A minor philosophical point on ROI versus "value of your time"

[simplicio]

Posted this on reddit but maybe people here are interested too.

ROI is conceptually different from hourly rate, but you can combine them. You just have to decide what your time is worth – if you have a job with overtime possibilities, that rate is a good choice. Or just “what’s the smallest dollar amount I’d do an hour of work for?” Let’s just say $15/hr to start with.

Let’s say an item costs $10, profits you $100, and your total time to test, list, store, deal with customers, pick, & pack adds up to 1 hr. Your cost is then $10 + $15 = $25 and your real ROI is 100/25 = 400%, not the naive answer of 1000%.

Now let’s say it costs $1, profit is $10, and total time to list the same: ROI = 10/(1+15) = 63%.

We always argue here ROI versus the value of your time as if these were opposing considerations, but it’s trivial math to consider them both at the same time.

[T-Satt]

Good post. Gives me some math to think about in the business!

[ChristineR]

This is an extremely important concept for new sellers to get. I totally bought things that were not worth my time in the past, having no idea how much time it takes to list. Though the Ebay listing functionality is running much more smoothly than it was when I started, I’m still limited as a part-timer in what I can get up. So important to remember when out sourcing. The other thing to keep in mind is that the cost of shipping items over a pound just keeps rising. I think there are some 1-2 pound items between ten and twenty dollars that are not going to be worth it to the buyer to pay shipping of $7-12. Some of those are sitting in my garage unfortunately.

[T-Satt]

I agree. This is also why I want to make the listing process as efficient as possible. If I can keep to listing 4 items an hour, at a MINIMUM of $10 profit per hour, I am getting $40/hr. When I do my consulting, I get a bit more than that, so that makes it even.

I always think about how long to list (and Veronica also adds in how long to ship for bulky items), and any prep time, into the buy decisions. That holds us back on some shoes, as I know that it will take 15 minutes to clean and prep, and for us shoes are long tail, so unless the potential sales price is large, I will pass. If they are in great shape, no problem. But if they need prep, it has to be a bigger return.

On your shipping of 1-2lb items, can they fit in a Priority Padded Flat Rate Envelope? That shipping is only $6.30.

[Jay]

Good to see the math. But I also like to consider the emotional cost of listing items. If I hate the stuff I’m working with, then the cost is enormous to my quality of life. But if I am interested in the items we list and sell, then it brings me joy.

[simplicio]

Yes, I absolutely agree. I hate scanning books, for example, but I probably leave money on the table for that reason.

[T-Satt]

Yep. Me too!

[ChristineR]

T-Salt: I definitely underused the PFR in the beginning, but many of my items are décor and breakable. I bought some boxes that fit in the PFR, but many of the items at that price point do not fit. And I know some people put mugs FOMO in there, but I’m not comfortable with that because I worry about breakage.

[T-Satt]

That makes sense.

I agree that I underused the PFR until recently. I’ve gotten good at stuffing with class…😄

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