High profit margins are the ‘secret sauce’


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High profit margins of course put more cash in our back pocket, however profit is only the start.

These days I do a fair bit of helping other eBay sellers to optimize their listings so I see a lot of different eBay businesses.  Through this insight, several patterns quickly became apparent.

Low margin eBay businesses (less than 20%  gross margin) work extremely hard with sweat pouring off their brow, pumping out tons of product however they don’t make much money.

High margin eBay businesses (> 70% margin) work slower, with more staff to help, and make tons more money.

Another pattern I have noticed is most small eBay sellers start with cheap items i.e. an Ipad case and sell it for a few dollars. This creates a lot of work for VERY minimal return. To earn big profit you need to focus on items that make money on ebay.

The base criteria we use today for all eBay products is as follows:

  • Must make at least 100% profit
  • Must sell at least 15 times per month
  • Sell price between US$20 and $150
  • No brand names due to the fact they could be knock offs

Yes we will sometimes make exceptions to this criteria if the numbers show it is a good product, however 95% of the time we will stick to this criteria.

Another big insight is how easy it is to sell an item which has high demand i.e. (sells more than 15 times per month).

Often I will see lousy photos and lousy ad copy however the item sells like hotcakes.

This, as opposed to trying to sell an item with low demand or way too much competition i.e  an ipad case, where you MUST have the perfect photos and fully optimized ad copy to get on the 1st page of eBay’s search results.

I have said this before however it is worth repeating, with an eBay business, like most other businesses, we make our money BEFORE we buy, not when we sell it.

Research is the key BEFORE buying products.

Love to hear you feedback…

Best regards
neil-waterhouse signature
Neil Waterhouse

 

Author – Million Dollar eBay Business from Home – A Step by Step guide – https://www.neilwaterhouse.com

Which Items make eBay Sellers the most money on eBay? http://www.waterhouseresearch.com

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This entry was posted in Drop Shipping, eBay Business, eBay Tips / Strategy, Internet Marketing and tagged . Bookmark the permalink.

3 Responses to High profit margins are the ‘secret sauce’

  1. John Brokken says:

    Hi Neil,
    I was wondering if I could pick your brain a little. I am a real estate investor and entrepreneur but have sold on ebay before. I work with “at risk” high school students and I am developing a class to show them how to build a business. I am planning on using an ebay store as an example and have the class build an ebay business since it has the main parts of a typical business. I am starting to do research on products but am not sure what to use as our business product. Can you offer up any insight or suggestions? I would greatly appreciate your help.

    Thank you for your time,
    John Brokken

  2. Andrew says:

    Hi Neil,
    When you say “Must make at least 100% profit” do you mean 100% profit margin or 100% markup? Which example below is true?

    a) 100% profit margin: You buy a unit for $20 and sell it for $60. Less $20 expenses makes $40 net revenue. Less cost of the stock ($20) leaves $20 profit or 100% profit margin.

    b) 100% markup: You buy a unit for $20 and sell it for $40 (100% markup). Less $15 expenses makes $25 net revenue. Less cost of the stock ($20) leaves $5 profit.

    I presume you mean profit margin, but just wanted to check.
    thanks
    Andrew

    • Hi Andrew,

      Just to clarify…

      a) 100% profit margin: You buy a unit for $20 and sell it for $60. Less $20 expenses makes $40 net revenue. Less cost of the stock ($20) leaves $20 profit or 100% profit margin.

      Hope that clears things up for you.

      Cheers

      Neil

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