Scavenger Life Episode 389: Journal of Career Escape

It’s true that resellers in reckoning profit forget the real costs – particularly time.

It’s also true that even once you take all that stuff into account, the ROIs can sometimes be incredible.

All so very true. Most part time resellers are about 70-75% net profit (10% COGS, 15% Fees, the rest miscellaneous). Larger Retailers are 5%-15%, after labor and overhead. Full time resellers play in the middle, mostly 30%-50% net, not including their own time invested as a labor cost. Time invested is the wildcard…

It’s difficult for me to believe statements about resellers having better profit margins than some other (which?) businesses when they are a) not backed up with actual numbers and b) are sometimes comparing apples with oranges (ie, not counting labor). I also like to keep in mind that a higher profit percentage isn’t always better. I’d rather have a 10% profit margin that amounts to $10k than a 70% profit margin that amounts to $1k.

In 2017 I had 40% profit after all costs EXCEPT LABOR.
Once I included my labor at $20/hr (very rough estimate of hours), my profit was $0. I’m not full time, and don’t strive to be super efficient, but I do regularly sell items for $60-80 that I purchased for $5-15, so it’s not like I have $0 profit b/c I’m really bad at reselling. I’m very pleased to have created for myself a $20/hr job that I enjoy and is flexible.

Anybody else want to share and compare true net profit numbers? 🙂

Sonia, are you okay? I think you’re taking a light hearted thread and making confrontational. Sorry you say you make no profit. Hopefully you still enjoy scavenging and somehow there’s some money to make your life better.

Jay,
I’m sorry if I sound confrontational. I truly do not mean to be. At all. And I’m totally fine. I guess I’m not very good at providing critique diplomatically. Could you take my comments in the same way as you would like others to take your comments when you say things like “All these youtubers say that they make $1m in yearly sales, but they don’t advertise their cogs, so it’s hard to know how much they really make.” I’m just trying to make a similar critique here – trying to get at the mathematical heart of the matter. Just by your statement about trying to make me feel better about no profit shows me that we seem to have some terminology confusion going on, and I was just trying to highlight it – I thought that would be something you would be interested in.

Could you suggest a (very specific) better way of expressing my critique?

Very often I see you making a similar type of critique when people just throw statements out there without backing them up with real data or without truly defining what they’re talking about, and frankly it is technically confrontational, but in a good way. That’s why you’re a great moderator and interviewer. I’m just trying to do something similar once in a while, and somehow I end up unintentionally irking you (and others?), and I’m not sure why. If we can’t get to the bottom of why this is happening and what can be done to change it, I guess I’ll just stick to more direct answers when people ask for help, and keep my other comments to myself. I will try, anyway.

Understood. Maybe we have moving goalposts here.

We started by just making a joke that Scavengers often buy for $1 and sell for $30. or $70. Or $100+. Its incredible profit margin unheard of in most main street businesses.

It’s no different than Walmart saying they buy something for $1 and sell for $1.10. That’s their profit margin. They just sell a lot of $1.10 items. But they also have huge overhead of stores, employees, benefits, advertising, etc.

Why is it difficult to believe that Scavengers can make better profit margin than Walmart? We don’t make more total money, but better money per item. Why? because we’re selling things we find so cheap that can be sold for so much more. Arbitrage. Our costs are much cheaper because we don’t have brick and mortar stores, trucking fleets, etc.

Now you’re going for asking for net profit after COGS, fees, time, etc. If this is the case, why not provide the formula you want people to provide (if they want to play). This is much different than gross profit margin per item.

For example, we sold an item for $54 + shipping this evening. We paid $5 for it. We pay our helper $3 to photograph and list it. 13.5% goes to eBay and Paypal. What’s my profit margin on that item? What other expenses are you wanting to know?

• This reply was modified 7 years, 4 months ago by Jay.
• This reply was modified 7 years, 4 months ago by Jay.

“Now you’re going for asking for net profit after COGS, fees, time, etc”

Um, Jay, I was not the one to ask for net profit. You brought it up in the post I responded to when you said:
“Just incredible net profit per item that no other business can even dream about.”

I now see that you meant GROSS profit, not net profit. I’m totally with you on awesome gross profits for resellers (which is why this is so much fun!), but not on net profit (except maybe Simplicio!! :)). As T-Satt said, his business would also (currently) net zero profit after labor costs.

As far as what definition I want for net profit, it’s not up to me. I should have asked what you meant by net profit in your post before responding, which probably would have avoided all of this back and forth, but in general I find it best to use well-established business definitions for profit, which can be found here:
https://en.wikipedia.org/wiki/Profit_(accounting)

From that list, I find “gross profit,” “net profit before tax” and “net profit after tax” to be most useful for my reselling business. Both of the net profit numbers require “deducting all expenses”. Unless I consider myself a slave who works for $0 salary, the cost of my time is one of these expenses.

This thread is what happens when people listen to an English/Russian Lit major (me) talking about business 🙂

Yet…you have two successful businesses…

You may not speak the language clearly, but you get where you need to go.

😎

“Hopefully you still enjoy scavenging and somehow there’s some money to make your life better.”

OK, at the risk of getting kicked off the forum, I feel compelled to make one more attempt to clarify what I was saying.

