I'm going to reveal in clear, concise detail how you can scale your business and sell used books online by the thousands each month, as well as top selling DVDs and videos. But more importantly, I'm going to show you how to do it and make a reasonable profit.
Scaling up a warehouse operation goes way beyond buying yard sale books. Mind you there's nothing wrong with buying profitable yard sale books or any other way of building a profitable home business. But you're in a different league now.
It's hard work. But if you want to be personally and financially independent, selling books online can be an ideal way to achieve your goals. You'll be astonished to learn that you can start a profitable business today in these hard economic times using fulfillment companies and still be very successful.
Obviously, the only reason you should start selling used books online out of a commercial location is because your home-based business has run out of room and your business has good cash flow that's reliable and predictable.
Good cash flow? What's that?
First, let me tell you what it's not. It's not the net profit figure you find on your Profit & Loss statement. You need to study your cash flow statement and understand how much free cash flow your business produces and how to profit from online sales.
Your free cash flow is the money left over after paying for all expenses required to maintain the business and grow the asset base. Again that's not the same as your net profit from your P&L.
Lets say you've sold $1,000 worth of books in one month selling used books on Amazon from home. This is your gross sales figure.
At $10 per book that's 100 books sold. From that you subtract your sales commissions and selling fees of about 18% if you're selling on Amazon. That leaves you with $820.
From that you need to further subtract your Cost of Goods Sold (COGS). That's the cost of the books you actually sold. If you pay an average of $2.50 per book, that's $250. Now you're left with $570 from selling used books online.
Other components of COGS are your shipping supplies such as bubble mailers, packing tape, and postage labels. Deduct an average of $0.50 per book for another $50. This leaves you with $520.
The remaining $520 you can call your gross profit. From here you deduct your monthly operating expenses.
These are expenses such as your pocket pc scanner subscription ($40) and your online postage subscription ($17).
There will most likely be other expenses but for a home-based operation, not many.
After subtracting your scanning and postage subscriptions, your final number of $513 is your net profit; roughly 50% of gross sales.
Cash flow is a different animal. In the example above your Profit & Loss statement shows a net profit of $513, but it that "really" profit?
No, what you need to do is examine your cash flow. The normal sales velocity when selling used books online as explained in my home based business book, Internet Bookselling Made Easy! is about 33% for new listing sales.
Therefore, to sell 100 books in one month, you must buy and list at least 303 books. Using the average COGS figure previously mentioned, you have to spend $757.50 to acquire those books.
Subtracting $757.50 from $513 leaves you with a negative cash flow of -$244.50! How can that be?
It happens because the $757.50 you spend buying inventory is not considered an expense until the item is actually sold. The unsold inventory is carried as an asset on your books. If your average sale price is $10 you still have $2,030 worth of books on your shelf (203 x $10).
So even though you have over $2,000 worth of inventory online, you've already spent working capital for those books that you can't expense until they sell. Thus you create a negative cash flow each month you go book scouting.
Large scale bookselling involves processing tens of thousands of books each month. One problem with handling that much inventory is knowing where to sell books by the TON that you can't list online because they're either damaged or don't have any value. We'll cover that issue as well.
Without a solid cash flow statement you can never sustain a business selling used books online. That's because you'll burn thorough your working capital in a short time instead of owning a nice profitable business.
Your cash flow must exceed the combination of operating expenses and asset acquisition if your business is to be sustainable enough for you to gain a profitable share of the market.
To achieve that you'll need to understand passive income opportunities that exist as an online bookseller. It's a concept called "residual sales" that's been generating online profits for me and other book sellers on line for years and I'll discuss it in the next article.
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