posted on August 29, 2006 08:18:10 AM new
For those that are selling on ebay full-time, how much of your profit do you take to reinvest back into goods for your business? I haven't had to worry about this in the past, but now that I'm totally on my own and relying on ebay for my income, I need to really get a tight hold of the money that I'm bringing in. I've always been kind of scattered about it. But now, I need to continue to reinvest in the busienss so that I'm not running out of stuff to list (which is a HUGE worry right now).
Fluffy, if you're reading this, your input would be valued, too. I know that you have a great mind for business.
posted on August 29, 2006 12:41:02 PM new
Running out of stuff is one thing I never worry about.
I don't support myself totally but it's hard for us to make ends met if I'm not making money.
I normally invest more when sales are good so I don't have a set reinvestment amount. I would say I reinvest 15% to 30%
You may have to branch out somewhat, if you haven't already. I know you have said that you buy off ebay - can you find your items elsewhere? Without knowing your whole situation it's hard to say but it seem that paying postage on every item adds to the cost and that is money that could be spent on inventory.
Think of running ads in your local shoppers or newspaper.
Put up flyer's in your city's laundry areas, retirement center etc. offering to take stuff off people's hand.
Contact church's and let them know you are looking for xyz.
Is there anything you can drop ship?
I've often wondered what I would do if I found myself in your shoes. Hopefully you will get many great suggestion right here.
Good luck
posted on August 29, 2006 02:12:11 PM new
I put 50% of my gross profit back in to the business for more inventory, Ebay fees, Paypal fees and other expenses - in other words, if I buy something for $50, it is because I think I can sell it for $100 - $120 - I need to at least double my money on each item. I do, of course, make exceptions for higher dollar items - $300 and up - I need to be able to make at least $100 on it.
It is also advisable to figure out how much time you spend on each item you sell and figure out how much you are making per hour. If you are only making a $2.00 profit per item and you spend an hour on each item - you may want to get a job - UGGH!
~~~~~~~~~~~~~~~~~~ Caroline
Seems there are only two states one can be in in this business. You're either inventory rich and cash poor, or the other way around.
Let's not call it profit until we're using it to pay the mortgage or book a cruise, preferably the latter.
I have a simple system -- some might say too simple -- based on good hard cash.
-I don't use credit cards. I only have one credit card and I'm thinking of getting rid of that.
-I pay eBay $50 a day out of my PayPal balance towards my fees.
-I draw $400 in cash out of my PayPal balance every day. $100 goes into an envelope for purchases. There is a high 4-digit amount in there now, so I know I need to be devoting some time to buying and finding new vendors (a never-ending process). That seems like a lot of cash to have on hand, but my main supplier gives me only a few days' notice when merchandise becomes available. It's much easier if I don't have to scramble at the last minute or draw money out of personal savings.
-The remaining cash withdrawal is allocated to personal and business uses:
1) The personal is my profit, also known as the payoff for all this hard work. Before I spend any of it on bills or personal purchases, I sock away a chunk of it into savings.
2) The business cash goes for things like buying stamps and other supplies at Costco. Don't confuse supplies and inventory. You'll need to keep them separate on your tax return.
To sum up, your gross sales receipts need to be allocated among:
Buying merchandise
Business expenses
Profit
You can start out by assigning your best-guess percentages, then adjust it as you go along. You'll most likely be making adjustments during the year anyway since the business tends to slow a bit in the summer.
Another advantage of this system is that you will find out pretty quickly if you are actually making money. When you use credit cards to pay fees and buy supplies, it's much too easy to get into trouble. I have talked to too many sellers who really don't know if they are making money, which means they probably aren't.
posted on August 29, 2006 07:56:27 PM new
Fluff has good advice. When eBay stabilizes and you can pretty well determine your sell-through rate, it is good to determine how much you need to sell and list to make the income you need - alloting eBay & Paypal their fees, your cost of inventory and supplies. This should tell you how much you need to spend on inventory. With a sales background, I always set my numbers for the month and do everything I can to make them. It has taken more than a year and I am still not where I need to be, but I think I am experiencing the same ramp up time of a B & M business - as long as eBay doesn't throw too many more wild punches!
Here's some unsolicited but I think important advice:
Don't attempt this while undercapitalized.
If I were starting over again, I'd want at a bare minimum $10,000 in cash to work with. Too many people try it with the cash they have on hand, but then they have no cushion with which to weather the bad times.
