Budgeting

[xpress4]

Does anyone have any advice on budgeting as an Ebay seller? I'm justing starting out. I grossed about $4k the first month. I'm not sure how to create a budget for this....mostly how much should I reinvest each month on new inventory, pay myself, set aside for taxes etc.

I have created a spreadsheet that's working well for inventory/sales/net income etc. but budgeting that net income is where I struggle.

Any tips you might share would be very much appreciated!

[dnasilver]

Without knowing your overall finances or your short/long term goals, the time frame to reach your financial goals, no one can give you sound advice. 

[dbfolks166mt]

     You are asking a question that people spend multiple years in college learning how to calculate. From a high level perspective what matters are a couple of things, your ROI and your bottom line net income after taxes. For the ROI I look at what my ROI is/was and if I am not achieving a greater ROI from my sales than I could achieve elsewhere then I probably should choose elsewhere. For example if my ROI for the year was 10% I probably would have been better off investing in the stock market which has had a 14% increase over the last year. Yes the market varies but then so to will your eBay returns. 

     The second factor is time and return as a result of your net. How many hours of effort did you expend to earn your bottom line post tax income. If you expended 60 hours of effort to earn $600 then you are making around $10 an hour. Would/could you have made more doing something else?

     The third is are you doing this to make a living or are you doing it as a side activity to have something to do? If it is the later then your ROI and hourly earnings may not matter all that much as long as you are not loosing money. 

     As far as actual budgeting that is pretty much on an individual basis. You should know how to factor your taxes and if need be make the quarterly payments to avoid penalties, only you know what tax bracket you are in. All the rest kind of depends on your personal finances. How much can you afford to invest in inventory and how much space do you have to store it. Are you looking to grow your business or do you have a profit target you are trying to achieve and would be satisfied with? 

     Not very specific answers but without knowing more about your finances than you would probably want to post on this forum or your particular goals about the best I can offer. 

[powell-memorabilia]

Regardless, set aside money for taxes.  Better yet, send a quarterly payment to the IRS - it is easy to do, and they have the due dates on their website (those dates don’t line up as one would expect).  

[lacemaker3]

Don't do anything with the money for the first 30 days after the items were delivered to the buyers, until the time for the MBG has elapsed. After that, you should hold onto some of the money for 6 months, in case of a chargeback. You may never need it, but you should be prepared just in case. You should consider keeping about 10% of the gross income, or the value of your most expensive item sold  in the last 6 months, whichever is more. Once you have that amount built up, just keep it as a minimum balance that you maintain in your eBay bank account.

Your tax situation as far as the business income goes, will depend on what income you have from other sources, so you will have to do some calculations based on reasonable estimates. Run several different scenarios. Definitely consider sending in estimated taxes, because you won't have any withholding from your payouts. There should not be any penalties for the first year, but if you owe too much when your taxes are due, you may be required to do estimated taxes for the next year, to avoid penalties. You can use tax software to do some estimates based on different levels of income; steady income, slightly increasing, moderately increasing, etc. This way you can also estimate other business taxes, like self-employment tax.

FYI, with collectibles like you are selling, it can be difficult to consistently source new, quality inventory, and that can make it difficult to maintain a steady (or increasing) income. You may start out strong, because you list your best items and collectors snap them up, but then you are left with pieces that may take longer to sell, and it's hard to find replacements for the most desirable pieces.

[mr_lincoln]

@xpress4 

Good, someone who uses spreadsheets.  I use a target margin of 50% and that begins with what I determine something can sell for and that is typically a range of prices not just one price.

So the Sold search research is critical before I purchase something for resale.  I work backwards from what I think I can sell something for to determine what I can buy it for.  

Another critical piece is sell through rate.  Depending on how you purchase your inventory you want your items to sell fast enough to cover your purchase cost.  If you purchase inventory with cash then the sell through rate is simply how long before you get your money back AND make a profit. Using credit to acquire inventory is similar except you only put the cash out when the bill is due.  

You mentioned grossing 4K in your first month ... that's great if your cost was 1K, not so good if your cost was 3K.

[xpress4]

Thanks to you all. Great advice. This month I netted 50% of sales.  As said, this will fluxuate considering what I'm selling. I did this on the side while working a full time job. The goal is to make this a full time job if I can.

Great points about the sell through, estimated tax, and not spending for some time. I'm in a situation where I live remotely and make a couple of trips out of town per month to buy. When I return home I list everything I have. The few items that don't sell I  am socking away for to do a periodic flea/antqiue market. So I'll have to hold out money to reinvest, but I not sure how much of the profit to apply to that. Do you have a rule of thumb on that?

[mr_lincoln]

---

@xpress4 wrote:

Thanks to you all. Great advice. This month I netted 50% of sales.  As said, this will fluxuate considering what I'm selling. I did this on the side while working a full time job. The goal is to make this a full time job if I can.

Great points about the sell through, estimated tax, and not spending for some time. I'm in a situation where I live remotely and make a couple of trips out of town per month to buy. When I return home I list everything I have. The few items that don't sell I  am socking away for to do a periodic flea/antqiue market. So I'll have to hold out money to reinvest, but I not sure how much of the profit to apply to that. Do you have a rule of thumb on that?

---

@xpress4 

When you see inventory at a good price Buy it, otherwise you will regret it later when you can't find good inventory at a decent price.  If this is a side hustle right now use your other income to finance good stuff cheap and sell it as your schedule permits.

Another option to liquidate inventory you will not sell on eBay is to take it to an Auction house and let them sell it for whatever they can get ... flea markets are great but you have to haul stuff back that doesn't sell and store it again ... the auction outlet means you drop it off and get a check later.

The fewer times you actually touch and handle an item the better.

As it relates to reselling make sure you have more than one venue to move your items.  If you try to do just one venue full-time and it tanks (which it will from time to time) then you are stuck with no cashflow.  

[dhbookds]

not necessarily ebay business.........but...........in general........

10% of income into long term, retirement, investment.......no matter how small...over 30-40 yrs adds up

10% into emergency fund.......should have 6 months of income.....saved in case loss of job/disaster

10% of income into shorter term savings, taxes, car/house/vacations/etc

Building up the emergency fund should be priority.......and tapping it should only be in absolute emergencies.

Biggest question for most ebayers is how much to reinvest in inventory.....and many go wrong here, I think for long term success.  Thought being I'll never find "it again" for this price.....and end up with the "death piles" that will take years to list, much less sell.  Cost of that inventory can be low.....but storing it for years/ while continuing to buy is simply churning money.......  Some do ebay as a hobby.....so that may not be a consideration, but if you are trying to live on the proceeds, it's trickier.   I have no formula for reinvestment, but if you do the lst things mentioned, you will be ahead.