Profit margins

mcja

Mwahahahaha!!

the_lunatic_is_in_my_head

The direct costs are fairly easy to work out, what you need to consider is the rest, covering loses for lost in the post (you may be able to claim but you also might find it isn't worth the time), customer returns (for change of mind you'll lose the outward postage, for faulty items you'll lose both ways and possibly the item value depending upon the nature of the fault and whether the supplier will take returns and typically the lower the price of the goods the more of a pain the customers are) and any refunds you make through Paypal they will keep that 20p processing fee, there's also damaged stock or stock that has lost value beyond what you paid to consider. The cost of running the PC all day, lightening, heating costs that wouldn't be needed if you was away at work all day. Business waste should be disposed of appropriately. If you are holding a lot of stock you may wish to insure it (and holding stock may affect your home insurance), if you are working from home and it's clear with deliveries coming and going you may want to review your general security. If you work away from home you'll need to cover rent rates, utilities.

To earn a few quid it's fairly easy going, to make a living selling low value items I think you have to work extremely hard and it's worth doing for the satisfaction alone if you can hack it.

Gleeful

30% profit is what I'm running at currently per item. Some more, but at least 30% on everything, after eBay fees.

terra_ferma

OP, you will get as many answers and formula as replies to this question.
For example in my niche area I have two main competitors. One sells very cheaply, makes a small profit for each item.
Another one has very high profit margins, but fewer sales.
We are al equally successful in our own way, we would all give you different answers as to what the perfect formula is, but it depends on each individual case.
The variables in these cases are: feedback/stars and reputation, mix of goods on sale (e.g. I'm very niche, let's say I only sell small red widget, one sells small widgets in different colours, the other red widgets in different sizes, if it makes sense).
Also level of customer service (eg answering messages, return policy), flexibility of payment time/method, space/labour availability to process a larger number of orders, cashflow availability for a high stock to profit ratio.

Both have been going for several years and are doing very well.

terra_ferma

marie-20 wrote: »

This is quite interesting!

For me our average sale price is around £3.00 inc postage & VAT.

We are currently making around 50% profit on the actual item cost but as our listings all include free P&P our actual profit figure based upon total sales is around 20% after we have paid out our overheads of 3 part time members of staff, a unit and general bills.

I know it doesn't sound like much but we stated trading in July 2011 and so far this tax year we have turned over around £300K so we have earned i.e. me(!) a wage of around £60K - well I would if I stopped spending it on expanding our stock into all carton quantities and purchasing new lines lol but that said I now hold around £50K in stock . . . . not bad to say I started off with £2K redundancy money.

First of all well done for your success! :T
I have to say that this kind of model of low profit and fast turnaround seems to be very succesful on ebay, although it scares the hell out of me.
Holding almost one year worth of profit is not something I would do, but I have a kind of 'just-in'time' system with tight stock control and very little room for stock.
If I sell an item for £3 I would have at least £3 profit, preferably £4 before tax.
But it's interesting to see someone else's business model, it's important to keep challenging one's way of doing things.

Takeaway_Addict

terra_ferma wrote: »

First of all well done for your success! :T
I have to say that this kind of model of low profit and fast turnaround seems to be very succesful on ebay, although it scares the hell out of me.
Holding almost one year worth of profit is not something I would do, but I have a kind of 'just-in'time' system with tight stock control and very little room for stock.
If I sell an item for £3 I would have at least £3 profit, preferably £4 before tax.
But it's interesting to see someone else's business model, it's important to keep challenging one's way of doing things.

I wouldn't be scared of it unless u sell one item, if you have 10 items that all have low margins if one for whatever reason bombs and doesn't sell then you sell it of at cost or a small loss and carry on with your other 9 products and look again to increase the range.

alx2013

I have around 5% bad stock (defective items, losses etc)
I have lines which I make a really tidy profit, and some lines which just didn't work out and I actually sell at a loss - I made some bad calls last year, it's all part of the learning curve!
Overall I probably make 30% once everything has been factored in.
My main problem is sourcing new stock, I am selling in a very competitive market, and also storing it as my items are bulky.
At any time at the moment I hold between £10.000 and £12.000 stock, any more and I would need to seriously think about storage!
I bumble along happily and earn a decent part-time wage but I am constantly on the look out for that item or items which will make my fortune!
Of course the aim is to have my own website eventually, but I've tried that before and the footfall was nothing like on Ebay!

terra_ferma

Takeaway_Addict wrote: »

I wouldn't be scared of it unless u sell one item, if you have 10 items that all have low margins if one for whatever reason bombs and doesn't sell then you sell it of at cost or a small loss and carry on with your other 9 products and look again to increase the range.

That's not the reason. I don't like the level of risk, particularly because ebay is very flickery, with drs etc it's not a platform where I'd feel happy to take such risks, in terms of cash flow and investment.
I'd consider it for my websites though.
It doesn't suit my circumstances but I'm not criticising other people who do it, on the contrary it's interesting to see how people make it work.

mcja

Oh wow, can I just say in what has been a very sh1tty week, I have been so buoyed up by your support. I think my idea is a good one, and will be looking into it in more detail as I think there is profit to be made, I also am watching other products with about 100% sales increase obviously then taking costs out of that as well.

I have learnt a huge amount from you all and can honestly say the last 72 hours have been the craziest I think I have ever been through. Fingers crossed hubby finds a job before his redundancy kicks in an then I can pursue this for holiday and clothes money which is all I really need to make it for.

Thankyou all so so much for not saying...."you are bonkers" and just giving me exactly the advice that I asked for.

Marie-20, amazing to read your figures, and thankyou for taking time to share them. I may not be a millionaire but it has put the fire in my belly which wasn't there when I left my job on Monday.

Thankyou all again.

Xx

soolin

Thank you mcja, a lovely post and I hope all goes well for you