You already know all the awful things that can happen to you, such as getting suspended and having your PayPal account frozen. Assume these things are going to happen and plan for them. I have been suspended three times, all on false charges, and my PayPal account was frozen for over a week because by a fluke of bad timing it was overdrawn by $2.00.
Devise another source of income. Might be selling at flea markets, doing mystery shopping (though I don't recommend that), or merchandising for one of the big companies that pay regularly and promptly. It's good to have at least some cash coming in while eBay is doing a recto-cranial extraction.
fLufF
--
[ edited by fluffythewondercat on Aug 30, 2006 08:55 AM ]
posted on August 30, 2006 09:49:25 AM new
Great advice fluffy, I wish I had known you about 7 years ago when I stumbled onto eBay as a way to buy and sell (and hopefully make money). I'm doing O.K. but not exactly living on the profits. I do have a part time job and distributions from an IRA to hold me over until Social Security kicks in (if it ever does). But, all my groceries, gas, clothing and medicines (along with inventory, fees, postage and supplies) come out of the eBay account so I think I am doing pretty good. I do not charge 'inventory' or shipping, learned that from these forums long ago! I only buy if I have money (all my buying is from estate auctions and/or yard sales). If I run out of money for inventory then I have to dig in my eBay room for things to sell. I could probably list for a couple of months without buying anything LOL. As to percent, some months it is 50% and most months it is 30% or so. It just depends on the 'opportunity' to buy and fees.
posted on August 30, 2006 10:38:12 AM new
pmelcher, you are doing very well indeed if you can continue to find profitable merchandise at estate sales.
Up until this year I had pretty much given up on that. But my husband, who believes his find of a lifetime is just up ahead, keeps dragging me to sales.
Currently my merchandise mix is 90% new silver jewelry, 5% estate sale finds and 5% antique silver from my own much-too-large collection. I would like to bump that to 70%, 15% and 15% except that you cannot predict what you will find in someone's estate.
Selling just antiques and collectibles is a tough gig. I've noticed some of the bigger sellers now have Best Offer on all their listings. I think that's a smart move.
posted on August 30, 2006 03:22:46 PM new
I think it all comes down to having a good cash flow - The old saying is true, it takes money to make money. I've seen people with a poor cash flow miss opportunities. I deal almost exclusively in used items, and the best deals I find cost thousands in one shot. It certainly eliminates a lot of competition.
As far as what to reinvest, it is an answer that really is hard to answer. Having a decent amount of cash (or access to cash, it doesn't have to be in a drawer at home) is really important. Just make sure you have cash to buy, and buy wisely. Selling is actually the easier part as far as I am concerned.
Fluffy is right about the credit cards - It's very easy to get into trouble if you are not careful. My primary card is an american express card, it is free, and must be paid off every month. I have enough points from all of my business expenses for a dozen round trips anywhere now...It's going to be fun to cash that in, I am probably going to use it for a trip to Australia in the next year or so.
posted on August 31, 2006 05:58:33 AM new
Thank you all so much for the wonderful advice. Fluffy, I like the idea of using the envelopes. I think it will help to keep things straight. Right now, I have about $10,000 in inventory to work from, but want to keep reinvesting in the business so that I don't run out.
I especially like the additional advice, Fluffy. You're right! Anything can happen between Paypal and Ebay. I'm trying to come up with ideas that I can do outside of the home to earn additional income. My problem is that I have a hearing disability (and other medical problems) that pretty much precludes me from working outside of the home. I qualify for SS disability, but it would never be enough to support my daughter and myself. Unfortunately, with my type of hearing disability, hearing aids (although I wear them) don't really help much. If anyone can help me with ideas, I would appreciate it.
Right now, my sell through rate is about 90%. My sales have been great through the summer although once the fall hits, I don't know what is going to happen. I'm running about 200 auctions a month and am trying to get items into my store because it is pretty much wiped out. Time is something that I definitely need more of! I'm going to put myself on a schedule to see if I can utilize my time more efficiently.
Any other ideas or help would be greatly appreciated!
posted on August 31, 2006 07:17:41 PM newI'm trying to come up with ideas that I can do outside of the home to earn additional income. My problem is that I have a hearing disability (and other medical problems) that pretty much precludes me from working outside of the home.
Why not try writing part-time?
I'd approach it from several different angles simultaneously. Write an article on something you know about and shop it around to local publications with an eye towards perhaps eventually becoming a weekly feature. At the same time put together a book proposal on that subject matter or some other.
You're already an expert on hearing loss and eBay. Who knows what else.
I know many people who have written books and believe me, they're nothing special. You can do it.
Caroline