Turning Your Online Auctions into a Real Business
How easy is it to
your online auction hobby into a profitable business? It's all a matter of volumeand good business planning and management.
Let's consider an example. Caitlin has found a source for iron-on transfers for T-shirts and sweatshirts. She can buy these transfers for $1 each and (based on her experience and research) can sell them on eBay for an average price of $5. That's four dollars profit for every transfer she sells.
Caitlin has huddled over her copy of Quicken and determined that she needs to generate $30,000 in profit (
!) to make her eBay business worthwhile. Assuming that she works 50 weeks a year (everyone needs a vacation), that means she needs to average $600 in profit each week. At $4 profit per item, she has to sell an average of 150 iron-on transfers a weekeach and every week.
Because only about half of all eBay auctions end with a sale, Caitlin
that to sell those 150 items she has to launch 300 auctions each week. That's a lot of work, as you can imagine.
Can Caitlin make a go of it? It depends. Can she physically manage 300 auctions a week? Can she pack and ship 150 items a week? And, more important, can she
150 items a weekis the market big enough to support that
of sales volume?
If Caitlin answers yes to all those questions, there's still more planning to be done. To begin with, this example greatly
the costs involved. Caitlin will need to figure eBay's costs for all those auctionsthe listing fees for 300 auctions, and the final value fees for 150 completions. If she accepts PayPal payments, she'll need to determine what percentage of her
will use PayPal, and what her fees for those transactions will amount to. Assuming that she uses a third-party website to help her launch and manage those auctions, she'll also need to figure those fees into her cost structure.
All totaled, these auction listing and management costs can add up to close to 10% of her revenues. That means increasing her cost per item from $1.00 to $1.50 or morewhich
her profit per item to just $3.50. With this reduced profit margin, she'll need to sell even more items to hit her profit dollar targetsan extra 20 or so successful auctions each week.
All this needs to be
inbefore Caitlin launches a single auction. And at these volume levels she's definitely running a business, which means reporting the income to the IRS and paying taxes. There's also the matter of
, which she'll need to collect on all sales made to buyers in her home state.
Turning your eBay sales into a real business is a major undertaking. If you're serious about making the leap from
merchant, check out my companion book,
Making a Living from Your eBay Business
(Que, 2005), available wherever business books are sold.
The takeaway here is that making a living from eBay sales is just like running a business,
in its financial complexities. Anyone contemplating this type of endeavor should do some serious business planning, which should include consulting an
or another financial planner.
work out, you need to answer one more question: Is this something you'll enjoy doing every day of the week, every week of the year? Even if you can make money at it, managing hundreds of auctions a week can wear down even the best of us. Make sure that you're up to it, and that you'll enjoy it, before you take the leap.