Should you incorporate? How will you get paid? Think about these and other issues before writing your plan to set up a business on eBay.
Steve Kline and Jim Howard, who sell automotive accessories and other items at near wholesale prices on eBay, have come along way in the 18 months since they first launched their business. They’ve gone from start-up to currently grossing more than $45,000 a month in sales.
That level of success is exceptional among entrepreneurs on eBay. But there’s something else that makes Steve and Jim a rarity.
They wrote up a business plan before launching their eBay business.
“When you start going to banks for operating capitol, they want to know your goals, your strategies. A business plan helped us relay our message and make our case to them,” says Steve Kline, co-owner of the eBay store Closer to Wholesale, when asked what motivated them to put pen to paper.
But Kline and Howard are in the minority among eBay businesses. In the brick-and-mortar world, business plans are as necessary as bank loans to start a business. Not so for many who start their business on eBay. Mark Thompson, a counselor who advises eBay entrepreneurs for the non-profit business counseling group SCORE in San Diego, Calif would be impressed. “I wouldn’t say it’s common to skip or procrastinate through the business plan step,” he says. “It seems to be the rule.”
And that’s why Thompson is such a busy man. “The majority of people I see are coming back around to the basics of starting and managing a small business due to sub-standard results with an eBay store the first time,” says Thompson.
An eBay business plan is like a traditional a business plan
“Absolutely,” says Elizabeth Gaudio, senior executive council for the National Federation of Independent Business, the Washington, D.C. based small business advocacy group. Gaudio advises entrepreneurs interested in setting up an eBay business these following principles, which also apply in the offline world.
Should you incorporate? There are many factors to consider, especially from a tax standpoint. Gaudio puts it bluntly. “A good accountant is your best friend and money well spent. Incorporation can be especially helpful if your eBay venture is an expansion of a business you already operate in the bricks and mortar world,” She says. Incorporation also gives you added gravitas if you’re approaching lenders for start-up costs like inventory.
Intellectual property issues. This is especially important in the online world. You don’t want to find out six months into your launch that there’s another company with the same name as yours -- only they have the trademark. In such a situation, you’re likely to get nasty letters from their attorney telling you to change all your logos, brands, domain names and sellerID or else!
Practical Considerations. Don’t forget to think through things like payment methods, security and marketing. Are you better off using PayPal or accepting credit cards yourself? eBay secures the online part of each transaction, but what about protecting buyer information once it’s in your possession? How will you safeguard and organize your files? eBay is a vast market with more than 200 million users worldwide. How will you market yourself to stand out in the crowd?
What’s unique about an eBay business plan
Jim “Griff” Griffith, dean of eBay University, the online auction’s officially sanctioned training program, and author of The Official eBay Bible offers these words of caution. “Success can be your worst enemy if you’re not prepared for it,” he says. “Every business plan for eBay must target time spent by you and others.”
You should consider things like how much time it will take to prepare pictures of products, write-up your listings, manage orders, pack and mail goods to buyers. Figure out what you can do to streamline the process.
You can rack up a lot of sales on eBay very quickly. But a business owner needs to pace him or herself and get help if needed. Consider Zachary Winn, the owner of the My Shoe Addiction store on eBay grossing $16,000 a month in sales. He’s working 12 to 14 hours a day, seven days a week. Winn says he can’t afford to take a break right now, because he is the business.
Last updated: Oct 1, 2006
RENEE ORICCHIO is a technology writer and former supervising news producer for CNN Financial News. She has been covering the computer industry since 1987. @oricchio