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Take up eBay selling part time or full time

A number of people have become eBay entrepreneurs. Some have current shops and wanted to extend their customer base nationally or internationally. Some start by decluttering their homes and then find a way to continue their activities.

To become an eBay business you have to register a private personal account as a business. Your activities are reported to the Inland Revenue. If your business picks up you might need to be registered for VAT. If you are you can pay the eBay listing and final value fees without VAT (they are based in Luxemburg). However this will mean having to charge customers VAT and loose the competitive edge you may have had when not being VAT registered.

You will also need to understand the long distance sales rules, where a customer can return any goods without reason and get a full refund. You can charge a restocking fee, particularly if the goods are unopened. You will also need to set up what you will do if you have returns due to damage, faults and also postal losses. Much of these and your profits will be eroded.

You don't need to take credit cards (which is an expensive process and costs 3-5% per transaction) but you will have to open a PayPal account. PayPal was bought up by eBay and replaced their own method of money transfers. PayPal allows your customer to pay using their credit card. This will cost you 3.4% plus 20p per transaction, but could be 5% even with UK based customers if their bank account is in another country. On business accounts this also applies to cash transfers via PayPal, but not if the customer pays by cheque or cash on collection.

The fees for listing on eBay are by opening price of an auction, reserve or fixed price. When the item is sold you are charged a final value fee. This can easily be 10 to 14% of the price. With PayPal and costs to get to the post office (postage and packaging is added to the selling price) this can cut 15% from your profit.  The fees on eBay+PayPal have increased year on year, in line with the fraudulent activities that PayPal protect buyers from.

You will also need an accountant, but as a sole trader business the costs are not high and the tax rules cap your NI contributions at sensible levels and income tax is on profit which is of course after all business expenses are paid.

To be successful the common sense rules for setting up a business apply. Buy low, sell high, keep costs down and turn over stock quickly.  List what you would like to sell and then watch for what sells and what does not. Watch the competition and work out their strategies. Source a product. Get hold of suppliers and get the best rate you can. Start small and build up carefully. See what works and what does not.

Work out a business plan to include a few pages that outline the market opportunities, your strategy, strength and weaknesses of the plan and most importantly your budget. Then invest and expand. Buy inventory and spend more time on your business. Register your business - it is not expensive and your accountant can advise you.

Plan around set backs. Never give up, don't stop trying until you succeed. Your breakthrough is likely to happen just when things are starting to look desperate. Once you get into the swing of things you can consider making it full time and resigning your job.

Do people really make money on eBay?

Every now and then we hear of someone making a fortune selling on eBay.  As eBay has 90 million users and sells $80,000 in product every 60 seconds clearly someone, as well as eBay, are making money.

You have to learn quickly how to become successful on eBay. Watch for the savings, such as half price listing days, or 5p and 10p listings and be able to list on those days quickly and efficiently. These offers are often restricted to private sellers and they now prohibit the use of Turbo Lister or require you to list from a mobile phone. That is okay for one or two items but too time consuming for a hundred or more.

You need to work in all your costs to be covered by the buyer.

If you are VAT registered eBay wants you to include that in the listed price. They take up to 10% of that VAT amount in fees and PayPal another 3.4%.  In addition, if most of your sales are to countries where you would not include VAT your price is 20% too high. Sellers in the USA can apply sales tax at the point of being sold, as sales tax applies only within the state.

In particular you have to make sure that the postage costs don't cut into your profit - and eBay wants you to list postage free and cap the amount you can charge to cover post and packing. This makes it much harder to charge the fair additional price to post outside of the UK.  A good electronic scale is worth while to establish what the parcel is going to cost. With repeated items you will already have the figures, but if you have one off or combined postage you will have a different box and weight.

You have to avoid the mistakes that cause others to fail. There are a number of books claiming to teach you how to be successful on eBay. Certainly they look as if they make the authors money, but it is doubtful if they really will do the same for you.


Last updated 11th August 2014