3
Planning and Organizing Your eBay Business
As with any business endeavor, you will quickly realize that when you start your eBay business planning and build a bridge from where you currently are to where you want your business to be, and there are a lot of little intricacies involved in this process. If you don’t already own a business, it’s essential to identify the necessities for keeping things running smoothly. You can avoid spreading yourself too thin by focusing on a niche. Being a generalist is harder and requires greater study and experience. Become an expert on what you’re selling before adding new product categories. It’s also crucial to start thinking about naming your business as well as ensuring you are complying with applicable laws and regulations.
If you don’t plan to open a brick-and-mortar store, you will most likely conduct your new business from home. If you live with others, this means being in sync with everyone at home. What may seem like a harmless venture to you may be viewed as an annoyance by roommates or family members who don’t share your vision (or your profits). You will want dedicated space to handle storage of items for safekeeping and protection from accidental damage. Be sure your family or housemates have given their blessing.
It is a rookie mistake to imagine eBay as a digital yard sale. You don’t want to sell junk. Today’s eBayers are savvy and demand quality merchandise at a fair price. Unsold merchandise piling up all over the place is the result of leaping before looking.
In this chapter, we’ll be discussing suggestions for determining your mission and developing a business plan, tips for identifying your niche, the best way to brand your new company, how to stay on track with business structure and “legal stuff,” and gathering up the essentials you’ll need to get things started.
A mission statement helps you and others understand what your company does and why you’re in business. This can be as simple as a brief written statement of who your customers are, what you sell, and whether you conduct business locally, nationally, or across borders. For example, there are eBay sellers who only offer local pickup and who sell big items; in these cases, the cost of shipping could be so expensive that most buyers wouldn’t want to pay the freight. The company that sells commercial kitchen ranges to restaurants, schools, and local government agencies will focus on local buyers and skip the hassle of dealing with complicated and expensive shipping. Most eBayers sell to buyers across the nation because what they sell is practical to ship. More experienced sellers ship globally. A clear mission statement becomes more valuable when you add employees—it is important that your team’s mission statement is ever-present in the way you conduct business. It embodies the essence of your goals and the reasoning behind them. Your mission statement also helps to share your vision not only with employees, but also with customers, vendors and the community.
The easiest way to develop a mission statement is to study other companies’ statements, which can inspire you with ideas for yours.
Here are some of the questions to ask yourself while you sit down to write your mission statement:
▶ Why are you in business?
▶ Who are your customers?
▶ What differentiates you from your competition?
▶ What is your public image?
Avoid the hype of a meaningless mission statement that could describe any company. Vague, high-sounding ideas do not propel you forward. Focus on realistic and meaningful goals that genuinely relate to you and your business.
Let’s see this in action. Here, I’ve prepared a sample mission statement for the fictional eBay seller of vintage shoes, “nothingdusty”:
At Nothing Dusty, we offer a unique selection of rare antique and vintage footwear that is fully restored and ready-to-wear. Even though what we sell is very old, everything looks factory-fresh. We gladly ship to anyone on the planet and our prices are fair as are the wages we pay our employees. A percentage of every sale we make goes to help with global environmental causes. We are extremely loyal to our employees, and we obsess about our customers.
In addition to a mission statement, you can develop a business plan to help you become incredible at running your business. Does a business plan sound too formal for you? Not at all! A business plan can be as simple as a mental plan for making things happen or as precise as a well-developed documental roadmap for guiding your company from startup to ongoing management. There’s no right way to write a business plan, and you don’t need to spend a wheelbarrow full of money hiring a business plan “guru.” Business plans can take on many different forms. A business plan is a helpful tool for starting a new business or applying for loans, but a superior business plan also provides direction and clarity for operating an existing business. It can be as short as a single page or as long as your heart desires. When researching business plans, you’ll discover terms like “traditional” and “lean startup.” A traditional business plan is robust and dives deep, while a lean startup plan is sharply focused and only contains summary key points. The perfect business plan is the one that works best for you. The Small Business Administration (SBA) recommends that a traditional business plan include these nine sections:
1. An executive summary
2. A description of the company
3. A market analysis
4. An explanation of the company’s legal and management structure
5. A description of the product (or service), the customer value proposition, planned intellectual property and product development, and research and development strategies
6. The company’s marketing and sales plan
7. Funding requirements (if the business plan will be shared with investors or banks)
8. Financial projections
9. An appendix (for supporting data and documents, credit histories, resumes, product images, reference letters, or other matters that don’t fit elsewhere)
Scan the QR code in Figure 3–1 for the SBA’s business plan development guide.
