Forum Replies Created
-
AuthorPosts
-
12/13/2018 at 10:47 am in reply to: No eBay listings at all show up in Google search sponsored results? #53301
Twizzle: What is the most important part of getting your sales on IG? Having a large following (and how are you growing that)? Are hashtags your best friend in doing that?
I would love to hear more about that…
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.
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… 🙂
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.
Yet…you have two successful businesses…
You may not speak the language clearly, but you get where you need to go.
😎
He would like the work…You just have to be in Denver. 🙂
We love him. Amazing work!
12/12/2018 at 10:53 pm in reply to: No eBay listings at all show up in Google search sponsored results? #53264I have noticed this as well with Google shopping. When learning Poshmark, I would use Google Shopping to get an idea of current pricing for new items. I can find my own listings on Google shopping…from TrueGether, Bonanza, Etsy…buy not eBay..
Again, another reason why we crosspost now. Everything is on eBay, and I am working to crosspost to other platforms. Ebay is still king overall, but if we can start seeing steady streams on Poshmark/Mercari/Etsy, then it helps us with visibility, especially on Google…
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… 🙂
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.
Looks fine. Not all Zegna is made in Italy.
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…
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…
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!
-
AuthorPosts