Ebay Basics: How To Keep Your Profits From Evaporating

If you’re fairly new to eBay, or business in general, you may be scratching your head and wondering why your profit isn’t what it should be. This article looks at some ways to plug the profit hole and keep you afloat! There are two main aspects to ensuring profits in business - and this applies to any business, eBay or otherwise. Let’s look at them in turn. The first is the gross profit margin.This is the term applied to the portion of any sales amount that is the profit element. For example, if an item costs you 50 and you sell it for 100, it’s tempting to think you’ve made 100% profit.

This is incorrect - what you have in fact done is applied a 100% mark-up to your cost, which equals a 50% gross profit margin. This, for newcomers to business, is a common mistake and can give the trader a much rosier view of their profit margin than is real.Also, the difference between gross profit margin and nett profit - the magic ‘bottom line’, so called because the nett profit always appears on the bottom line of a profit and loss sheet - is something not always fully understood by newcomers to business and trading. Put simply, nett profit is what you have left after everything else is paid out. These payments include such things as rent for premises, rates, staff wages, transport and insurances.

These cost elements are usually known as overheads.Although a full explanation of overheads is beyond the scope of this article, basically they are, as described above, anything that is not classed as ‘direct costs’ - defined as what you pay for your stock. Too often these overheads are either ignored or simply forgotten - and this can have a disastrous effect on the difference in the amount of money you should be making and the amount you actually are making.This difference can, in some businesses - especially those in high-volume, low-margin markets - mean either success or failure.

So - what can be done to ensure that this does not happen to your business? For that we turn to the second aspect of ensuring profits in business: price setting.Price setting literally means just that - setting the price for any item that you are selling. Again, a full discussion on price setting is too large in scope for this article but, basically, you must set a price for your item that will do two things - firstly, the price must be competitive (you have to sell your goods!) and secondly the gross profit margin must be sufficient for you to make the nett profit you require.