FIGURE 3–1: The U.S. Small Business Administration’s Guide Write Your Business Plan
If you’re asking in your mind right now, “Can you tell me how to make a lot of money on eBay?” I would reply with, “Yes—through hard work doing what you love.”
There is no scientific evidence that guesswork and random chance will beat out hard work and experience. The people who are most successful are those who are doing what they love. I genuinely believe that you are far more likely to succeed by selling merchandise on eBay that you’re passionate about. Wanting simply to become rich is a foolish starting point. I am very rich, and I always knew I would become rich for a very simple reason: I love to work hard, and I love what I do.
I enjoy variety in my life, and what I sell on eBay reflects my varied interests, from collectibles to vehicles and everything in between. I find the entire process fascinating. I enjoy staying up-to-date on technology just as much as delving into old books to learn about museum-quality artifacts. I love to feel finely made fabric and admire master works of art. I am afforded the opportunity to see so many truly fascinating items because of my eBay pursuits.
Perhaps you love people and enjoy helping others. Try selling items for family and friends. The joy of helping other people brings a tremendous sense of accomplishment. Look to your hobbies for the possibilities. While you’re dreaming of landing a lucrative agreement with a major wholesaler, that same company has been listing their wares with multiple other online firms. Do you struggle figuring out where to source goods? Most factories already sell on eBay. You may find it far easier and more profitable to start with secondhand goods rather than new items. The margin for new merchandise is generally lower because there’s a tremendous amount of competition for new goods. Unwanted, used items tend to be in ample supply. Just look around you for profitable items you can sell today.
Here are some product categories that do well on eBay:
▶ Antiques, collectibles, and vintage items
▶ Cameras
▶ Designer clothing, shoes, and accessories
▶ Dolls
▶ Electronics
▶ Event tickets
▶ Excess inventory
▶ Housewares
▶ Jewelry
▶ Laptops
▶ Musical instruments
▶ Mobile phones
▶ Sporting goods
▶ Toys and games
▶ Vehicles and vehicle parts
tip
Check out http://www.terapeak.com for clues on the hottest-selling eBay merchandise. This service comes complimentary with an eBay Store subscription. There you’ll find insights on what to sell. You can also seek pricing guidance by looking at eBay’s sold items.
I need to qualify the above list by reminding you that good stuff sells and junk collects dust. You’ll want to sell items that will fly out the door. Brand-name goods tend to do the best; however, as you venture into antiques and collectibles, unbranded items can do very well if they’re interesting. There are occasions where you’ll stumble across a Spanish galleon of riches. For example, I was helping someone clear out their mother-in-law’s apartment and took home two bags of early 1980’s Apple computer software. Do you remember floppy disks? As it turns out, these are highly collectible. In ferocious bidding, I sold one of the programs for $2,500, and the two bags generated tens of thousands of dollars. Can you believe they were headed for the trash? I share more ideas for product sourcing in Chapter 10.
You read about selecting your eBay user ID earlier, but let’s take a deeper dive into naming your business. Everyone talks about branding, but what does that really mean? A company name must be memorable. Coming up with a fantastic business name is a crucial step toward building and growing your brand. A memorable name connects with customers and sticks with them. Before you become stressed, relax; this is long-term thinking. When you’re just selling your mom’s Barbie collection or packing up your dad’s unwanted hand tools, branding isn’t going to make or break your eBay business.
As you become more established, though, how you brand your company will become important. Here’s the dilemma for small business owners: hiring a pricey business-naming firm or branding company isn’t realistic. You have to figure out the perfect name for your company without the help of a big-budget advertising agency. And even if you spend a mint to develop a company name, there’s no assurance that customers will embrace it.
