Hi everyone. Once again, for Tuesday Tips we're going to address the question: Should I Start A Reselling Business? Our first installment dealt with the "Is This Right For Me" portion of the question. You might want to read that post first if you haven't already.
In this post, we're going to talk about the other part which is "Can I Make This Work?" Remember, we're still in the pre-business phase. These are meant to be some general ideas for you to think about before you decide to try reselling out.
I'd thought about this earlier, and I think you can break the initial concerns up into two sections:
1. Time
2. Money
I'd originally planned to write mostly about the "money" part of the equation. But I thought about it, and "time" just seems so intertwined with money. I almost think sometimes it's more important. I mean, time is money, right?
Basically, the Time portion of the question comes down to this: you either need to have a LOT of it, or you must be to able to allocate it VERY efficiently to tasks that must be done.
I think a lot of folks who are interested in the reselling business have an impression that you'll actually spend LESS time than in a 9-5 job. Or that it's an easy way to make money.
Haha.
Nothing could be farther than the truth (I'm sure fellow resellers will back me up on this one). Pound for pound, (or hour for hour) you'll spend MUCH more time at this job than in most office-style jobs I can think of. I think this is probably true with most work-at-home type jobs anyhow, but reselling seems to eat up an extraordinary amount of time in general.
The main problem is that with a reselling job, you're most likely responsible for EVERYTHING. At your last clock-puncher job, maybe you got a little pissed off because a co-worker asked you to help them out writing part of a report.
Well, with reselling there is no other person. You're responsible for:
• Travel to find your items
• Identifying items at stores
• Buying/haggling for them
• Cleaning and/or repairing them
• Research and/or appraisal
• Photographing the items
• Processing the photos
• Writing descriptions for items
• Listing the items
• Promoting the items once listed
• Blogging and social networking
• Website maintenance
• Customer service and/or questions
• Packaging and postal delivery
• Inventory control / reports
• Book-keeping and taxes
• Managing yourself and your time!
All of these tasks eat up Time. I understand that a lot of folks are looking to do reselling "on the side" - just to make some pocket change. This is fine - but you've still got the same responsibilities. You'll deal with fewer items, but you'll still need to spend the time to get them listed and sold.
Here's the thing: I'm almost 100% positive that if you just want to try it out and sell a few items a week, you WILL succeed. Might be a confidence booster. However, going beyond that and reselling on a regular basis without realizing the time committment you're getting into might just DESTROY you.
Enjoy your weekends? Be prepared to sacrifice at least one Saturday or Sunday a week to reselling. Most garage/estate sales happen on Saturdays and Sundays, and you need to get there early (7-8am) to get the jump on other resellers. Ebay and other auction sites experience the most action during the weekend, when buyers are at home - often you'll be listing items between 4-9pm on a Sunday. Many people I know spend Sundays processing the weekend's orders and packaging them for delivery on Monday or Tuesday.
And that's just for the weekends. We regularly spend time working on weekdays right up until midnight.
Time management is so important. To make Reselling work, you need to identify the areas that are absolutely essential to the business, and then allocate more time toward them. You need to identify the areas that aren't essential and stop devoting time to those parts. I think a lot of it also goes back to the first part of the equation - you really need to have the right personality and you need to enjoy this type of work, because the amount of hours you'll put in is disproportionately large.
However, one important point is that the quality of the time you spend working can be much different. It can be extremely rewarding and liberating. In general, what you put into it, is what you get out of it. And the fact that YOU get to decide where/when to allocate your hours is pretty amazing. Need to take a vacation? Stop listing items, put the Etsy shop on hold, and just go. Need to take more time off again in 3 weeks? Sure.
And in any case, I would rather spend 12 hours a day working on our business than 8 hours flipping burgers at the mall.
How about you?
Ah. I spent so much TIME talking about Time, that I may not have enough to talk about MONEY. Haha. So I'll try get right to it:
I have some good news, and some bad news.
The good news it that it doesn't require a tremendous amount of capital (money) to get into reselling. But hey, a monkey could've told you that.