I am absolutely making money from scavenging, and that money does make my life better. As I said in my post, I am making $20/hour (thousands of dollars a year). Just no profit above that.

Having a little bit of a business background, I just get very confused when people talk about net profit as a number in which labor costs are not included.

Simplicio,
Based on the numbers you’ve been sharing, I can totally believe that your net profit, even after labor is included, is fantastic. You seem to routinely make hundreds of dollars of gross profit on a single item without lots of piddly sales. But you as a data point seem like an outlier to me.

Ok, I’ll jump in the water on this one, seems like the temperature is fine…. 🙂

I think the reason that most of us resellers talk about our Net Profit and DO NOT include our own labor as a cost to Net Profit is due to the legal nature of our business. 90% of us I’m sure report our business Net Profit on our Schedule C. I would guess another 5% report on a Schedule K since they are an LLC (that is us). The last 5% would set up as a Sub Chapter S or other legal methods. I would let Mark Tew check those numbers, he would know much better than me the breakdown.

But going with the 95%, our own (owners) labor is not counted as an expense on the tax return. We don’t log our hours and pay ourselves a paycheck and record that as an expense. Because of that, we don’t track our own hours as labor. Our “pay” is the net profit we derive from the business on a cash basis.

Because of that, we never really track and truly see what our Net Profit would be, apples to apples, with a Wal-Mart, Target, Amazon, etc, where all employee labor is put as an expense on the Profit and Loss statement.

I would 100% agree with you Sonia, after you add your time at a reasonable rate ($20/hr sounds reasonable) then your business is probably at $0. I know ours would be as well…

Now, that isn’t a bad thing, as while the legal entity of XYZ reseller showed $0 profit (and owed $0 taxes), it still paid employee Sonia at the same time. And Sonia was still able to pay her bills with that paycheck. That is us as well. If Troy and Veronica were to get paid as employees, then we could pay our bills, but T-Satt Resellers as a business would show a profit of $0 (much to the chagrin of the taxman…and any investors that held stock). Hey…Non-Profit entities do this all the time. No profit, but all employees are paid (including those that started the Non-Profit).

I will also drop our true blue %’s by year. No lie, these are our Net Profit Percentages each year WITHOUT our own labor.

2015 – 38%
2016 – 37%
2017 – 32%

Now, were we to add our own labor…we would be 0% across the board. This is why startups are so HARD. You don’t make any money (to an investor) while you are growing. You are consuming all of your capital to grow the business: reinvesting in more inventory, reinvesting in higher cost inventory, adding labor as you grow, adding costs (such as warehouse and insurance), and the owners AREN’T GETTING PAID. There are a lot of times I have read about people looking for VC money and when the VC asks what they are doing with it, the owners say “take a salary”. Startups can grow themselves to death…

So yes, I will agree with you that once you add your own time as labor, most of us would be $0…but we get paid along the way and we keep on growing.

Now, I think the best takeaway from all of this conversation is this…

How can we grow our business to make more $/hr of our own time?

For Jay and Ryanne, it would be grow to a large inventory, list it and forget it. They have invested money and time in their listed inventory (like an buying an Annuity), and they get paid down the road, when they put in 0 time, but sales still come in.

For us, it is how to hire out parts of the business, so we focus on sourcing (the $100/hr job).

I am always looking for ways to make more money per hour worked. We can always make more money with more hours worked. But how to increase the rate?

Like my old boss said when I was a salaried person and worked so many hours…”when you are salaried and work overtime, you are driving down your hourly rate…”

That man was efficient…and the man I’m chasing today…

I think to hopefully clarify (but also risk completely making this extremely muddy) on why I say that many of us are at $0 net profit, this is on a CASH FLOW BASIS. Or said another way, on a CASH BASIS for tax purposes.

We are all generally used to tracking the amount of labor that we spend getting items listed as a “cost” in the current period (let’s use month as the current period). Then we look at the sales in the same current period to see if we are profitable. If we are increasing our inventory (which just about all of us are), then we are LISTING more than SELLING. As a general rule, when a business is growing, cash is tight for this very reason: we are spending money today in labor and inventory to have bigger inventory down the road. These dollars are INVESTED for future revenue.

Now, if we were Wal-Mart, or Target, or other business ventures (using the Accrual method of accounting), we can state that the labor that we are investing in listing an item (prep time to clean, photography, photo editing, research, listing, etc.) is part of COGS (if it ain’t listed, it ain’t available for sale), therefore all of our time should be capitalized as INVENTORY and put on the Balance Sheet as part of Inventory Value. Now, from THAT standpoint, we are all still PROFITABLE when the item SELLS.

Take our photography. We are paying $2 per item today for something that may not sell for months. In the current period, that $2 is an “expense” and lowers our net profit. But if we add that $2 to the price we paid for it, increasing our Inventory Value, and then we don’t take the expense until we sell it (like COGS), then we are truly matching Revenue and Expenses. This is the Matching Principle that is a major pillar in Accrual Accounting.

To really get the truth of the matter, we should assign our labor a rate, look at the amount of time to list the item, attach that labor cost as part of COGS, and when we report COGS, we are reporting both the cost to purchase as well as the labor to list. THEN we have a true apple to apples comparison.

