination of digital marketing and “boots-on-the-ground” marketing.
Neel loves talking about marketing. He gave us input on how much you should spend to get unique online business ideas to start making money.
How much is the marketing budget for a startup?
To most effectively start a great online business idea, you’ll want to spend 15 to 20% of your desired revenue on a combination of digital and print marketing. Neel told us:
[su_quote]We spend about 5% of revenue on marketing. When you first start, I recommend 15 to 20% of your spending on marketing because once you get a client, it’s pretty easy to keep them.[/su_quote]
As your marketing strategy helps you reach your desired revenue, you can reduce your marketing to maintain revenue and increase profits.
How to offer remote cleaning services
The best business ideas can fall flat if you don’t market them right and find the right clients. You’ll want to use digital marketing skills like:
- Social media
- Search engine optimization
- Paid ads
Neel explained how to start a remote house cleaning company and get ahead of the competition fast.
[su_quote]If you answer the call, we close 60% of requests, but if we don’t answer, we only close 16%. So we use a call agency and an automated text messaging system to follow up if we miss the call.[/su_quote]
MaidThis also uses an online booking system to provide potential clients another booking option.
In addition, any time they clean a home, they’ll send postcards to the five houses on either side of it. Neel told us:
[su_quote]If someone in a neighborhood is our client, their neighbors are probably our target audience.[/su_quote]
Neel explained what to include in your calls:
[su_quote]When someone calls, we ask them something like, ‘Do you want weekly, bi-weekly, or monthly cleanings?’ Note we don’t offer them a one-time cleaning.[/su_quote]
Neel also uses automated marketing tools and funnels to help book customers more regularly.
[su_quote]When a client hasn’t requested their home cleaned recently, they’ll send an automated text message. They even have a one-click brownie-sending service (yes, he sends baked goods) to help encourage return customers.[/su_quote]
How to get reviews
Customer reviews are crucial to work remotely. You’ll want to provide great customer service. Then you want to encourage the cleaner to ask for a review because in-person meetings tend to create a better relationship than remote interactions. Neel told us:
[su_quote]Make sure your cleaners ask for reviews because the customer is more likely to review when they ask. We give the cleaners a $25 bonus for every review they get.[/su_quote]
Neel went on to explain:
[su_quote]After each cleaning, we’ll request an automated review that takes about 10 seconds for the customer to review us.[/su_quote]
You can also minimize bad reviews in the business world. Neel shared his secret:
[su_quote]When you get a bad review, call them and offer to send someone over for a complimentary recleaning.[/su_quote]
Useful marketing tools
There are some useful marketing tools that small business owners use to market their companies:
- Canva: Simplify graphic design with Canva. Get access to thousands of templates for website and social media for as low as $4.99 per month.
- SurferSEO: Write blog content faster and rank higher on search engines with SurferSEO.
- MailChimp: Email and SMS marketing automation is one of the keys to success that many small business owners mention. Get started with Mailchimp.
Next we’ll discuss some of the frequently asked questions about remote businesses.
Remote Businesses FAQ
Still considering whether a remote cleaning business is for you? We’ll answer some of the commonly asked questions about companies that work remotely including:
- What companies are fully remote?
- What is a remote-first company?
- Benefits of remote work for companies?
- Reasons not to allow work from home?
What companies are fully remote?
There are plenty of companies that are fully remote, but some of the best small business ideas that you can operate from your own home (or anywhere in the world, like Neel does) include:
- Consulting services: You can be your own boss and advise people on your area of expertise as a business consultant.
- Social media management: Manage other companies’ social media accounts using online communication tools to manage multiple platforms at once.
- Online courses: Online courses can make millions and can approach 90% profits without the need for a physical office.
- Affiliate marketing business: Working as an affiliate marketer is another opportunity to create pieces of content once and let them make you money forever.
- eCommerce business: An eCommerce site that sells print-on-demand products can be a fully remote business.
- Web development: Creating websites or app development is another great remote business.
- Graphic design: Designing digital and print materials for companies doesn’t require being in their physical offices. Just grab a computer and get started.
- Virtual event planning: Start your own business as an event planner. You’ll be working remotely most of the time. When you plan virtual events, it’s 100% remote work.
- Virtual assistant business: A virtual assistant helps business professionals with work that is time-consuming and has to be done but doesn’t create much business value. You can be a virtual assistant with 100% remote work from your own home.
What is a remote-first company?
“Remote-first” companies prioritize remote work over in-person jobs. These companies are often similar to fully remote businesses, but they still maintain an office for when people need to get together to achieve their organizational goals.
Benefits of remote work for companies?
Whether you run online store ideas or want to start a remote business sanitizing company, there are benefits to remote work for many business owners, companies, and remote employees , including:
- Global talent pool
- Lower costs
- Happier employees
- Freedom to work when and where you want
- Potential efficiency gains
- Lower turnover
- Healthier workforce
- Green initiative compliance
There are also many reasons why you might not want to run a remote business.
Reasons not to allow work from home?
There are numerous reasons why companies might not want to allow remote work, including:
- Potential efficiency loss
- Harder to schedule meetings
- Buildings and office furniture are being paid for but not utilized
- Inability to monitor employee behavior
- Difficult to share knowledge
- Harder to build corporate culture
- Lack of control
- Collaboration may suffer
- May cause employee isolation issues
- Difficult to hire efficiently
- Some people work better in person
- Cyber security issues
Where can I learn more about Neel and MaidThis?
You can learn more about Neel and MaidThis on the following sites:
- Neel’s Podcast: The Remote Local
- MaidThis Franchise: Apply to Be a Franchisee
Start your own remote business
We’ve explained how to start a remote cleaning company, shared other online business ideas that can be run remotely, and provided advice from a highly successful business owner about how to start a cleaning business without cleaning.
Now it’s up to you. Will you put in the time and energy it takes to create the systems you need to build a business you can run from anywhere in the world?
Comments
Adolf@
2023-06-25 20:11:49
Kike
hazel@
2023-05-05 00:31:11
yes please i would love to learn more on this aspect
Insureyourgrowth@
2023-03-31 06:51:25
Banking business
Judah C Bailey@
2023-03-17 20:01:47
Great article. The world of banking is an interesting one. Not just from an income standpoint, I believe the correct banking setup can help improve customers' lives as well.
christopher ojiako@
2022-10-23 10:25:53
I will like to join the discussion
Abu Bockarie@
2022-10-20 08:02:37
I love the discussion and will like to continue with it because, it's very much crucial. It's lucrative for me to know more about it and thank you very much for enlighten me.
Cisko@
2022-06-01 02:50:28
Great advice, about to start my first bank! Do you have any suggestions for the name? Thank you
Get business advice straight to your 
Inbox 
Learn from business failures and successes in 5 min or less. The stories, frameworks, and tactics that will make you a 10x better founder.
Join our 45,000+ entrepreneurs