The New ebay: The Official Guide to Buying, Selling, Running a Profitable Business

Chapter 22

Budgeting for profit

I once met an eBay seller who told me he could not afford to pay his eBay fees because his profit margin was only 3 per cent. I asked him if he’d visited his business model and assessed ways of reducing his postage costs, electricity bill, transport costs or the time spent packing products to find other ways to increase his profit margin. It wasn’t a trick question. I was trying to help him understand that eBay fees are one small part of an eBay business’s profit equation. Many of the costs that go into running an eBay business are within your control, while others simply are not. To be a successful eBay business you need to be zealous in reducing those costs within your control. You could argue as much time should be spent reducing costs as dealing with your customers and products.

It may seem odd to include a profit calculator before we’ve covered off all the costs involved in selling on eBay. But you need to appreciate your profit margin before you purchase products and begin selling them on eBay, so it’s prudent to ensure you fully understand the eBay profit equation before going any further into advanced selling techniques.

Let’s start with some very basic definitions and equations:

Gross sales (or gross profit or income) is the total amount of goods sold by your business plus any additional income (100 shirts sold at $30 each = $3000 gross sales).

Cost of sales is every expense you incur in the course of making a sale. This ...