I do this now when I’m purchasing. When I buy the item, I add at least $5 to it to see if I like the ROI ($2 for photos and $3 for fees if the item is around a $20 price point). We could all do a similar set of calculations…

Assign your labor a reasonable cost ($15-$20), look at how long it takes to source, photo, and list, and then add that to your COGS (purchase price). So if you think your time is worth $20/hr, and you take 15 minutes to get something listed (from sourcing to final listing), then add $5 per item to your sales and you get a better profitability when MATCHING REVENUE AND EXPENSE.

These are the geeky accounting things that I keep in my head and try to use to expand in a profitable way. But these are ALSO from a matching timeframe, and will differ from a CASHFLOW timeframe, which is what we usually do day-to-day…as we pay our bills in real time…not accrual time…

I hope that makes things clearer. When we are all growing, we are spending more time and money to increase our inventory. From a CASHFLOW perspective, this puts us at a loss, when from an ACCRUAL perspective, we are increasing Inventory, which is future revenue.

Again, Jay and Ryanne are a perfect example of this. They have “invested” their time and money in growing a large inventory. If you put $ on all of their labor in the past, then they have a low net profit from a CASHFLOW perspective. But if they stop listing altogether, and just collect revenue for the next few years, then they are extremely PROFITABLE FROM A CASHFLOW perspective: No labor in the current period except to ship, but lots of cash coming in…

See…this is why people hate accounting… 🙂

Thanks, T-Satt. That makes a lot of sense. I think I would have enjoyed studying accounting! 🙂

Sonia: I take that as a WIN!

😎

This is why I tutored Accounting while I was studying it. It makes sense when you know how to look at it.

Spot on about everything you have posted. BUT Don’t forget, understanding all of these principles before going full time helps one to build a proper COA and that in turn is where a business owner drives his ship! A full, complete COA is where all expenses of any type is properly classified and expensed against the proper journals and General Ledger.

Left over money for the business is called OCRA [Operating Capital Reserve Account]. After gross profit is determined from those hard costs associated with the GP number, then comes, Owners Draw [owner salary], executive salaries, bonuses, taxes to Uncle same, etc., etc. You will be lucky if you have 5%-7% left over for your OCRA account.

We are a Sub-S corporation, so any company profit is passed through to us as the principle owners, taken and shown as owners draws on the books. Once passed through, then for tax purposes we would pay taxes on that amount at our own, personal tax rate instead of at the “C” Corp rate. Which many people don’t realize that corporate profits tax can be as high as 50% of what’s left. That is why large corp. make huge donations at the end of the year, contribuit to symphonies, art museums, etc. That is how Mobile Oil and Exxon got away with paying zero tax on millions and millions of profit, put into their OCRA account, bonus all the execs, then DONATE Huge amounts to non-profit entities.

I know you and I run our businesses on a tight line and reflects a bottom line that shows our mehtodologies.

Put another way, as something to think about, a business can make a lot of money, have a nice gross profit, pay a good salary to all employees, give bonuses, pay high executive salaries and then end up running in the red and paying no taxes.

Borrowing an Arsenio Hall Phrase .. “Hhmmmm”

Mike at MDC Galleries and Fine Art in Atlanta

I don’t really have anything to add to the discussion other than I had to read that a few times (could also be waking up at 5 am to work on startup) other than “ah” once I got it.

I am however confused by the net going down year after year. Is that due to expanding to such a point that outside help is needed? Or does a larger business with additional costs (idk what) per item add to the overall reduction in net?

I do find the hard part with this business as a f/t seller is balancing the point when items are too expensive, long-tail and slow moving vs. cheap and fast-moving items. Is the net going down year after year the result of having to introduce cheaper items in to keep a steady flow of sales and to gain in gross, or something else? I’ve just been imagining having to introduce in products with cheap price points as “diluting” an overpriced, slow moving inventory.

That being said, I feel the cost of one’s self as “labor” is interesting from the non-business perspective of one’s self-worth as a participating member of the working class vs. being a self-employed business owner. I’d rather have an overall net of 0 as a self-employed person rather than have my hours set by someone else’s view of the worth of my labor.

I think that you can easily start getting a smaller Net Profit % if you are willing to reach lower and accept a lower ROI so that you are still “feeding the beast” and keeping sales flowing. Something that we fight doing sometimes, and something that we accept sometimes. As Sonia said, 10% of $300k is better than 30% of $50k. We have done that a little, but it hasn’t moved the needle.

Looking at our Net Profit % from 2016 vs 2017, Fees were up 1% (probably from promoted listings) and Meals and Travel was up 3% (eBay Open–we didn’t go in 2016). Interestingly, Shipping costs were up 2% Year over Year, something I was watching. I know that Labor will hit us this year and drop our net again, but we are willing to take that hit (cash flow wise). From an accrual perspective, it is only $2/item, so we get those benefits when they sell (we just don’t capture that cost, hang in on the balance sheet as inventory and sell it as COGS to properly match).

” I’d rather have an overall net of 0 as a self-employed person rather than have my hours set by someone else’s view of the worth of my labor.”

