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01/07/2019 at 9:28 am in reply to: Scavenger Life Episode 393: Happy New Year and Returns Happen #54677
Marie: Glad you liked the discussion! I know that there are a lot of things to remember and understand with numbers. I’m thinking of having a breakdown time to discuss numbers in depth and why they matter. But if you ever have any questions or something you don’t understand, just hit me up at tsatterf@yahoo.com
Seam Store: Are you still doing consignment? If so, is this with individuals or with companies?
I always put returns as part of the Gross Profit. So for us, returns are taken out of Product Sales, so it reduces everything from the start.
01/07/2019 at 8:51 am in reply to: Scavenger Life Episode 393: Happy New Year and Returns Happen #54669Week of 12/30-01/05
Total Items in Store: 2,687 (Up 62% YOY)
Number of Items Listed: 69
Number of Items Sold: 59 (Down 5% YOY)
(Includes 1 Etsy, 0 Bonanza, 0 TrueGether, 1 Poshmark, 0 Mercari)
Weekly STR: 9% (Down 7% YOY)Total Product Sales: $1,690 (Down 2% YOY)
Sales Volume Variance to Prior Year: Down $84
Sales Price Variance to Prior Year – Up $42
Cost of Items Sold: $328
Cost of Labor: $80
Highest Item Sold: $61 – Ariat Black Leather Cowboy Western Boots
Competition: Highest Priced Sale: Veronica wins the week and Veronica leads for the year 1-0.Clothing
# Listed: 1,677
# Sold: 44
STR: 11%
ASP: $27.05Shoes
# Listed: 453
# Sold: 12
STR: 11%
ASP: $32.89Hard Goods
# Listed: 557
# Sold: 2
STR: 2%
ASP: $34.97Etsy
# Listed: 154
# Sold: 1
STR: 3%
ASP: $39.90Poshmark
# Listed: 113
# Sold: 1
STR: 4%
ASP: $50Mercari
# Listed: 72
# Sold: 0
STR: 40%
ASP: $0
Loved the conversation on mortgages. Our family motto is “never get a 30 year mortgage”. I have told my boys that they WILL only get a 15 year mortgage on their house. Only a couple hundred more a month, and the savings is huge. I’m kicking myself for getting a 30 year mortgage when we purchased this house. If we had done the 15 year like I should have, it would be paid off right now.Also a good conversation on the amount of money invested in inventory. One of the strengths of your model is that you have little invested in your inventory and you are looking for large ROI items. Now, these items take longer to sell, but your cash requirements are low.
Always good to know what your strengths and weaknesses are in your business…01/05/2019 at 8:29 am in reply to: Scavenger Life Episode 392: No Alarm Clocks – We chat with Troy aka T-Satt about the eBay Lifestyle #54573Geoff: 100% correct. For tax purposes, they will have you calculate your COGS
Beginning Inventory + Inventory Purchases – Ending Inventory = COGS
So COGUS (unsold) would be in inventory (or written off and by default of the above, part of COGS).
Simon: that was an issue for us as well. Our STR dropped from 19% to 14% this year. Something that I am hoping to correct with better purchasing and checking our pricing. It may also just be what it is, and I have to accept the fact that we will need more inventory space.
But I really want to fight against a lowering STR right now…
Completely agree Mark! This year I’m going to do a “true” budget (our goal) for the year, and lock those numbers in here in the next week. Then I can always report the actuals against the yearly goal.
Simon: Regarding your question of “did your store increase and if so why?” One important item to discuss here. This is a bit accounting geeky, but when you get it, it helps answer this question.
When looking at a variance of any kind (actual vs forecast, actual vs prior period, etc.), there is a simple mathematical formula that will tell you how much of the variance is due to increased sales (Volume Variance) and how much was due to higher pricing (Price Variance).
If you have your sales volume and your Average Selling Price for each (in this case, total sales for 2018, ASP for 2018, total sales for 2017, and ASP for 2017), then you can calculate the Volume Variance vs the Price Variance by doing the following:
Volume Variance = Change in Volume x Prior Year Price
Price Variance = Change in Price x Current Year VolumeI will use our numbers to illustrate (my numbers here are slightly off from the above numbers, as these are from SixBit (accrual) vs Quicken (Cash):
2017 Sales – 3,511
2017 ASP – $22.66
2017 Product Revenue – $79,5512018 Sales – 3,872
2018 ASP – $27.09
2018 Product Revenue – $104,958Volume Variance = (3874-3511) * $22.66 = $8,179
Price Variance = ($27.09-$22.66) * 3511 = $17,227Double Check = $8,179 + $17,227 = $25,406
$104,958 – $79,551 = $25,406So for us, we were up Year Over Year, driven a little by volume, but mostly due to selling higher priced items. If you set this up in a spreadsheet, it can do the math for you automagically all the time.
Sonia: Yeah, I could agree with that. I can see the IRS frowning upon trying to take a loss on those sales (especially items that would have a significant loss like that). Small personal items they wouldn’t care about, but you wouldn’t want to have that showing up in your records if they were looking.
I can see the argument for $0 net profit on the sale, since the item wasn’t initially purchased for resale, and is selling for a lower price. For us, when I have sold items like clothing that was mine, I put a thrift store purchase price. So I’m showing a normal profit and paying tax on that, but too small to worry about and it keeps our books clean.
Your COGS Unsold is just Inventory. Inventory is all goods you have purchased for resale, listed or unlisted, at the end of the year.
Your Tax COGS will be calculated by taking Beginning Inventory + Inventory Purchases – Ending Inventory. It should be the same as your reported COGS on the P&L.
No problem!
In my own research, you probably have two options:
A) Put a reasonable cost on the item that you would pay at a thrift store. Especially if you have sold similar items in the past, you can get this number and defend it. You show a profit on these, and pay taxes accordingly, and it is a reasonable method that is defendable.
B) You claim that these are very one off type items, that you sold on eBay in a manner consistent with a garage sale. If you know that you paid much more than what you sold them for, you MIGHT be able to argue that you should not have any profit on these sales (similar to garage sale revenue…you are selling for less than you paid, so you don’t have to report the profits). You mark the COGS the same as the selling price. This is more aggressive, and I would get tax advice on if you go down this path for documentation and coverage.
Most likely, you are too small for them to worry about and won’t have to prove any of this. But like insurance…you sleep good at night knowing you have this covered and documented well.
Sonia: You actually could take that loss (there is nothing that says that you can’t), but the stickler is that you have to be able to prove what you paid for the item (like the original receipt).
Mr. Tew would be able to provide a much better answer than I, but if I am in that situation, I look at what a reasonable cost would be if I purchased that item used at a thrift store.
My main driver is…don’t put $0 COGS for any personal items sold. Make sure you put a reasonable cost for that item and be able to defend that in case of an audit.
SilverFoxFinds: Just something to chew on…
If you sold items that you had for your own personal use…you need to add the cost you paid for them into your COGS for tax purposes. And if you have other items that you don’t have the exact cost on them, put a reasonable COGS for them as well.
Again, I’m not a tax attorney, I just play one on the internet…but you don’t want to pay more in taxes than you should. You can ask someone Like Mr Tew for exact guidance, but you still paid money for those items, so reduce your profit for taxes. Worth the time to check into!
SilverFoxFinds: That is an amazing ROI! You were a 24X seller, buying at $2K and selling at $48k. That is amazing!
Mickdog: I wouldn’t knock that Net Profit % at all. You are a 10X seller (paid $2k, sold for $20K), and your other costs that you can control are relatively small.
Getting and staying over 50% net isn’t easy, especially the larger that you get.
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