Let’s consider an example. Caitlin has found a source for iron-on transfers for T-shirts and sweatshirts. She can buy these transfers for $1 each and (based on her experience and research) can sell them on eBay for an average price of $5. That’s four dollars profit for every transfer she sells.

Caitlin has huddled over her copy of Quicken and determined that she needs to generate $30,000 in profit (not in revenues!) to make her eBay business worthwhile. Assuming that she works 50 weeks a year (everyone needs a vacation), that means she needs to average $600 in profit each week. At $4 profit per item, she has to sell an average of 150 iron-on transfers a week each and every week.

Because only about half of all eBay auctions end with a sale, Caitlin knows that to sell those 150 items she has to launch 300 auctions each week. That’s a lot of work, as you can imagine.

Can Caitlin make a go of it? It depends. Can she physically manage 300 auctions a week? Can she pack and ship 150 items a week? And, more important, can she realistically sell 150 items a week is the market big enough to support that sort of sales volume?

If Caitlin answers yes to all those questions, there’s still more planning to be done. To begin with, this example greatly simplifies the costs involved. Caitlin will need to figure eBay’s costs for all those auctions the listing fees for 300 auctions, and the final value fees for 150 completions. If she accepts PayPal payments, she’ll need to determine what percentage of her buyers will use PayPal, and what her fees for those transactions will amount to. Assuming that she uses a third-party website to help her launch and manage those auctions, she’ll also need to figure those fees into her cost structure.

All totaled, these auction listing and management costs can add up to 5%10% of her revenues. That means increasing her cost per item from $1.00 to $1.50 or more which reduces her profit per item to just $3.50. With this reduced profit margin, she’ll need to sell even more items to hit her profit dollar targets an extra 20 or so successful auctions each week.

All this needs to be factored in before Caitlin launches a single auction. And at these volume levels she’s definitely running a business, which means reporting the income to the IRS and paying taxes. There’s also the matter of sales taxes, which she’ll need to collect on all sales made to buyers in her home state.

The takeaway here is that making a living from eBay sales is just like running a business, especially in its financial complexities. Anyone contemplating this type of endeavor should do some serious business planning, which should include consulting an accountant or another financial planner.

If the numbers work out, you need to answer one more question: Is this something you’ll enjoy doing every day of the week, every week of the year? Even if you can make money at it, managing hundreds of auctions a week can wear down even the best of us. Make sure that you’re up to it, and that you’ll enjoy it, before you take the leap.

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