And that…is the best line of the thread… 🙂

AND a decision to accelerate the growth of the company inventory. Either buying more in a newer year either quanitity our increased unit costs.

Until one is at a level that is as large as you ever want to get, item wise, the reinvestment back into the business, called plow back, continues.

I cringe when people use some of the SL weekly numbers to calculate that they will make “X” number of dollars and then plan to quick their full time job. That thinking some times seems to be based on the logic that they have a full storage area already packed with a complete inventory.

We operated in the red, meaning no money for us, for years while we kept plowing back money we made from sales, into more inventory. $.10 an hour is not uncommon for someone in growth mode, for several years. The SCORE network says that 5 years is about average before a business owner can make any money.

I have posted several times before, if you don’t have $10,000 cash righ now to invest in your inventory, then you will have to “earn”- make $10,000 to have that amount invested in your “stash” of sellable items. Now take all the expenses that have been mentioned and subtract those from your GROSS SALES, and forget paying yourself, how long will it take a new seller to build up an inventory asset of $10,000.

We have about 1,200 items in our inventory. We buy higher cost items along with box lots of cheaper item. Our Profit & Loss statement shows we have approx. $8,000 tied up in inventory. or about $6,66 per item. It took us years to grow that inventory.

Jay and Ryanne have approx. 8,000 items in their inventory, that represents a large amount of cash tied up, just sitting in their storage area. Multiply that 8,000 items by whatever dollar value you want to use as a COG and you get $16k, $24k, $32k dollars they have sitting in that storage unit. All of that had to come out of their NET SALES. They sold a certain dollar amount, they paid all their fees, then they lived off a portion [and lived very close to the vest as they always remind us] and then and only THEN did they have cash [NET CASH] left over to put into their OCRA account and used that to plow back into their business to grow.

BUT NOW they have leveled off. I see it in their weekly numbers. I remember when they had 2,000 items, then 3,000 then 4,000. That represented GROWTH and came only out of bottom line NET profits yet they still were living, frugualy be it, but living. Old car-truck, used clothes, selling honey, scavengeing everything that was not nailed down, burning wood, etc., etc.

BUT GUES WHAT, they have leveled off now. Go back and see how long they have hung around the 8,000 item mark? Came close to 9,00 for a short while, but dropped back down. So where is there 9,000 items, 10,000, 11k, 13k inventory? You won’t see that for a while if ever. Now that they know their cash flow, what the 8,000 item $25,000 investment is returning to them, now instead of growing, they just replace what they sell and float at the 8,000 ++ range. BUT that is not the whole picture. They now “PULL” that net profit, OWNER’S DRAW, and re-direct that bottom line net cash, into a diversification plan. That is real estate investment. Viola’.

They still have Ebay store expenses, fees, a living salary and then use that operating capital reserve account amount of money to continue to build their business, but it’s not Ebay hard goods inventory that is the sole focus any longer, but real estate “inventory”

I can see Jay’s long range plans, next will come a coucncil member, then Mayor of Lauray, the Virginia Governer, then on to Washington. LOL :-), The man who built an empire by selling old, used, shoes, yeah right. Smart like a Fox. LOL, LOL, 🙂 🙂

Mike at MDC Galleries and Fine Art in Atlanta

Dang, this is also interesting. Just on Ebay alone, I currently have 10k items in stock with another 10-20k unlisted reqdy to go to increase or replace existing inventory with little effort.

I feel that to an extent, you will even out at a level of items in your inventory, sell or delist a bunch, and then still need to figure out a way to replace potentially thousands of listings at a time. To already have a high listed inventory with stock already ready to replace it is definitely key to making this an actual functional business as opposed to hoping to luck out at a thrift store or auction frequently.

Lots of good points in your commenr, MDC

Interesting comments – however, how many small businesses would not exist if they wanted a set salary, or if the owner of the business hired someone to do all the work? How many small businesses in your area start off small, and are successful, but once they expand they fail quickly?

To me, scavenging is a skill – it is like any other skill that you have to learn, you go through stages from apprentice scavenger to master scavenger and your knowledge can be shared, but never directly transferred to someone else.

It’s a very unique business we are in – even amongst us on this site our businesses, what we sell, and how we run them vary drastically. It’s also what is great about online selling – you can focus on what you want, and other can focus on other things and we all still can make money doing it on the same platform.

Inglewood: Absolutely true. The ability to consistently find, purchase, list and sell items is a skill. But…successfully running a business is a different skill. The two can overlap, and should overlap, but not always.

The ability to invest in successful stocks is it’s own skill, but the ability to have (and maintain) the capital to invest in those stocks is a different skill. I have seen it also in the poker world. I see a lot of amazing poker players that are dead broke. They can consistently win, but they can’t maintain the cash because they don’t have proper cash management skills. They can beat the game, but they can’t grow.

I had a professor in college that did white water rafting as a hobby, and would crew boats on weekends and during the summer. He would see so many others that were great at piloting the boats, loved the job, and would go out on their own to start their own businesses. Most would fail. They knew the business, but didn’t know how to RUN a business.

