How to Run a Successful Reselling Business

The following is a guest post from David Bakke. In addition to running his reselling business and working a full-time job, he contributes his best personal finance tips and ideas on Money Crashers.

A few years ago, I decided to sell some of my wife's old college textbooks on Amazon. Later, I found several unused items around my house that I also sold for a decent profit. With a little luck and a lot of hard work, I eventually developed my own reselling business. I made quite a few mistakes along the way, but I learned a lot and quickly realized I could do this as a side business and make decent extra income. There are a number of things you should do (and things you should avoid) when starting, developing, and maintaining your reselling business.

6 Strategies for Running a Successful Reselling Business

1. Start Out Slow and Safe

Unfortunately, a lot of people lose a great deal of money trying to sell products on auction websites because they don't understand the basics of supply and demand. If you dive in head first and build up a $50,000 inventory before you know whether your inventory will sell, you may lose substantial money. Instead of jumping in headfirst, start out slow and safe. Find an item that you can purchase and resell at a profit, and list it as cheaply as possible while still making money. Later, you can adjust this mentality and begin leveraging the expertise you've gained to improve profit margins.

2. Leverage Your Expertise

When I started out, I had a particularly strong knowledge of laptop computers and other small electronics. I possessed a thorough understanding of different features and benefits of the products, and I had a good idea of what I wanted to sell and the prices I should set. If you have no clue about Apple computers, then don't start your business off trying to sell them just because they're popular. Stick with selling products that you know about, and start small.

3. Provide Impeccable Customer Service

Fantastic customer service results in a high feedback rating for your business. I use eBay to sell a large portion of my inventory, and my current eBay feedback rating is 100% positive; I have never received any negative feedback. Buyers use the feedback ratings in part to decide whether to buy from you. In addition, I've found that customers pay a higher price for an item for sale by someone who has a higher feedback rating than another seller with a lower feedback rating. What entails excellent customer service? Some aspects include:

• Fast shipping
• Careful packaging
• Quick responses to emails before and after the sale
• Going the extra mile whenever possible for a customer
• Having a clearly stated, fair return policy
• Describing items accurately

Although I don't advertise this, if someone buys an item from my company and it turns out to be defective, I offer the customer a full refund, including paying for return shipping costs, and I usually also refund an additional 10% of the purchase price for their inconvenience. Although it may seem like this provides no real benefit for my company, it has helped my perfect customer service rating, which has yielded improved profits and continued expansion.

4. Expand as Your Confidence Grows

If I find a good deal on a laptop and I know I can sell it at a profit, I'll pick up three or four of them. This has expanded my business's profits, and it doesn't take too much of my time to set up multiple auctions and sell more than one item. Time management plays an important role in my business because I also have a full-time job. I've learned a lot more about which products sell over the years, which has also helped me to expand. Through trial and error, I now know which brands of digital cameras sell faster than others, and I adjust my purchasing and pricing accordingly. I've also learned that I don't always have to out-price the competition either. Prospective buyers sort listings on auction websites in ascending order by price. If you have an item that you know can sell, make it the fourth or fifth cheapest listing to improve your chance of making the sale.

5. Keep Records and Don't Ignore Tax Obligations

Keep accurate records. Utilize accounting software or set up an Excel spreadsheet to track your sales and payments received, as well as your monthly profits and losses. This provides many insights into your business's profitability, and may spur ideas for improving. Do not ignore your tax obligations. Both eBay and Amazon report sales numbers to the IRS once sellers exceed a certain sales or transaction threshold. You don't want the IRS to discover that you sold $50,000 on eBay last year, yet paid no taxes on your earnings. Consider making quarterly estimated tax payments to stay ahead of the curve.

6. Market Your Business to Friends and Family

When I first started out, I never said much about my new venture to family and friends. I was initially unsure as to whether I could actually make money at my new business. After I gained confidence I began spreading the word, and I soon developed a solid clientele of friends and family who regularly buy products from me. These sales account for almost 30% of my business! Get the word out, maintain a high level of customer service, and watch your business grow even more. As a bonus, friends and family can provide free word of mouth marketing to help you find even more new customers.

Final Thoughts

I started my reselling business with little more than a roll of mailing tape and a little disposable income. I started off slow and always provided the best customer service possible. Use your business sense and expertise to become a reseller - believe me, the sky is the limit! Do you have any other tips or strategies for starting or running a reselling business? 

Comments

[Kris @ Everyday Tips]

I have resold a lot on Amazon, and that rating matters so much. I know I sold many items at a higher price than others just because my rating was 100 percent. (Just supporting your customer service comment.)

Education is also huge, and dealing only in what you know. Some people try to sell everything, yet only truly know about certain items. They spend a bunch of money on inventory without realizing they will only lose money or break even. In their head it looked like a great deal, but when it came time to actually sell, it was a different story.

Great post.

[jim]

This is some good advice.

[Briana @ Prairie EcoThrifter]

I did some reselling of textbooks in college, and I'm sure I could resell quite a few things in my house, especially my clothes. Great advice!

[RB Boren]

One more endorsement of the importance of excellent customer service. It is the best long term investment of time, money, and effort and pays off big over time.

[AffordAnything]

I like the "start slow" idea. I've seen too many businesses lose their shirts because they jumped headfirst into an untested idea. It's better to be patient, start small, minimize your risk, do a test batch, and see what happens. You'll learn a lot about your product and the market from those tests.

[j]

I started my resell business about a year ago while i was still working part time and it grew into my full income. i now make anywhere from 5-7k a month and only work part time.
here are my .02$ tips

1. find a nitch - for it it was projectors was able to buy them cheap at auction or ebay and resell them on Craigslist making around $200 profit each sell & 2k a month.

2. expand - it can be a little nerve racking to spend $500-$2000 on something you really aren't sure what it is but do you RESEARCH that item could sell for 3-10k. Call the manufacture, look up completed items on ebay. It took me awhile to "grow a pair" and spend more money than i really had but it always pays off in the end. Try Lab equipment, industrial and maybe scientific but that can be hard to sell.