Here's another success story...

I started out on eBay about 3 years ago, having found one of those Mattell handheld football games from 1978 for $2.00 at a local thrift shop. I put it up on eBay with zero feedback and was shocked when it sold for $78! I've grown since then with annual sales increasing each year:

2000: about 40,000 in SALES and $5,000 in profit
2001: $165,000 in sales and profits of around $26,000
2002: $383,198 in sales and profits of $58,554
2003: I'll sell over $55,000 just in January with profits of about $7,500. If I annualized that over the year I'm on track to do $675,000 in sales this year and earn about $93,000 in profits.

The key to selling on eBay is to find something you're interested in or understand and sell that. I report all of my income on my taxes, and recently formed an S-Corp for tax purposes. Before that I filed a Schedule C each year for my eBay activity. Then again, when you're getting almost $400 k through your checking account the odds of the IRS noticing you get pretty big.

We ship on M/W/F and its about 50 items each time, or 150 items/week. The boxing up and shipping takes about 4-5 hours which is why I have a 15 year old kid come in at $6/hour MWF and do it for us. I have a full time job still and just do this for fun, though I'll make more on eBay this year than my job (I hope).

I have a TMobile Sidekick and am constantly checking my 100+ emails per day through my phone/sidekick. I then check my paypal account over lunch and prepare a shipping list here at work, and fax it to my wife,who has shipping labels in the fax machine so the list comes out formatted onto labels already.

One very helpful thing is to not look at current auctions, go to "ADVANCED SEARCH" and search under completed auctions in order of "highest to lowest" prices and see what the item has gone for in the past 30 days, you can expect that average.

I do disagree on one point, and thats listing items. If you want to do big volume you CANT do regular auctions. If I wanted to sell 20 of the same item in a week I'd have to put 20 auctions up, which would "flood the market" and make the buyers percieve more supply than demand, thus driving down the price. Instead, I list one or two of an item at a "BUY IT NOW" price a couple of bucks below the average. Every time one of them sells I simply click on the "relist" button that appears at the end of the auction. In less than 20 seconds I have another auction up for the same thing. Doing this I can sell 5 of the same item per DAY if I go into eBay every 3-4 hours and relist stuff.

My margins are only 12-15%, but I do so much volume that it makes it worthwhile. There are always tons of things out there to buy and resell for a profit, you just have to look. I picked up 500 copies of a particular DVD title recently at $14 each from a liquidator and am now selling them on eBay at $30 or so. Its not a huge thing, but my $7,000 investment will gross me about $14,000.

I have about $50,000 in inventory in my garage and basement that I turn over about once a month, and I buy everything on my American Express for miles and Southwest Airline tickets ($20,000 in charges gets you a free SWA ticket that you can sell on eBay for around $300, so 1.5% cash back).

Post here if you have any questions, I'm also a CPA and know a thing or two about the taxes for all of this.

Hope that inspires some of you. In the next two years I'll have my house and all debt paid off and will be able to quit my real job and do eBay exclusively. I now have over 3,500 feedback and climbing and am a Platinum level powerseller (over $25,000/month consistently).

About 90% of the hot deals on FatWallet can be sold on eBay for a decent profit too. Thats where I got my start too.

sphiatt,

I am interested in how difficult it is to set up a company and also why you chose the type of company you did.

I had mentioned earlier the idea of buying wholesale and reselling. It doesn't seem that this is what you are doing at all. Do you even need a resellers license, if so how is it useful to you?

I like the relisting idea, that sounds really easy compared to some of the other alternatives.

Will you divulge any hints on finding large volumes of items at discount? Do you search locally? at auctions? or some kind of wholesale distributor?

Thanks for the info.

sphiatt said:

<< Here's another success story...

I have a TMobile Sidekick and am constantly checking my 100+ emails per day through my phone/sidekick. I then check my paypal account over lunch and prepare a shipping list here at work, and fax it to my wife,who has shipping labels in the fax machine so the list comes out formatted onto labels already. >>

I would love to hear more about how you use your sidekick.