I just had that a few years ago in an oil and gas company I worked with. I was brought in to set up the accounting and finance department. They were deep in debt, bills overdue, cash not flowing in. They were killing on the growth and product side, but the business side was a mess. I righted the ship, got them on a good path, and then they want to make more bad decisions. We didn’t have the capital to fund the projects, and needed to pay down the debt. They wanted to double down and expand way beyond their capabilities. They knew THE business, but not how to RUN a business. I realized they were not going to ever run the business like a BUSINESS, so I decided it was time to part ways. They folded 9 months later…

So that is such a big part of what I think is important when you go full time. Know how to run the business side of things, as well as how to make good purchases, take good photos, price correctly, list correctly, ship fast and packed well, etc. And if you find you are weak in one part of your business, hire that out or get a mentor to take that part over.

When we are all doing this on our own, we have to be the purchasing agent, the lister, the photographer, the researcher, the shipping department, customer service, the accountant, the treasury department, and the CEO. Very hard to do all of those things, and impossible to grow and scale by ourselves. The bigger you get, the more important each piece gets, and this is where specific skills come into play.

If you want to go fast…go alone. If you want to go far…go together.

Almasty: Amen to that!

Amen Mike on the thought process to have the amount of cash set aside for your purchasing.

This is why I track our numbers so much, and why I forecast on a cash flow basis the current year as well as one future year. At some point, your sales will match your listing capability, and you hit stasis. You aren’t growing your inventory, you are at one level until you either increase the amount you can list each week or you increase the net profit on each item. At our current pace, we will hit stasis next year. So…do we try to increase volume or ASP? And what is the cost to do so (in increased labor or increased purchase price for inventory)? And what does that do to cash flow, and how long will it take to see the return (in cash sales) from these changes? This is why knowing Sell Thru Rate is so important.

So, while we are all talking this game, and we are really getting down to what Net Profit really is, there is still that other (and more important) metric…cash flow. Cash is King. It won’t matter how much value we have in our inventory if it doesn’t sell. You can’t pay your mortgage, buy groceries, or fill up the car with your “potential profit” sitting in inventory. You gotta sell that stuff to have the cash to pay your bills, AND still be able to replenish that inventory. And if you are growing your business, you need more of that cash for more inventory.

This is why having the capital to grow is so important, and keeping your burn rate down is also so important. It is no wonder that Elon Musk, Jeff Bezos, Bill Gates…all lived like paupers when they were creating their businesses. They lived on the very cheap and plowed money back into the business.

The best mindset to have is when you make a sale, you set aside money to grow the business FIRST, and make sure you can live on the rest second. If you pull your living expenses out first, you won’t grow your business like you should.

BINGO! That is why we have made “Zero” for the last few years. All plowed back into the business.

For those who want to quit their regular day job, start the Ebay business on the side, create a Savings account at your bank, and yes you should have a business account. It is not good to “co-mingle” your business ins and outs with your personal money. Then at the end of each month, move any money left over into that savings account and almost zero out the business account, or do the same with your PayPal account. Leave just enough to run the business only. Then if after a few months, do some quick math, look at how much is in the savings account, subtract the month’s beginning balance and look hard at the amount [difference]. That amount MAY be able to be your monthly pay. If you have $300 left and you worked 27 hours per week x 4 weeks = 108 hours then divide 108 hours into the $300 then you are making $2.77 per hour. We have made as little as $.10 per hour in our early years.

You will be surprised at how long it is going to really take to have enough in the real Net column that will be left for you to live on, even if you live extremely cheaply. Just another way to look at the “Cash Flow” concept T-Satt speaks about.

mike at MDC Galleries

Mike: That is how I did the business for the longest time. I knew how much to leave in the PayPal account to cover expenses (fees, shipping, and the next week’s purchases) and we only live off the excess.

So, if you plan to purchase 100 items each week at an average of $5 per item, then you have to leave $500 in the PayPal to cover those purchases. Add to that your current eBay fees, $100 for shipping (I always keep that for float), $100 for possible returns (I still do that too), maybe $50 for shipping costs, etc. So let’s say that all adds up to $1000 in expenses you need to cover. Then you only get to transfer (and live off of) the amount over that number each week.

That process would sometimes mean that we would shop and kill it on the weekend, then we couldn’t get “paid” until Wednesday or Thursday, as we had to build back up another $500 for the next week’s purchases first. And if you want to start going to 150 listings a week, gotta save $750 first.

If you don’t have the capital to buy, you can’t spend the week listing, and you can’t make more sales. When you go full time, feeding the business comes first, and feeding yourself comes second…

Here is a simplified way to look at cash flow, the life blood of any business, unless you are an OPM [other peoples money] person whereby you borrow other peoles money to invest into your business based on the premise you can make enough to pay that loan back, with interest, and still have profit of any kind left over.

I will use a simple lemonade stand.

You want to set up and sell lemonade on the corner. You have your parents buy everything you need to build a stand, buy materials to make lemonade, serve it and put it on their credit card [i.e. a business loan=OPM] and very quickly you are in business.

