Know Your Profit

When I first began my eBay business, it seemed like I spent endless hours each day wrapping and shipping. I was SURE that I must be making money on every sale! recommended books

On the surface, having a lot of products to wrap and ship can make you think that your profits are just a rollin’ on in.

But a quick look at my preliminary numbers told me that while some products were a gold mine, others merely had me in the salt mines.

In order to truly evaluate if what you are selling on eBay is worth your time, effort and financial investment, you need to know the true profit you are making on each and every item.

While using your product sales to cross sell other higher profit margin products or to drive traffic off eBay to your website does not require a high item profit margin, selling the “bread and butter” products that generate your regular stream of eBay income does.

Unfortunately, many eBay sellers do not have the full picture of what their profit is on each item they sell.

Sadly, using the “I think I’m making a profit, so I must be.” system of accounting can be a recipe for business and money making disaster.

Before you make any decisions on what you are going to sell, you need to sit down and evaluate EACH product you sell for its profitability.

If you sell a lot of the same item, this can be a fairly easy task. If you sell a variety of items, or each item you sell is different, you can still use this method to evaluate future products before you make the decision to purchase them for sale on eBay.

There are 5 key things you need to look at for each item to determine if it is profitable: recommended books

1. The item’s actual cost. The cost of an item includes what you paid for it, any sales tax paid (if you did not buy it wholesale) and what the shipping charges were (if any) to get the item to your location.

2. All fees associated with the listing and sale of your product. This includes listing fees, final value fees and PayPal fees or any fees assessed to you by the merchant who processed the payment.

3. Shipping charged to the customer versus actual shipping costs. Not calculating this can eat a HUGE hole in your profits. If you do not charge the correct shipping amounts for your items, your profit margin can disappear faster than you can ship your item! You should charge your customers based on the weight of the item in the box with the packing materials. Toss your package on the scale, before you list your shipping costs in your auction.

4. Shipping supplies required. If you are not using free or low cost supplies, those expenses really add up.

You can get FREE Priority Mail shipping supplies at:
http://shop.usps.com/ Just search on priority supplies.

*For non-priority boxes check eBay for great deals on shipping supplies.

5. The time it took to actually wrap and ship the package. Your time = money! The longer it takes you to wrap and ship an item, the lower your earnings go.

Now, some of these fees are easy to calculate with a little basic math:

Gross profit per item (sale price + shipping/ insurance collected) – Expenses per item ( product cost + the fees + actual shipping/insurance) = Net Profit per item.

Once you know if the individual product you are selling is making a profit, you can then move on to look at your total sales. From your total sales you deduct your general expenses (Supplies, any overhead etc.)

Once you calculate your bottom line, divide it by the number of hours you put into your business each day.

Here is where the rubber really hits the road, as they say!

If your salary or hourly wage (or the time you spend if selling is just a hobby) is not the dollar amount you want to make, it’s time to re-evaluate what you are selling and what your selling process is!

Unfortunately, even a lot of Powersellers don’t take all the numbers into consideration and find themselves either out of business or working for free!

(And yes, I had many days where I worked for free before I started applying this system to each item I sell.)

If you have a good selling manager program, a lot of them will provide you with the tools to track your profit.

However if you do not use a selling manager program and want a quick and easy way to do calculate your true costs/profits on your eBay sales, a great tool to do this can be found at Profit Calc.

Profit Calc. will calculate for you in minutes what the true cost & true profit is for each product yousell.

One of the most frequently asked questions I get, is "Is this item worth selling on eBay?".

With Profit Calc, there is no more guessing, no more wondering! I love this tool because it does all the work for me of calculating fees, packaging costs and my favorite category - Profit Made Per Auction!

The numbers will never lie. If you treat your business like a business it will pay you like a business.

If you treat your business like a hobby, it will cost you like a hobby.

Profit Calc will help you analyze which products make the cut!

Before you place any orders for products, you will want to make sure you have run it through the above criteria for profitability!

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