I have been selling on EBay for a little over a year. Most of the items sell for more than I paid for them. I have accumulated some inventory over the past 12 months and I have not yet set up any sort of business entity. I am enjoying selling on EBay. My sales seem to be growing by a small percentage overall but I still do not know how to answer the question of how I am actually doing. There are always more questions than answers it seems.
Do I have too much inventory? How long should I carry the inventory? How much should I discount the items to sell them? What should my average profit margin be?
I have read at least partially many books on starting a business but none of them seem particularly helpful for someone in my position. So first of all I should clarify what "my position" is and I guess what I would like for it to be. First and foremost I do not want employees. I do want to have several different income streams. EBay seems to fit quite well as one of these income streams. I have somewhat arbitrarily chosen 10,000 dollars as an annual goal for each income stream. So an additional question is how do I reach that goal with my EBay sales?
All the math equations seem very rudimentary but what to include in the addition and subtraction is where things get a little fuzzy for me.
Using 10,000 dollars as a nice round "goal" number leaves a slightly less round number of 833 dollars of income per month.
Gross Sales- This is a nice easy number to calculate (particularly since I have everything on an Excel spreadsheet. The total of my sales + what I have collected for shipping - any refunded amounts. For January of this year my number came out to be $760.77.
Cost of goods sold- According to Wikipedia there are several ways to calculate COGS. The example they use is beginning inventory for a period + purchases during period - ending inventory for period. I am assuming that the formula that I got from an EBay workshop is another acceptable method.
"Cost of Goods Sold is an accounting category that takes into account what you paid for something plus all of the costs associated with getting the item ready to sell. So if you wholesale new items on EBay your Cost of Goods Sold will have things like inventory purchase price, shipping, customs, import taxes and so on."
Using this formula my Cost of Goods Sold for January was $228.02 (Total cost of items sold + sales tax for items sold + in bound shipping cost for items sold)
Operating expenses- Here again I will quote from the EBay workshop.
"Once you have deducted your Cost of Goods Sold from your gross sales, you have one more step to go to get to your net income, and that is to deduct the costs of operating your business. This is where you begin to deduct your shipping costs, EBay listing fees, packaging costs, gasoline costs, telephone charges, computer and internet expenses, and so on."
This is where things get a little more confusing for me. What is the so on? Can I really include my internet and computer if I also use them for personal business? I don't pay myself a fixed income right now but if I did would that be part of the "so on?" For the purpose of this illustration I have chosen to use the following in my calculation.
EBay fees + Pay pal fees + Shipping costs + Packaging costs + a percentage of my internet service + mileage. For January this number calculates to $307.31
Net Income - Gross sales ($760.77) - Cost of Goods Sold ($228.02) - Operating Expenses ($307.31) leaves me with the $225.44 and that is before I pay myself or replenish any of my inventory or pay income taxes.
Two hundred twenty five dollars and forty four cent is not a particularly impressive number (assuming that I made all the right calculations) and when I factor in the amount of time I spent to earn 225.44 dollars my hourly pay is well below minimum wage.
But here is the up side. I have enjoyed the time I spent to earn that $225.44. I am learning new things along the way, including how to streamline some of the things I do, so less time is required. Since January my "net income" has been increasing. But most importantly that 225.44 dollars and the numbers that follow it have no limits. That 225.44 dollars is not my monthly salary. Whether that number increases is not up to someone else's evaluation of my performance. It is up to me. If I see a way to grow my little business I can do it. I don't need someone else's permission and if it is a successful idea I reap the benefits of my efforts.
All in all its a rather humble beginning but it is a beginning. So how am I doing? Compared to other EBay sellers? Compared to other entrepreneurs? To other women my age? I guess it is a rather rhetorical question. There are other EBay sellers, entrepreneurs and woman my ages (and younger) making a whole lot more then $225.44 a month. But I can not answer the question on a purely financial basis. The truth is I am enjoying the ride.
"Do not be too timid and squeamish... All life is an experiment. The more experiments you make, the better."
- Ralph Waldo Emerson -