<< One very helpful thing is to not look at current auctions, go to "ADVANCED SEARCH" and search under completed auctions in order of "highest to lowest" prices and see what the item has gone for in the past 30 days, you can expect that average. >>

Agree!

<< I do disagree on one point, and thats listing items. If you want to do big volume you CANT do regular auctions. If I wanted to sell 20 of the same item in a week I'd have to put 20 auctions up, which would "flood the market" and make the buyers percieve more supply than demand, thus driving down the price. Instead, I list one or two of an item at a "BUY IT NOW" price a couple of bucks below the average. Every time one of them sells I simply click on the "relist" button that appears at the end of the auction. In less than 20 seconds I have another auction up for the same thing. Doing this I can sell 5 of the same item per DAY if I go into eBay every 3-4 hours and relist stuff. >>

Great point!

I'm also a PS and make some decent play money. What really helped me get to power seller status, was a way of tracking my auctions an the associated emails. I bought a program called Shooting Star. While it doesn't do everything I want it to do, it provides a wonderful "workflow" system that will allow you to see the status of all your auctions and which ones need attention. They have a free trial.

eBay doesn't take commission out of shipping fees do they? Does anyone super inflate shipping to save on commission? (ie laptop buy it now for 30$ with 1000$ shipping) eBay probably wouldn't appreciate this but the effect would be much more subtle with say a 10$ ram stick (6$ buy it now 6$ shipping).

NicholasDWoolfwood said:

<< eBay doesn't take commission out of shipping fees do they? Does anyone super inflate shipping to save on commission? (ie laptop buy it now for 30$ with 1000$ shipping) eBay probably wouldn't appreciate this but the effect would be much more subtle with say a 10$ ram stick (6$ buy it now 6$ shipping). >>

They don't take commission out of shipping. That is why you see many items sell for $0.01 with $11.99 shipping or some such outrageous shipping price. I wonder if they will start to regulate that somehow.

I'm glad everyone seems to be appreciating all our input. Let me respond to some questions above:

First, for NicholasDWoolfwood:

ON INCORPORATING:

I set up an S-corp which provides personal asset protection in the event I'm every sued (very unlikely but nice just the same), the main motive for this was to avoid the dread "Self Employment Tax" on most of my eBay profits. Here's a quick and dirty example:

If you earn $50,000 on eBay (profits after all expenses), and you're NOT incorporated, you'll file a schedule C for this business and pay 15.3% SE tax (Self Employment), or about $7,650. Then the remaining income ($50,000 - $7,650 = $42,350) is taxed at your regular tax rate for income tax purposes, say at 15%, the minimum tax rate. That is another $6,353 in tax. So if you're not incorporated you pay a total of $14,003, or about 28% of your $50 k goes to taxes.

Now say you incorporate, rather than a schedule C you file an 1120S, and pay yourself a salary of $500/month. The $500/month is subject to employment tax ($6,000 for the year X 15.3% = $918). Your business makes $44,000 ($50,000 - $6000 in salary expense), and you earn $6,000 on a W-2 and another $44,000 as a return on your investment in the business, so you're taxed as $50,000 income at 15% = 7,500. Your total taxes as an incorporated entity are then ($7,500 + $918 = $8,418, or 16.8%. You just dropped your tax from $14,003 to $8,418, A SAVINGS OF $5,585!

There are some details I'm not mentioning like the deductability of 1/2 of your SE tax on your personal return and a few other things, but in broad strokes you can save yourself a lot of taxes by incorporating.

ON TAX EXEMPT LICENSE:

I do have a tax exempt license for reselling products, which can be very useful when you buy from Sam's Club, Costco or some online retailers who charge sales tax. Remember though you are only supposed to use this for items you're going to resell and not for personal expenses like food at Sam's Club for instance.

When you compete essentially on price on eBay (very little differentiation on service perceived by the buyer), a 6.5% savings on your costs can be the difference between a profitable sale and a VERY PROFITABLE sale.

