In this post I’ll share with you how our approach to spending money on various eBay listing tools has changed from the early days when we had no money nor experience to few years later when we were generating well over $100,000 a month on eBay alone.
Early days – low revenues, low margins, no cash
When we just started our eBay business, Victor and I were working on it on the side. We were still studying in University and the idea to sell on eBay was just a way to make enough income to afford our basic needs like paying (cheap) rent and having a beer once in a while. Who thinks about paying for eBay seller tools at this stage, right?!
Money was very tight so we had to build our eBay business in the “lean startup” method, simply because we couldn’t afford to do it otherwise.
We didn’t spend a penny that wasn’t 100% necessary:
- We worked from home
- Had no employees
- Registered the cheapest possible legal entity
- Didn’t pay for any listing management services or eBay seller tools
- Learned some html and css just to be able to design eBay listings on our own (CrazyLister didn’t exist at the time)
- Learned way to lower / avoid eBay fees
Since we never had the lowest prices or cheap shipping services, our net margins were 8% at best after deducting eBay and PayPal fees.
Back then, we didn’t even take into consideration some of the most basic expenses that influenced our bottom line profit like the cost of returns, VAT and losses due to fraudulent activity, so our real profit was even lower.
Our total revenues in the first year weren’t high, mostly because we started selling on eBay without any previous experience in online sales nor in running our own business and we were not doing this full time. It took a while to learn how the business works and actually make money on eBay.
If you do the math, you realize that you can’t really afford to spend money on anything with low revenues and low margins, so you will try to make as much profit as you can just to be able to pay rent.
To illustrate this, here’s a quick example:
- Monthly eBay sales – $10,000
- Net margin – 8%
- Net monthly profit – $800
Even if that’s not your primary income, you will be very reluctant to shave anything from this amount if it’s not mandatory to keep your business alive.
Growth Stage – Your Time Matters
As we started to put more time and effort into our eBay sales, things began to shift and our sales started growing quite rapidly.
Very quickly, I noticed that I was now spending at least 4 hours a day on customer support and another 3 hours on placing orders with the various suppliers we were working with.
I already talked about how I was able to reduce the time spent on customer service by 40% with 3 customer service email templates, it’s a very good read for anyone feeling overwhelmed with this issue.
As for the order processing task with suppliers, we went from working with 2 suppliers to about 15 in a short time.
This meant that instead of emailing and talking on skype with 2 suppliers, I had to do the same with 15.
Basically, the time spent on communication with suppliers multiplied by seven (!).
I realized that we had grown to this point by spending most of our time to search for new products, reach out to potential suppliers, and generally concentrate on business development rather than ongoing day to day operations.
Focusing on growth
Gradually, I was spending less and less time on business growth and more time on day to day operations.
Now, if there’s anything you should know about online sales, and specifically about selling on eBay, is that it’s a hyper competitive environment and you must think ahead at all times to beat your competition.
Otherwise, you might find yourself with declining sales and no plan to revamp your eBay business.
So, spending the vast majority of my time on ongoing operations was clearly bad news for the future of our business.
That was the point we decided that NOT spending money on eBay seller tools that could save us time on the day to day operations might eventually lead to our business demise.
I wrote this before and I will say it again – A business that is not growing is effectively slowly dying.
A practical example for you to save hours on daily operations:
- I analyzed the time spent on each business activity
- Understood what is the most time consuming activity – order processing, 3 hours a day
- Found the most effective solution to cut time on that activity – order management software for $60/month
- The software reduced time spent on order processing to 30 minutes a day
- I used the other 2.5 hours to list new products
- The results: new products added $10,000-20,000 revenue a month (with the 8% net margin, it meant extra $800-1,600).
- Conclusion: The $60 spend resulted in 15x revenue and saved me hours of headaches and human errors that are inevitable when doing manual work.
Funny story – when we were looking for a centralized system that could process all the orders from multiple sales channels (eBay, Amazon, websites) and automatically send them to our suppliers, there wasn’t anything in the market that catered to all our needs.
Eventually, we decided to build such a software ourselves, we called it MOM (multi order management)…which later became CrazyVendor.
CrazyVendor was so effective for us that some folks at eBay asked us to offer CrazyVendor as a solution for other eBay sellers, and so we did.
Although we don’t advertise CrazyVendor anymore (we focus on CrazyLister), we accept new customers from time to time, and to be honest, we are very proud of the fact that CrazyVendor was ahead of its time in the eCommerce industry.
Today, there are tens of eCommerce solutions that do a great job in saving you a lot of time when it comes to order management.
The Value of Listing Optimization Software
So one type of software saves you time, but another type we believe in even more is one that helps you increase eBay sales.
To increase your sales you’ll need a listing optimization software.
Listing optimization softwares are less common simply because it’s much harder to build something that actually works.
Let’s look at an example to illustrate the effect of listing optimization on your sales:
- You list 50 products
- Average sale price is $80
- Your conversion rate is 1% per listing
- You have 300 views per month in each listing
- 1% out of 300 is 3 sales per month per listing
- Total of 150 sales per month
- Revenue: 150 x $80 = $12,000
Now you decide to use a listing optimization software that increase your conversion rate:
- Your conversion rate improves to 3%
- Total sales per month triple to 450
- Revenue after optimization: 450 x $80 = $36,000
Your sales tripled…and that’s no magic! As I wrote last week, I don’t believe in magic, there is hard work that goes into listing optimization if you have to learn it yourself and do it alone like we did in the early days before CrazyLister existed.
With the listing optimization solutions, you save time and increase conversions, there is a double effect here and that’s why we love optimization solutions so much!
Key Takeaways – Apply to Your Business
Let me summarize the above:
- Early days: when you are just starting and money is tight – don’t spend a lot of money on software, be very selective and spend on those that bring multiple effects like time savings and optimization. Spend up to $50 a month.
- Growth stage: when you start growing and spend more and more time on day to day operations – consider buying software that frees up your time considerably in order to focus on business growth. It may be worth paying $100-300 a month.
- When your business scales and you have multiple operations, take a look at each major activity and see how you can optimize it to bring you the most value. That’s when you will want to consider buying multiple pieces of software (one for inventory, one for pricing, one for listing optimization, one for analytics etc.) and the entire package will cost anything from $500 to $20,000 a month.
The upside is that they will add value of tens of thousands and more each month.
Over to you
- How much do you spend on software each month?
- How many softwares you use?
- Do you think it’s worth the money?
Share your thoughts in the comments below and let’s start a discussion!