Probably the most common email I receive is from people who are looking to start a business on eBay, but have very limited funds – usually around just a few hundred pounds.
These questions and emails are mostly from people with very little (or no) eBay experience who simply want to start something part-time that can provide a decent second income, with the long term goal of turning it in to a proper business – something that they can leave their job to work on.
And really it’s very understandable why this “group” struggles and requires a lot of help, as creating a successful business on eBay is tough under any circumstances, never mind with a budget of just £200-£300.
In fact, many people would go as far as saying that with a budget like that, you have no hope of starting a profitable business on eBay…
But, I don’t agree with that! And today, I want to share with all of you one specific business model for creating a profitable business on eBay, that is ideally suited to people with a starting budget of just £300 (of course you can also utilise this method with a higher starting budget, but I wouldn’t recommend it if you have a lot more than £300 to spend, as you’ll be limiting your profit potential that way).
Alright so, let’s get right in to it – step one of this eBay model is actually all about learning. Yes that’s right, we’ve all heard the saying that “failing to prepare if preparing to fail” and that couldn’t be more true than with eBay and online selling in general.
Though don’t fear – this isn’t a months-long process. Ideally I would recommend you get my Easy Auction Business video course, as that covers everything you need to know to be successful on eBay, through 15 hours of video lessons.
But as this post is geared towards people with a relatively low starting budget, another option is to simply read everything on this blog. I reveal many things that others would charge thousands for, and you have it all for free, so please don’t waste this opportunity – take a few days to go through all the posts (old and new) and you’ll be in a much better position to get started.
At this point you’re now ready to proceed to step two – gaining top-rated seller status. The importance of becoming a top-rated seller cannot be overstated, as it really is the integral first step in creating a successful business on eBay and gives you so many advantages over non top-rated sellers.
This is something that many newbie sellers really struggle with, but once again you’re in luck, as I have revealed the exact strategy I use with my 60 Day Blueprint customers to get that coveted top-rated seller badge in as little as a few weeks’ time!
You can find the full guide (recently updated for 2015) here: How To Buy A Top-Rated Seller Account for £200!
Please don’t make the mistake of assuming that getting top-rated seller status really isn’t that important and you can just wait until it happens “naturally”.
If you do that, then you’re putting yourself at a big disadvantage from the beginning – you’re going to have to compete with sellers who are top-rated and that means they’ll have an edge over you in two of the most important areas when selling on eBay:
- Search rankings
eBay’s search algorithm places a big emphasis on top-rated sellers and higher search results = more views for your listings = more click-throughs = more sales! It’s really that simple.
- Conversion rate
Conversion rate refers to the number of people who bought an item from you, in comparison to the total amount who viewed your listing.
As an example, let’s say we have two sellers; A, who is not a top-rated seller; and B, who is a top-rated seller. They both get 5,000 views to their listing every month but A has a conversion rate of 6% and B a conversion rate of 10%.
The result is that seller A makes 300 sales a month whereas seller B makes 500 sales a month. A nearly 70% increase in sales and profit, all due to the higher conversion rate!
And guess what – being a top-rated seller means having a higher conversion rate, simply because buyers trust that TRS badge.
There are some further advantages, such as the ability to qualify for eBay’s Premium Service badge and the ability to charge higher prices, but search rankings and conversion are by far the most important and are reason enough by themselves to go all-out in becoming a TRS.
So please, follow my guide and really put all of your effort into it! Also, don’t be put off by the £200 loss (though really that’s still a phenomenal investment) as if you’re selective in what you buy and re-sell you won’t make any loss at all in this process, and can even turn a little profit along the way.
The best way to do this is to buy and sell items from a niche that you know. Say you’re a big comic book fan, or buy a lot of retro games – use that knowledge to your advantage and buy and sell those types of items.
Once you have achieved top-rated seller status, you’ll have also gained a lot of valuable experience putting what you learned in step one into practice.
And you’re now ready to proceed to step 3 – finding money making items to sell! This step is what I also refer to as “the power of cheap items”.
Yes, you guessed right – step 3 is all about selling super cheap products. I’m talking about items that sell for between £1.99 – £2.99 max, including free shipping!
Now I know what you may be thinking – “but Andrew, how can anyone make any profit at all from such items!?” Well the key to success here is to focus on:
Very low priced items, that cost you no more than 20-30p to buy in bulk.