ON DISCOUNTS AND FINDING ITEMS TO SELL:

I'd recommend anyone who wants to earn money on eBay find something they're interested in first and try to find that for less than what that item/product line is going for on eBay. I personally am interested in home electronics and DVDs. I like keeping up in that market anyway and because I know and understand the products I am better able to sell them.

I find some stuff locally but the majority of it I get online or through other sources around the US. Be creative and don't be afraid to ask how much volume you'd have to do to qualify for a volume or reseller discount. When you do call to speak to someone about becoming a distributor/reseller of their products always refer to your Company name and not you personally. Its really easy to make up a company logo and insert that into a standard Word Fax/Letterhead form to start presenting yourself as a business. It also helps other companies feel like you're legit and they're more willing to sell to you at discounts.

ON PICTURES:

jghanisco mentioned pictures above, I'd like to say that I've only used perhaps 100 pictures in all my auctions in total that I took. Its just so much easier to go to Google and find the picture of what you're selling, then right click on it and cut and paste the URL of that item into your auction. If its sold on Amazon you can get their pictures the same way very easily. You can even find completed auctions with good pics and use those too. I never bother with capturing pictures, its not worth the hassle IMHO.

ON MY SIDEKICK:

Beltme asked about the Sidekick, I have a website with my own email server, and its POP3 enabled, so I just have my Sidekick set up to POP3 download all my emails from 2 different email addresses right into the sidekick. From there I can read and reply to emails any time. The other day while waiting at the Doctor's office I got through 40 emails. At a long stop light I can get through 2-3. You can also just go to tmobile.com and login there and have the desktop interface there so you can read and reply to your emails on your regular computer via the internet. That works better when you have cutting and pasting to do.

I also log on to paypal.com to do my stuff on there through my sidekick, including recording payments, sending invoices and transfering my paypal balances to my checking account, all of which can be done easily from your sidekick.


ON SHIPPING FEES:

Much of what I sell qualifies as "MEDIA" so I can ship an 8-DVD set via MEDIA MAIL with the USPS for about $3.50 or less. Its tough to beat the media mail rate. I typically charge about $1.00 more than my actual shipping cost to cover boxes and the overhead of the 15 year-old kid I employ. Any more than that and I start getting complaints from buyers about overcharging shipping. I also give buyers the option of upgrading to Priority for $x.xx more if they wish. I always get a delivery confirmation on everything and tell buyers insurance is optional but recommended.

I used to inflate shipping (i.e. charge $10 shipping and then ship Media Mail for $3.00), but the average market takes the shipping price into account when they buy so the prices haven't changed much since I dumped that strategy. Sometimes I would get more for an item but the buyers generally assumed I'd ship Priority Mail for the $10 charge, and when I shipped Media Mail they got pretty mad and left negative/neutral feedback.

Hope that helps.

NicholasDWoolfwood said:

<< Stupid question. Does it have to be media to ship it usps media rate?
>>

It's my understand that it is illegal to misdeclare media mail. If you could argue that something in the package is media, then you could probably justify it. But if nothing falls under the "media" qualification, you're risking trouble(though that risk is probably not very big).

sphiatt said:

<< pay yourself a salary of $500/month. The $500/month is subject to employment tax ($6,000 for the year X 15.3% = $918).Q]

Hi Sphiatt,

I was wondering if you would be allowed to not pay yourself the $500 per month so that there would be no employment tax. That would save the $918 each year. I was just wondering if there was some rule that says you have to pay yourself some minimum amount so that you can't slide by those employment taxes. Thanks for all your help in this thread!!

I answered my own question. With a little searching and exploration I have uncovered a resplendant piece of software called Dreamweaver. It is truly HTML for idiots. Just design your page and than copy the accompanying code into Ebay's dialogue box.

Does anyone have a problem with placing the bid at $1.00 and ended up loosing money? Or do u also use a reserve price strategy?