Now comes the basic 3 steps to cash flow:
#1 – Every cup you sell you put the money in your left pocket and you do this for 30 days.
#2 – on day 29 you pay your expenses
* Pay your parents back: = You now owe them for lumber for the stand, nails to put it together, paint or magic marker for your sign, a vendors license to peddle on the corner, interest to your parents, repay for the lemons, sugar, cups, advertising fees [Ebay reference], Paypal, a glass pitcher to hold the lemondae, auto expenses for your parents to go to and from the grocery store, state sales tax [unless tax exempt on the state level], pay your parents for their time [sub-contractor costs] unless they volunteer for free [but a phptographer, helper lister [will not work for free],
* Report what was in your left pocket to IRS on one line of your return, [then subtract everything that was in #2, including things I just didn’t think of] and arrive at your taxable income, then pay the government their share.
#3 put what money you have left into your right pocket.
* Next look at your right pocket total and then split that in half because your “Company” your “Business” is a living, breathing entity that you have to feed for it to live and grow, so this is the “Plow Back” that is a requirement of every new start-up. This first half goes to your business first before you.
* Now after that final 50/50 split look at what is left in your right pocket, pull it out, that is now yours, take it home and see if you can pay all of your monthly living expenses, if not you will have to live off of another income stream.

Don’t quit your full time day job until you can live off of half of your right pocket.

Simple Simon says, starting abusiness is easy and can be done in 30 minutes on line. Building a business that can sustain you is another story and you as the owner, are standing at the back of the line.

LOL, 🙂 🙂

I know, completely understated and over simplified, but in simplicity true.

Mike at MDC Galleries and Fine Art.

Don’t forget forcing yourself to source on days you don’t want to. It’s snowing out, but I’ve been out sourcing since 9 this morning. Should be done by 2, I hope. Only 3 more thrifts to go.

Rinse, repeat if there are good estate sales this weekend. Days off?! Pffff…

When sales are strong, it’s time to source. When sales are weak, it’s time to source. What is a fun weekend or p/t activity is absolutely vital multiple times a week (or a really good auction haul or estate sale) to make sure you survive at this. If you do get in a large haul, sit down and list it all, or at least most of it in order to start getting your money back from the haul. Then, your prize is to go out and source again.

Almasty: Amen, and THAT is where our money truly lies….

Listing is a $15/hr job. Photography is a $15/hr job.

Sourcing is a $50/hr job. That is where the skill lies, and THAT is where we need to spend the majority of our time.

Provided…you have an efficient process for listing what you buy (or you can hire it out, stay on target volume wise, and still get good returns)…

You’re forgetting the salary of the manager/CEO that designed the systems used to train and oversee those $15/hour jobs. Tons of skill and knowledge involved there – even more so than the sourcing knowledge. To be honest, that job can be farmed out too at an even cheaper rate than the other jobs.

I love this conversation on numbers, money and running a business, I started a new thread on some ideas I had so it wouldn’t get lost on this megapost: https://www.scavengerlife.com/forums/topic/building-a-life-not-a-business/

Thanks Mike. All is great, she has been up and around a bit this morning. Looking to hear from the doc for official discharge later today. But she is an amazing and strong woman, so I’m not surprised!

Her mom is staying with us for a week to help take care of her, so we are on a good path!

I was very concerned about promoted listings, the extra expense, and the idea that you have to pay the 20% to compete. I’ve just learned early on that you have to adapt and to be willing to give everything a go. It all comes down to the final numbers and the big picture and if the bottom line is bigger, I’m all in. I pay 1/3 the cost I will sell for up to 1/2 for higher priced items. When all is said and done, I put 7 grand in my pocket at the end of the month. I am paying off my house early and putting the rest into investments. Love your story, we thought investment properties early on, but have decided to just invest like mad and live the dream in Orlando when we retire @ 50 (we’re only 32 so it’s a bit off ; ). Life’s good!

Thanks for sharing Libby, I agree about selling higher priced items, nice to sell things sooner at a higher price with a fee than waiting and marking them down and making the same later.

It’s great to hear from someone who’s created a gigantic pipeline of sales:) If we didnt enjoy renovating houses, we’d also just throw money into index funds. We’d need $600k to live off a yearly 4% withdraw.

If you dont mind more questions:

–How are you finding so many high dollar clothes? There’s so much junky clothes that it’s amazing you can find 150+ pieces to sell each week. What is your sourcing schedule like?

–Is it normal to make $7k gross a week because that’s $28k gross a month? I’m surprised you only net $7k/month. Just curious how the math works and your costs.

I shop thrifts and consignment stores. I have created relationships with three stores in my area and I frequent those once or twice a month and I often get calls about big buys that I run in for. I shop twice a week pretty much all day long. I also travel up to 4 hours in every direction 2-6 times a month depending on which season we’re in to thrifts and consignments. Lastly, I drop my card every where I garage sale and that gets me a lead every other month of so.

These are my worst months. I do my best in January and the earlier months of the year. I have a photographer ( my sister ) who I contract all of my photography to, I pay a premium for my items so I can buy more at a higher quality to maintain customer satisfaction ($8000 per month), and I re-list my items every 5 days which then costs me money to list at the end of the month so I have a high Ebay fee, & free shipping and returns is expensive as well.

Appreciate the transparency. Obviously it works for you to invest all the money up front on good items. Plus Free Shipping and Free Returns is costly but must drive a lot of traffic. Used Clothing is very competitive.

$7k a month net is a solid number when all is said and done.

Yes, thanks a bunch for the info.