Small, lightweight items that can be sent via Royal Mail letter or Royal Mail large letter (still no more than 100g). Shipping will be the biggest cost (and biggest margin killer) for these cheap items and a tiny difference in size or weight can destroy all your profit.
Here are some examples of products that satisfy both our requirements:
- Stickers/Decals (reward, wall, 3D etc.)
- Cheap Jewellery (rings, bracelets, piercings etc.)
- Craft Accessories/Embellishments
To further evaluate any potential products you’ve found, you will want to use Terapeak for in-depth research using real sales data.
I talk about Terapeak a lot on this blog (for a good reason – it’s an invaluable tool for any eBay seller) so you should know all about it from step one. But just to recap, the three main things we look at when researching a product on Terapeak are:
- Total Sales (£) – this will show us how big the overall market is on eBay for that product.
- Sell-Through Rate (%) – this tells us what percentage of listings ended with at least one sale. 50% is really what I consider the minimum sell-through rate, ideally 60%+.
- Sellers per Day – this gives an indication of the level of competition on eBay for that particular product. By itself, sellers per day doesn’t really mean much, so we need to use that and the total sales figure to get our 4th number:
- Total Sales per Seller – this number should be above £500 per seller per month. £1,000 or more is a very good sign that the competition is not overly strong for this product.
Let’s do a quick search on Terapeak, so you can see how the process works. I’m going to search for “reward stickers”, filtering for new products only, and looking at the last 30 days of available sales data:
And here are the results:
As you can see, Terapeak gives us a lot of information, but at this point we’re only really interested in the main 3 from General Stats, and they are:
- Sell-Through Rate – 62.72 %
- Total Sales – £26 000
- Sellers Per Day – 85
- Sales Per Seller Per Month – £305.88
So in this case the sales per seller was a little on the low side at £305, but that’s not too bad considering this is a single product, and also taking into account the low price and good sell through rate.
I hope this example demonstrates how quickly and easily you can find this data using Terapeak! For me it’s a no brainer to spend £20 on a month’s subscription vs wasting hours upon hours of my time doing this research manually (and you’d still end up with much less reliable results).
But moving on…
If the product passes all four of these filters, that’s great! The next stage, step 4, is to start sourcing and to see if that item can actually be bought at a low enough price to make some money reselling it on eBay.
Congratulations, you’ve now reached the fun part – sourcing and buying your items! Most people with a £300 budget feel that they have very few options for sourcing products, but that’s actually not the case at all and you can even go directly to China at this point!
Let’s quickly head over to the wholesale section of Alibaba and do a search for “body ring” (if you don’t know the difference between Alibaba Wholesale and “regular Alibaba” then take a look at this post: What is Alibaba Wholesale Checkout?):
Straight away I find a product selling for $0.26, which is roughly £0.17, and it has an MOQ of just 100 units!
That means a total order cost of £17.00 before shipping (which won’t be much at all for such a small and lightweight item).
£17… yet there are still people who claim you need thousands of pounds to buy directly from China!
If however you don’t feel you’re ready to import from China, and want to start off with something easier, there are still plenty of other options.
You can look at US based suppliers, who I often recommend for such items as they have a huge selection of stock at very low prices, and shipping is relatively cheap when using USPS.
If you want to go one step easier, UK based wholesalers are even an option. For the items that we’re looking for, you’ll want to stick to pound shop style suppliers and liquidation/clearance stock.
“Alright Andrew – that all sounds good BUT how am I going to make any money? I know that these items can be bought cheaply but where is the profit when considering all my other costs, such as eBay and PayPal fees, and most importantly shipping!?”
Well let’s take a quick look at the actual numbers for a product that costs us £0.30 to buy that we sell on eBay for £1.99 with free shipping.
eBay Selling Price – £1.99
- eBay Fees – £0.25 (11% final value fees + £0.26 insertion fee/10)
- PayPal Fees – £0.15 (Micropayment fee of 5% + 5p)
- Shipping Cost – £0.54 (Royal Mail 2nd Class Letter)
- Item Cost – £0.30 (landed cost including VAT and import duty)
Gross Profit – £0.75
So not only have you made a profit, it’s actually a very impressive amount, if we look at the ROI (return on investment, i.e. your profit at the end in comparison to what you paid for the product).
