How to Build Your Slush Fund by Selling on eBay
February 19, 2007
Do have something you’ve always wanted to buy but never had the money for? This installment of eBay PowerSeller Personal Finance Tips will help you get what you want without breaking the bank.
Everyone has some type of budget, formal or informal. Most people also have things they’d love to buy that just don’t fit into the budget. One way to get that coveted new item is to carve out a tiny slice of your income over months or years until you’ve saved up enough. If you can’t wait that long then there’s only one way to get what you want. No, not credit cards! You have to make more money!
Making Money on eBay
You’d be surprised at how simple it is to make extra money by selling on eBay. My wife used to complain about the random items I brought home to sell until I showed her how much money I was selling them for. Now she’s all about eBay. Using the 10 tips below you can use eBay sales to build up your slush fund.
1) Buy What You Know
Everyone is an expert on something. Whether it is fashion, electronics, sporting goods, coin collecting, personal finance, or home improvement; buying what you’re familiar with will assure you get a quality product for a good price.
2) Buy What They Know
Companies spend tons of money building their brand in the mind of customers. Leverage the dollars they’ve spent, only buy well known name brand items to resell. They don’t have to be known to the whole world, just highly regarded in the niche you’re working in.
3) Do Your Research
Even when you buy what you know, you should still research the price, supply, and demand for items you purchase. Pay attention to details such as model numbers and item sizes in addition to the number and prices of competing sellers online.
I purchased some new iPod accessories for a real bargain but later discovered I couldn’t compete with the going price on eBay and now have to try and sell them through other means. I should have researched the lowest prices for competing products on Froogle before buying.
4) Know the Return Policy
What if you buy what you know and do your research but an item you purchased to resell just won’t move? If you can buy from a store with return policy of 15 – 30 days then you have enough time to test the waters and return the merchandise if they don’t sell.
Don’t avoid a deal simply because you can’t return it. If you know for a fact you can make money on something then go for it. Just make sure you’re comfortable with the return policy before committing your cash.
5) Consider Selling Costs
Buying something for $15 and selling it for $30 doesn’t mean you doubled your money.
Your total cost of selling could be $5-6 after you pay sales tax when you buy it and the eBay / Paypal fees when you sell it. I typically figure in my cost of selling at around 20% of the sale price. If that cuts too far into my margins I won’t buy the item to begin with.
6) Set Price Targets
Another way to describe this tip is don’t waste your time. If something is 75% off but regularly retails for only $5 don’t mess with it. Time is money. Know how much money you need to make in order to put the time into procuring, listing, and shipping a product. If the margins aren’t large enough, walk away.
7) Buy All They Have
Even with TurboLister it takes time to setup a product for sale on the web. If you find a good deal on an item, buy all they have. You only have to setup the listing once but you’ll get multiple sales out of that time you spend. I may get some snickers when I roll up to the checkout with a cart full of 20 of the same thing but I’m the one laughing all the way to the bank.
8) Use Discipline
Just like the investing world a disciplined approach is necessary for consistent long term growth. Tips such as buy what you know, do your research, and consider costs can also apply to investing in a company. If you don’t have the discipline to follow a system you may be better off letting a mutual fund manager grow your money for you.
9) Be Patient
In personal finance there is a saying of “Set it and forget it” in regards to your investments. The advice is to pick your allocations, setup an automatic investment, and check back a few times a year.
The same applies to selling in an eBay store. Once I list an item in my store I basically forget about it until it sells or someone asks a question. If I followed the principles I outlined above, I know it will eventually sell. I may check on items that have been listed for 6 months or more and adjust the price a little but in general I don’t worry about them once they’re posted on eBay.
10) Ignore the Critics
I’ve heard, “that’s too much work” or “no one will buy that”. The truth is if you follow these tips you should eventually have a buyer for all your products and your profits should be worth the time you spend.
Bonus Tip – Reinvest Your Profits
I sink almost all of my profits into more merchandise. The first thing I ever bought to resell was a box of custom Christmas ornaments. Even though I spent $8 and sold it for $20, I was nervous about losing my initial investment. Now if I see a great deal I won’t hesitate to spend $1,000 buying all they have. The continued reinvestment of my profits has allowed me to grow the money I have to work with. Now I can take advantage of deals I would have missed out on in the past due to limited capital.
Room for Improvement
Now you know my strategy for making extra money by selling on eBay. If you have any tips of your own that I’m missing out on please let me know in the comments. Happy selling!
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