FedEx is a terrific example of crowd-sourced branding. Founded in 1973, the goal of this powerful and respected brand was to provide a service that was needed in the pre-fax business community: overnight document delivery. Originally named Federal Express, the company was not affiliated in any way with the government. Perhaps its original intent was to suggest that it was an arm of the post office and somehow “federally” associated. This may have been its first naming error. Customers eventually found it easier to simply call it “Fed Ex.” The name stuck. In 2000, the company bowed to its customers’ higher wisdom and made the nickname the new brand name. Smart move for FedEx! It’s a true success story. Do you think it would have dominated the market with a name like “AAA Shippers”?
Choose your eBay name wisely. Selecting the best name for your business can prove to be a daunting process. You’ll invest a lot of time and effort promoting your online dynasty. Here are some suggestions:
▶ Don’t copy other people’s brands. Imitation is not flattery; it’s stealing someone else’s great ideas.
▶ Consider the domain name. As you grow this eBay dominion, you’ll want a website with a URL that matches your eBay ID.
▶ Keep things simple. Your name should be easy to pronounce, spell, and remember. If folks have a hard time remembering your eBay ID, it’s not a great one.
▶ Avoid puns, politics, and poking Protestants (or any religion, for that matter). Goofy names, those which evoke controversy by touching on politics or religion, are a no-no.
▶ Stay away from names that are too trendy or may require a rebranding later. If you sell PEX plumbing supplies, you’ll be limiting your future growth if the word “PEX” is part of your brand name. You sell plumbing supplies. PEX just happens to be the largest part of your business. When a better technology comes along in five, seven, or ten years, you’ll have to rebrand.
▶ Company names should not offend. That’s not to say pop culture is completely off limits. For example, the term “wicked” has become synonymous with awesome, cool stuff. And as such, it’s pretty positive in the minds of people. Wicked Skatewear, Wicked Brew, Wicked Donuts, Wicked Lashes, and a plethora of other brands include the word “wicked.” If a name is over-the-top (e.g., a parody or hyperbole), it’s not likely to be offensive.
A great business name tells your customers what you do. Brand confusion occurs when you’re selling things that don’t seem relevant to your company name or eBay user ID. If you’re advertising expensive antique furniture and selling it under the (fictional) eBay user ID “modern_day_ephemera,” don’t you think your customer might pause before considering placing a bid on your item?
Are your customers getting blurry vision, or is your brand as clear as mountain spring water? What image does your brand portray in the mind of your customer? How will they benefit from a transaction with you?
Is your brand sneakers or cuff links? Ties or bolos? What’s the voice you’d like your customers to hear? A consistent brand message will help grow your business.
Consider the eBay seller “betterworldbooks.” Here’s the text on their eBay profile: “At Better World Books, we love books. We also love the environment and helping people learn to read. That’s why every single purchase from us helps fund literacy around the world.” The name works because customers can see the direct connection between what they sell and what they hold as core values.
tip
Check your proposed eBay ID on the website http://www.namechk.com to make sure that the name hasn’t already been registered as a domain name or used on the most popular social media, video, or blogging sites. If you’re in the clear, you’ll want to register on these sites even if you’re not actively using them (the free ones, of course) to ensure that you are doing as much as possible to protect your cherished fledgling brand.
Would you believe that as of this moment, they have 2,829,146 books listed on their eBay Store? Amazing.
It is true that you can change your eBay user ID, and I know what you’re thinking: If that’s true, why does all this brand mumbo-jumbo matter? Developing the trust that’s associated with your eBay business is priceless, and brand building takes time and hard work. Every time you change your eBay member ID, you lose that instant recognition that buyers have associated with your business on eBay.
Considering your legal structure can be a conundrum. For some reason, the government has the ability to make even the most law-abiding citizen feel like they’re in an interrogation room. Audit? The very word causes people’s palms to break out into a clammy sweat.
That said, these concerns should never be a roadblock to getting started.
Let’s take a look at various legal structures that businesspeople use to operate a company. If your aunt is a CPA or brother-in-law is a tax attorney, you can skip this section and bend their ear over lunch. (Just be sure to pick up the tab.) Otherwise, please read on.
A sole proprietorship is the most common business structure for someone just getting started in business. You’ll be considered a sole proprietorship if you don’t register any other form of business entity. You can use your existing bank account. The funds you receive from customers will generally be paid with PayPal, and you can transfer the money to your personal bank account.
tip
Post a legal question at http://www.avvo.com, and a licensed attorney will respond with a legal opinion. Seek out professional opinions about the proper legal structure for your business.