75p profit from a landed cost of 30p means an ROI of 250%, which is terrific! You would struggle to make anywhere near a tenth of that selling high-end electronics…
And what if you can sell the item for £2.99? That would mean:
- eBay Fees – £0.36
- PayPal Fees – £0.20
- Shipping Cost – £0.54
- Item Cost – £0.30
Gross Profit – £1.59
ROI – 530%
To further add to the good news – with these super cheap products it’s very common for people to buy in multiples, say 2-3 at a time, and this will drastically increase your margins!
That’s because while you receive double the amount when you sell two items in one go, your costs aren’t anywhere near double (quite often you actually pay the same shipping fee, or at most a slightly increased one).
How can you check what percentage of sales are for multiples? Well the easiest way is to find a competitor selling that same product and check their listing selling history which will show you the last 100 sales.
From that you simply count how many of them were for multiples:
Even if we go with £1 profit per item sold, and you make just 10 sales a day, that still adds up to £300 a month or £3,600 a year! That’s a nice little additional income for minimal work.
But it doesn’t have to stay as a second income, not at all! There are thousands of sellers on eBay whose whole business is based around selling low cost items with free delivery.
And trust me when I tell you that they’re doing very well – garnering thousands of sales a month and making a full time income from these “cheap items”.
So while this is the perfect business model for people just starting out, with a limited budget, over time it can grow to so much more, to something that allows you to quit your job and work on eBay full time.
Yes, it of course goes without saying that this business model can be very time consuming in terms of order processing and packaging. That is really the main negative to this, as who wouldn’t much rather pack one order for £10 profit, instead of 10 separate orders.
Nothing good comes without some hard work though, and it actually isn’t that bad IF you properly streamline your entire ordering process.
I have guides on every aspect of creating an efficient in-house fulfilment system, with every part of the process covered:
- Packaging – use cheap, simple and consistent packaging (i.e. you don’t need custom sizes for each different item).
- Order Processing – process orders in bulk via Selling Manager Pro or even a dedicated system like Linnworks. Use integrated labels so that both the invoice and shipping label can be printed in one go.
- Product Storage – create a simple and efficient shelving/SKU system which minimises picking errors and time.
- Shipping – get an account with Royal Mail so that you can drop off orders in bulk or better yet, have them collected all in one go. This will also add to your margins as you’ll get reduced shipping rates.
As you can see, there are a lot of things you can do to streamline your order processing, and they will save you hours upon hours every week. I’m a big fan of investing in systems and processes that will make you more efficient than your competitors as this will give you a big advantage over them in the long term.
If you do want to really pursue this business model and grow it in to something bigger than a second income, then it’s integral that you get your listings ranked highly in eBay’s search results.
I already spoke about the importance of this earlier, so I won’t repeat myself now. The question I want to cover is “how?”. After all, every single seller on eBay would love to rank higher as that means more money, but why do some listings sit at the top of page one, getting thousands of views a day, while others languish unseen?
Well, the honest answer is that nobody can tell you for sure, apart from eBay themselves, and they’re not about to share their search algorithm with the public!
But don’t fear, as once again I have a complete guide, which if you follow to the t, will have you on top of the search results on eBay! This is the exact strategy used by the biggest and best powersellers on eBay, and it has proven time and time again to be extremely effective.
For those of you that have never come across it before, the main idea is to create a listing with a very low price > get loads of sales > get a boost in search rankings (eBay loves listings that do well with buyers, simply put) > make more sales (as your listing is being seen by more buyers) > get a further boost in search rankings… rinse and repeat!
That’s what I call a terrific, self-repeating cycle!
Of course in practice it is a little more complicated than that, so please take a look at the guide in full: How To Reach the #1 Spot on eBay’s Search Results
One final point before I bring today’s post to a close – to be really effective with this method, your listings need to look the part.
I’m talking about creating really stunning listings with amazing product photos that convert viewers in to customers. This is all covered in detail in Easy Auction Business, but once again I also have a number of blog posts going over these topics so check those out as well.
And that pretty much brings us to the end of today’s (long!) post.
I have been planning this guide for a while now as I wanted it to be as extensive as possible, so that someone can come to this post with zero business experience and leave with all the tools needed to create a highly successful eBay business.
I hope that the final post achieves that goal, and as always – if you need any further advice or help, don’t hesitate to post in the comments sections below and I will personally answer you.
Otherwise, until next time!
All the best,