We are looking to get into a similar process this next year, 3X with higher priced items so that we make more $/hr. Looking to increase our sourcing hours by adding some more time during the week (most of the time we source just 1 day).

Good to see you are making this process and these numbers work on your store, as that shows that it can be done!

T-Satt, how many people are employed in your business? I have hired someone before and it didn’t pan out, but I can’t figure out how to grow without hiring on people. I’ve always been very interested in opening a small store front where I can take in inventory, but haven’t wanted to take the leap because I enjoy staying at home with my kids. Future ambitions!

Jay, I should also mention my sister started with us very early on and I could actually do better if I hired someone else and paid per picture or hourly, but she is a professional photographer which sets our items and store a part and I do enjoy working with family. But that would easily increase my income by $2,000 per month.

We have one contract employee, a professional photographer that we pay per item. He takes the item to his studio, does the photos and brings the items and photos back. Works great as he can work on his own schedule and we don’t need a work space for him.

Veronica and I have talked about getting a separate house that we could use for the business. It would have enough room for everyone to work, store inventory, and we could bring our dogs to work (and they can have a separate yard to run around in…

We sound like we’re in very similar situations! How much do you pay per item considering he is professional? I’m going to keep my sister with me for as long as she’d like, but I started a second business and my photography is poor and it eats up my time.

What is your new second business? Does your sister list as well, or do you do list everything?

I pay my sister a percentage so my second business is on my own. She didn’t enjoy photographing shoes and accessories so those are mainly what make up the second business & some hard goods (I just sold a Frabel Blown Glass piece, we got a small taste of what Ryanne goes through with packing regularly, oye). She steams and photographs / crops and edits. We handle everything else on our end. I need your photographer for my other business T-Satt!!!

He would like the work…You just have to be in Denver. 🙂

We love him. Amazing work!

We pay $2/item.

He only does clothes and shoes, as hard goods takes too much time.

Now, for that price, he steams the items to remove wrinkles, photo, photo edit, and puts all shirts/pants/jeans folded into clear polybags so they are ready to ship.

T-Satt,

Are you kidding me. $2/item for a professional photographer and he steams the clothes?

I called a professional photographer I found on the web that was in my area and explained that I needed photos for items I was selling on ebay. He said that he couldn’t give me a exact price without seeing the items, but it would be in the $20-$25 per item range! I said right there, “That’s not going to work. Some of the items I sell only go for $20-$25”. He seemed unfazed and just kept on going with his speech.

How did you find this guy for $2/item?

Mark

Craigslist.

Now, he works out of the studio that he set up in his own place. He won’t do our Hard Goods as it takes too long to set up each shot. So we use him to do clothes and shoes to keep up the volume. I work with him on process so that he is quick and can keep to at least $16/hr for his work for us.

I personally dont think you need to hire a “photographer”. We just found a couple people who were good people. Taking photos for eBay is really simple. They use our equipment (an old iPhone).

The biggest skill is basically showing up and being able to be self-motivated. We pay by the hour $13/hour. Comes to about 5 items an hour with the photographs and listings. So $2/item sounds about right.

No steaming or ironing done here unless the item really needs it.

Totally agree Jay. We were just looking for a person to photo and planned to have them at the house. When our guy showed up and we got to talking, we realized how lucky we were to have that quality at that price.

It really showed me the benefit to having people be able to work from their own house. We are looking to use that setup when we get a lister. They can work from home and remote connect to SixBit and list from there.

You guys really found a keeper in that photographer. Amazing he’s willing to work at that price if he has a home studio.

Since we list more than just clothes, it’s nice having the two people come to our office to take photos instead of driving carloads of bulking hard goods back and forth.

I like your idea of buying another house that would just be an eBay office. Find a fixer upper. Use it as an office. Use it as a tax write-off. Then eventually fix it up to sell.

Yep, we know how lucky we are. With clothes and shoes, we do the listing in SixBit and put the SKU on a tag. He picks up the items (clothes are hung on hangers with the tag, then batched into protective bags for transport). Then he can work on his own schedule and we don’t have to be there when he works (he works other gigs, so he does our stuff around that).

My thinking exactly on the house. Downside is…this market is NUTS with high pricing right now.

So, storage units it is. Our photographer and my son will get some extra cash this Sunday, moving all our stuff from the 10×30 unit now to a 10×20 that is closer and climate controlled. Rent the van, do the move in 3-4 hours I think. 1/3 of the cost and we upgrade to climate controlled. Will get a second unit in a few months next door so we are 2/3 the cost, more space, and climate controlled.

Always wanting to level up…

Hey caught your last sentence. SixBit is still an SQL database and will reside on your main home office computer. Our assistant does connect to our WL SQL but that is because they are with a 30 foot range of the in office wireless network we set-up. SixBit works the same way, so how can an assistant tap into the SixBit SQL Dbase remotely from that far away. It would have to be “Cloud Based” and WL and SB are not UNLESS YOU CAN GIVE ME SOME WONDERFUL NEWS!!!

Please tell me that SB does have that capability now and at no extra cost. Please, please !! LOL 🙂

Mike at MDC Galleries

Mike: Because I’m a hacker…

I can set up a separate laptop at the house that is connected to the SixBit database. Using Google Remote Connection, they can connect to that laptop from any other laptop. Then they are effectively connected to SixBit.