The bad news is that it may require you to change your perspective on what it means to get "paid" at the end of the day. OK, now the monkey's just sad...
So for fun, let's do some VERY basic calculations. I actually did similar back-of-the-envelope simulations when we first started up A La Modern.
Let's say that you want to try and compare the amount of money you'll make by reselling to... MINIMUM WAGE.
Yes. Minimum wage, which is, uh, around $7.25/hr for the national rate? Working at this menial job at a standard 40 hours a week, earning minimum wage, you'd earn about $7.25 x 40 hours/week x 52 weeks/year = $15,080 a year.
Let's round this off to make it easier - let's say our menial job worker makes $15,000 a year before taxes. For him, he's done. However, for the reseller, selling $15,000 worth of items is not the same as EARNING a profit of $15,000. Well, duh. You have to subtract the cost of the items.
This is important, because if you resell $15,000 worth of vintage items, but you paid $5,000 to buy it, you've only made $10,000. Sales that don't take into account the original cost are hugely misleading, at least for me. I can brag about selling a $100 vase, but if it cost me $80 to buy it, I've only made $20 bucks.
Now let's make a couple of other assumptions for our reseller. Let's assume that the average cost of an item he'd buy in order to sell would be $10. Let's also assume that our reseller's average profit on each item sold is going to also be around 100% . That is, he would buy items for $10 and sell them for $20, with a profit per item of $10.
So, here's the question:
How many items per year would our reseller need to sell in order to make the same amount of take home profit as our minimum wage worker's salary?
Answer: 1500 items.
To get $15,000 take home pay for the year, our reseller would need to sell 1500 items for a profit of $10 each. That works out to about 125 sales a month, or about 30 sales a week.
This was somewhat of a shock to me. Though I know there are lots of Ebay resellers that can pump out 30 sales a week, that's equivalent to minimum wage!
Yes, I'm aware this is sort of an apples to oranges comparison. For instance, I don't know if the number of hours a reseller would put into selling 1500 items is the same as the 40 hr/week of our minimum wage worker. It might be less (or more, yikes). But also, I haven't taken into account other expenses that reselling 1500 items might incur.
The whole purpose of this exercise is just to give some basic idea about what you might need to do in order to make reselling work. I don't want to discourage people, but these initial numbers could be a dealbreaker for some - especially when you factor in the "TIME" part of the question in the first part of this post.
One bright spot... there are many, many ways to make our "minimum wage versus reselling" comparison outlook appear brighter. The two most obvious to play around with are:
1. Increase average profit per item
2. Increase volume of items bought/sold
I may be wrong, but it seems like these are two very different approaches taken by resellers. In general, I feel like increasing average profit per item is an approach that a "higher-end" reseller might take (like an antique store), whereas increasing the volume of items bought/sold is the approach that Ebay sellers (and sellers using other online companies) might take. Just my opinion though.
I'm not going to get into it any more here, but if you're interested you should play around with ideas for how you might increase either the average profit or the volume of items sold. It might also depend on the type of items you might want to sell and of course the amount of time you're planning on putting into it. And of course, I just tossed out numbers for average cost and average selling price of these items - your numbers might be totally different! The important thing is not the numbers, but the process of making a few estimates for your own use.
I better cut it here since the post is getting long. Hope this has been at least an interesting exercise, and sorry if this was boring for others.
Oh, and if you're still reading this, congratulations! I'm assuming you've decided that you're going to try this reselling thing out (if you're not already doing it, that is). For next week's Tuesday Tips, I'm planning on diving into "How to Start a Reselling Business". I think we'll divide it up into parts as well. Sorry, I know that a lot of people want to just hurry up and get to the "good stuff" - I tend to be too methodical sometimes. But I'll try not to be TOO boring. =)
P.S. For anyone who wants to dive right into reselling, you might consider reading some of Apron Thrift Girl's reseller posts. Some very thoughtful stuff there.
Previous posts in our Tuesday Tips ReSeller Series:[1/18/2011] Should I Start A Reselling Business? Part 1