Why An Ebay Seller Needs To Keep A Close Watch On Profits, Not Sales Volume

Posted by Nick Niesen on November 1st, 2010

One mistake that business owners make is that they focus on overall revenue instead of profits. While this thinking is flawed in any business, it can be especially dangerous in an eBay business.

Part of the problem is that this type of thinking is promoted by eBay. For example, you need to reach a certain level of sales volume to qualify for eBay Powerseller programs.

Sellers will also frequently sell products even if they?re not making money on them just so that they can build up their feedback.

I?m here to tell you that if your primary focus isn?t on the amount of profit your eBay business is making then you won?t have an eBay business for very long. It?s not true that if you have enough gross revenue that there will be some net revenue around. Trust me; it?s possible to have a lot of overall sales without making any money.

I remember back when I was more active with selling on eBay that I had a lot of months where I sold tens of thousands of dollars worth of merchandise every month, but when I actually sat down and crunched the numbers, I?d actually LOST money for the month. Then there were times where I sold only a few thousand dollars worth of items, but over half the revenue was profit. Can you guess which method I ultimately stayed with?

When I first started my eBay business, I?ll admit that I had this flawed thinking that as long as I got my sales volume up, I?d make more money. What I found was that the more stuff I sold, the more time it took up to fulfill the orders, more packing materials I had to keep on hand, and the more fees I had to pay eBay. The added cost of all these items wasn?t necessarily added into my acquisition costs.

The flaw in my thinking was looking at how much the item would cost me and then looking to see how much it sold for. If the selling price was higher than cost, even just a little bit, I?d buy it.

Eventually I got wiser (probably because I had to in order to stay in business) and started to focus on what items I could purchase and sell for a nice profit. While my sales volume definitely dipped, I made more money, and actually had more time to pursue other business interests.

So if you?d like your eBay business to still be open this time next year, then make sure you?re focusing on the right numbers ? the bottom line, not the top.

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Nick Niesen

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Nick Niesen
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