Well that is like me using TeamViewer. Whenever Susan and I used to go to Florida to visit our daughter, I would turn on TeamViwer and leave it running. Then I would take the laptop with me and log in to TeamViewer and remotely navigate WonderLister. Guess you are doing the same only having then tie into your laptop from thier own rig, then the office laptop is tied into your local area wireless network which accesses SB.

Guess I could just do the same with our two helpers, only I like for them to have the object in hand to look at the object as a second set of eyes, look for crazing and flaws we may have missed. But guess I could just be more deligent on the front in and not be such a quick entry and then they could do the research and such. But still nothing like having the object in your hand. And it would be harder work to transport plastic bins of heavy 3-d objects around. Some of our bins can hit 30 lbs. ++.

I agree with having the item in front of you when listing. So the plan would be for a remote lister to come by our house, pick up a batch of items to list and take it with them, they can list from their house and then our photographer would pick the batch from them, photo, and bring it back to us.

Jay,

“I personally dont think you need to hire a “photographer”. We just found a couple people who were good people. Taking photos for eBay is really simple. They use our equipment (an old iPhone) … The biggest skill is basically showing up and being able to be self-motivated.”

I agree Jay, I don’t need a “Photographer”. The problem is that when I had a person who took photos, they were not very good. They key is getting someone who can take photos and is good and self-motivated is the key. Good luck now trying to find them at a price you want to pay. I will have to spend a lot of time.

I had an idea. I am thinking of taking an introductory digital photography class at a local community college. I can learn some things, but also get to know the other students. I could then find out who would be good for my business and offer them a job. Not sure it would work out, but I am thinking about it. I think my chances of getting someone good for a little amount of invested time would be good.

Mark

For a smaller scale seller like myself, I find that having a setup area with proper lighting is a great starting point if you are moving up the ladder. I have 3 separate areas:

1. is a small photo box (bought on eBay) – it’s about 9″ square with LED lights built in, takes great photos for small items.
2. a larger workbench, where I have LED lighting overtop, and down each side. This area is about 3′ x 6′, and I use it as my packaging station when not using it for photography. I have been using a felt white sheet lately as a backdrop that I roll up when not in use.
3. the floor against a plain wall, for very large items and clothing. I have a mannequin, tripod for both my camera and lights, as well as various “podiums” to put items on.

I’ve also bought 3 identical Nikon cameras – one for each area. They have interchangeable batteries, lenses, etc. so I only need a spare battery for all 3 ready, and can move lenses around as required.

I like the photo aspect of the “job” myself – however, I started out in the 90’s taking 35mm photos to the 1 hour photolab, scanning them in my computer, FTPing them to a server, and writing HTML code to get 1 photo on eBay, so maybe my current setup compared to 20 years ago seems like a futuristic dream still.

This sadly got me thinking – I still have a huge shoebox of well over 1000 35mm photos from items I listed in the 90’s…wonder if they are worth selling? LOL – would be funny to “double-dip” on the same items 20 years later…

Inglewood,

I also have a photography area set up. I have a nice setup for small items and a setup for large – very large items. The problem is hours in a day. If I can contract this $15/hour work out, I can concentrate on the good stuff like sourcing, etc. I don’t mind taking pictures that much, but if I need up to 100 items done a week, doing that myself and listing them and managing the whole business is a bit much.

Mark

Yep.. A drowning man will grab onto a floating pine cone! So grab any help you can in order to build your store up to a level of good steady income. Then you can do what every company in America does, lay off the help and run on maximum – Kaizen and LEAN principles and do more with less because you have built up, streamlined, LEANed down, go to coast-maintain level, sell – buy – replace – rinse – repeat and then smile all the way to the bank! 🙂

Mike at MDCGFA

That’s a good idea. A photography class will have local people who probably know enough to take decent photos and might want some extra income.

Jay,

“That’s a good idea.” – Thanks Jay for the validation. It sounds like a good idea, but I am on the fence. But you think it is a good idea too, so maybe I am on to something. It will be an investment of some time and money, but it may well be worth it.

Mark

calljac86, could you expand on what you mentioned about dropping off your card at yard sales? I’ve been thinking about a similar idea, but didn’t know how well it would work. What does your card say? And what kind of call backs do you receive? Thanks!

We live in Indialantic (Brevard County), so about an hour from Orlando. We used to live in Celebration (Orlando) before we had the kids though. We actually live on the barrier island off the Atlantic coast. We are in Orlando every few weeks and all summer (I trade scavenged free/cheap timeshares so we stay mainly at Marriott timeshares lol). Orlando has way better camps in the summer for the kids, and I can go sourcing at the bins while they are in camp.

I was wondering if you rented a car. Downtown Orlando isn’t very close to Disney, but luckily you were going opposite traffic on I4 during rush hour at least. You got lucky with the weather! This week it was cold (for us) up until yesterday. My 4th grader actually had indoor PE one day this week because the PE teacher said it was too cold out lol!

You probably broke even using Lyft. Parking fees at the Dolphin are really high.

• This reply was modified 7 years, 4 months ago by ChristineK.