Consider keeping a separate bank account for your eBay business if you voyage beyond being a casual seller.
A partnership is the simplest way for two or more people to own a business together. Partnerships are a good way to manage a business when you aren’t the only owner, and you’d like to test things out before advancing to a more formal business structure.
A limited liability company (LLC) protects you from liability in most situations in the event of lawsuits or business failures. This is not something that’s very common with an eBay business.
Corporations are legal entities that are separate from their owners. Most corporations issue stock, are taxed separately, and can be held legally liable for the corporation’s actions while shielding the stockholders and management from lawsuits, in most situations. There are different flavors of corporations. For example, I run an S corporation, which is a special type of legal structure that avoids double taxation because all income flows to me personally while still affording me legal protections. If what you do benefits the public, you can form a tax-exempt corporation to avoid business income tax because you are helping with a cause.
If you’re just an itty bitty home-based casual eBay seller, you’ll fall into the category of being a sole proprietorship.
There are a few essentials to tuck into your eBay toolbox. Your mobile phone is all you really need to photograph and list items. But what happens after the sale? You’ll need shipping supplies, too. And then there are the virtual tools you’ll need, like various banking and communications accounts.
The tools you’ll need to get started on eBay are:
tip
It is absolutely essential that you replace a computer’s spinning hard drive every three years or a solid-state hard drive every ten years. You can do this yourself (if you’re computer savvy) or hire someone—but don’t wait until it’s too late. Hard drive failure will be a catastrophe to your eBay business when critical photos and other files are lost if you don’t have a current backup.
▶ A PayPal account in good standing
▶ A bank account
▶ An email account
▶ A way to capture photos, such as your phone, a tablet, or a camera
▶ A way to list items, such as the same phone or tablet, a laptop, or a desktop computer
▶ An internet connection
▶ A backdrop or background for photography
▶ Good, indirect natural light or lighting equipment
▶ Packing supplies, such as boxes, tape, a tape dispenser, and bubble wrap or void fill (I’ll discuss packing and shipping in-depth in Chapter 9)
▶ A way to print shipping labels, such as an ordinary printer or a dedicated label printer
▶ A postal-compliant shipping scale with a capacity large enough to weigh your biggest item and the ability to weigh as little as 1 ounce (I paid less than $20 for mine.)
▶ A cheap tailor’s tape measure (more on this later)
Don’t sink a wheelbarrow of money into fancy equipment. If you are a newbie to eBay, work with what you’ve got. You can improve your toolbox over time. Pictures captured on today’s phones are excellent—today’s phone cameras produce stunning images.
Perhaps you only want to sell a few items. Your success is measured by you, not me. If you love your job and have no interest in quitting, this eBay hobby is a great way to try something fun, interesting, and new.
If you’ve set your sights on big things, an investment in equipment would make sense, particularly if you have the clarity and confidence to know what size eBay enterprise you’ll be launching. Selling on eBay is a lucrative and relatively low-cost proposition when compared to many other business opportunities out there.
Start contemplating how you’ll safely store your items for sale. Fragile things will need to be out of harm’s way while valuables must be locked up. The last thing you want is to find that a very expensive painting has a big yellow stain from your faithful dog or to come home and discover that a pricey Ming vase has been knocked over by your precocious pussycat. Don’t you cringe at the very thought of hearing an antique vase shattering into a million pieces? Maybe you have a spare room, a spot in your basement, a corner in the garage, or some other suitable place for item storage. When guests visit, you’ll have more than just looky-loos; family and friends will want to pick things up and have a look at them—creating the opportunity for damage. When entertaining large groups of people, there’s a real possibility that a stranger can take something home that doesn’t belong to them. So, store your eBay items wisely.
Tracking a lot of inventory is a daunting task. I was having a delightful conversation with a fellow eBayer—a big-time seller—and at some point in our entertaining banter, it came to light that he had no specific method for tracking individual items. I was astonished by this revelation because his eBay business was by all reports an extremely successful one. “How do you locate the item once you’ve sold it,” I asked. “I just know where it is.” With thousands and thousands of items, this answer didn’t really track for me, but apparently, he possessed the uncanny ability to remember the locations of things.
I am very regimented and orderly—not because I was in the Navy for eight joyous years, but because I’m terrified by the possibility that I’m going to misplace something and have to face a very unhappy (or possibly downright hostile) customer. eBay allows you to enter a custom label to help with inventory management. You can enter anything you want in this field, which I will explain in more detail in Chapter 6. I have two bits of data that I enter for every item, which are the item location and the item stock keeping unit (aka the SKU). Here is an example: 42/14225. The number 42 is the shelf number, and 14225 is the SKU. In my inventory management system, I never use the same SKU twice except for replenishable items (items I sell over and over again).
The ideal moment to consider how you’ll handle organizing and labeling your inventory is on day one of your business. It is far easier to work with a well-thought-out system that grows than to address the subject when it becomes a problem down the road.
When mentoring someone who has never owned a business, this is the point where I see eyes glaze over. It’s OK. Relax. Do not allow yourself to become overwhelmed by all the legal considerations. Just remember to think about these key points moving forward:
▶ What you want to sell
▶ Your branding (c’mon this is part of the fun)
▶ Your legal structure
▶ What tools you’ll need (you probably already have them)
▶ How you will store and organize your merchandise
If you can wrap your brain around these things, you’ll be set up for long-term success.
As with all business endeavors, making eBay deals requires that thing most of us dread—paperwork. My mother used to say, “If you don’t mess up your room, there’s nothing to clean.” Mother knows best, and these days I stay on top of my eBay business by planning ahead and staying well-organized. One business associate tells me, “You’re the most organized person I know.” She didn’t know me way back in my teens when my room was nothing but clutter.
My general recordkeeping guidance is to retain customer and eBay emails until the returns grace period expires, or if you’re working out some issue with a customer, then 90 days after you resolve that issue. While the federal and state tax collectors might one day come knocking on your door, what you need to know from the income side of things is stored safely on both eBay and PayPal’s servers. PayPal has made tax reports a breeze to generate (from the income side). eBay and PayPal don’t track your cost of goods or expenses.
On the expense side of things, the IRS requires you to keep most records for three years so that you can prove the veracity of your reported deductions (and income). I manage my bookkeeping in QuickBooks, which also has a handy feature that lets you attach photos of receipts. I love being paperless because it keeps life uncluttered. American Express lets me upload pictures of my receipts, too, so I use their card for virtually everything business-related. I’ve been liberated from my paper prison.
I’ll cover packing and shipping in a meaningful way in Chapter 9; however, shipping records and proof of insurance should be kept until you receive positive buyer feedback or sufficient time has passed that it is unlikely anything went awry. Before shredding those records (never put sensitive records in the trash), check to make sure the parcel was delivered. Even better, contact your buyer and ask if everything arrived in good shape. Once positive feedback is received, I trash those records immediately. If no feedback arrives, I keep them for 90 days.
Consider this—you don’t always have to give a cut of your eBay bounty to the IRS (or to the state). Here’s what the IRS says: “Income resulting from auctions akin to an occasional garage or yard sale is generally not required to be reported. However, there may be exceptions. If an online garage sale turns into a business with recurring sales and purchasing of items for resale, it may be considered an online auction business.” If Justin Bieber threw you his sweaty stage-worn concert t-shirt and you score $5,000 for it on eBay (because you had a video of The Bieb throwing it to you), then you probably have to let the government know (and pay the tax).
Just how much recordkeeping you’ll need to maintain in fulfilling your eBay sales depends on whether you are a casual seller, a hobbyist, or a business seller. Ask your tax professional for guidance. Most tax advisors will give you a few tips for free because they hope that you’ll lean on them for tax prep come year-end. Keep purchase receipts for items you resell because the profit is the difference between what you sold it for and what you paid. Without a receipt, you may be held to pay tax on the entire sale, even if you sold it for less than you paid. Losses are usually deductible against your profits. Don’t think it matters much? Someday soon you’ll be making big bucks. In 2020 the federal tax rate for unmarried persons earning over $207,350 amounts to 35 percent. In my home state, they tack on an additional 7.6 percent which adds up to 42.6 percent in income tax. I hope that will get you motivated to save your purchase receipts. Deductions are the best cure for big tax bills.
Now, treat yourself to a nice cup of coffee or tea and let all of this brew in your mind a little bit. Work on bite-size goals and just do it. You’re well on your way to earning the extra money you always dreamed of.