The Break-Even Point Formula: Calculating the BEP


May 26, 2022

The Break-Even Point Formula: Calculating the BEP

Are you trying to figure out when you’ll make a profit? The breakeven point formula is an excellent way to calculate whether your business idea has the potential to create a net profit and, more importantly, how quickly.

We’ll help you understand the break-even point, what counts as fixed costs or variable costs, and how you can use financial modeling to improve your business strategy.

We’ll start by covering some of the managerial accounting terms a small business owner should understand to perform a break-even analysis. Next, we will show you how to calculate the break-even point. Finally, you’ll see how to estimate the number of units you need to sell to make a net profit that meets your goals.

Get ready to learn the different terms surrounding the break-even point equation.

Definitions

To better understand how new or existing businesses can use the break-even analysis formula, you need to understand the following terms:

• Break even point
• Sale price
• Fixed costs
• Variable costs
• Contribution margin

What is a Break-Even Point (BEP)?

The break-even point is the point in which revenue covers the cost of the fixed costs plus the variable costs. After reaching the break-even point, you are not losing money but making a profit.

You can measure the break-even point in either units or revenue. We’ll show you how to do both. First, let’s look at the rest of the definitions you’ll need to effectively calculate break-even point data.

What is the Sales Price?

The sales price is what you will be selling the product for. The sales price per unit, or unit-selling price, needs to be higher than the total expenses (variable costs plus the fixed costs). 

While the price per unit variable is often defined by what market research shows as fair market value, you can use the break-even volume formula to determine the selling price to make the profit you want from a specific number of units. We’ll show you how to do that later.

Keep reading to better understand what a fixed cost is.

What are Total Fixed Costs?

Man sitting behind the desk and calculating total cost

Fixed costs are anything your business has to pay, regardless of how many products you sell and how much money you make. Fixed costs include:

  • Monthly rent
  • Property taxes
  • Equipment
  • Business licensing
  • Insurance
  • Electric bill (portion not impacted by production volume)
  • Internet
  • Website and other software
  • Executive salaries
  • Benefits (if offered)

There are limitations to fixed costs. For instance, screen printing machines typically can’t produce more than 1,000 per hour. If you run it constantly (unlikely), that means a max of 24,000 shirts per day before you need more screen-printing machines (and probably more employees).

Some people might want to guide their pricing strategy based on how many units they need to sell to cover fixed costs. Dividing the total fixed costs by the number of units in inventory will help to establish the Unit Fixed Costs. If you need to do that to help you establish your price per unit variable, just use the following formula:

Total Fixed Costs / Number of Units = Unit Fixed Costs

To simplify reading formulas, the abbreviation FC will be used for fixed costs in the formulas.

What are Variable Costs?

A variable cost is any cost that increases as you sell more products. Using the example of screen printing, some of the variable costs would include:

  • Cost of the t-shirt or other items
  • Costs of the screens and ink
  • Labor to perform the t-shirt printing
  • Product packaging
  • Shipping charges
  • Sales commissions
  • Transaction fees
  • Advertisement charged by Cost Per Action (CPA) ads
  • Electricity that is directly attributable to the printing.

If you don’t know the variable cost per unit, you can divide total variable costs by the units sold to calculate the variable costs per unit using the formula:

Per Unit Variable Cost = Total Variable Cost / Units

The variable costs will be abbreviated as VC to make formulas easier to read.

Fixed and Variable Costs Equal Total Costs

Break-even analysis determines the intersection of total costs and revenue. The total cost of a business can be found with the formula:

Total Cost = Fixed Costs + Variable Cost 

Break even point total cost and revenue

What is the Contribution Margin?

The contribution margin is used to establish how much of a product’s revenue contributes to reaching the break-even point. The contribution ratio is calculated based on the difference between the sales price and the variable costs.

Contribution margin formula

You can also calculate the contribution margin as a ratio. To calculate the contribution margin ratio, you simply divide the contribution margin by the sales price, as you can see in the picture above.

What is the Break-Even Point Formula?

The break-even point formula can be used to calculate the number of sales needed or the revenue needed. We’ll look at both ways to calculate the break-even point below.

To calculate the break-even point in units, you will simply divide the fixed costs by the contribution margin. The equation can be written in two ways:

  1. Break-Even Point in Units = Fixed Costs / (Sales Price – Variable Costs)
  2. Break-Even Point in Dollars = Break-Even Point (Units) x Sales Price

Example: How to Calculate Units Using the Break-Even Quantity Formula

Let’s pretend you are selling hoodies and use the following assumptions:

SP: $69 

VC: $53.75

FC: $10,000

CM:____

BEP (Units): ____

BEP ($): ____

Note on SP and VC: The Sales Price was calculated using my Etsy Pricing Calculator and a two-sided Unisex Fleece Hoodie | Hanes P170 (Light Steel / 2XL) with front and back print from Printful for $29.40. The back print adds $5.95 to the price listed in the link.

First, you would need to solve for the contribution margin (CM)

CM = SP-VC = $69-$53.75 = $15.25

Then, you would use the contribution margin to solve for the break-even point units.

BEP (Units) = FC / (SP-VC) = $10,000 / $15.25 = 655.738 Units

Note that the break-even point is not an even number, so we have to round up to 656 hoodies sold to break even. That’s how to calculate the break-even point. At the break-even point, you’ll start earning $15.25 in profit per unit sold.

Break-even-point-analysis

Keep reading, and we’ll input the information into the break-even revenue formula.

Example: How to Calculate Total Revenue to Break Even

From the previous example, we know

SP: $69

VC: $53.75

FC: $10,000

CM: 15.25

BEP (Units): 656

BEP ($): ____

To calculate how much revenue you’ll need to reach the break-even point, you’ll use the formula:

BEP ($): = BEP (Units) x SP = 656 x $69 = $45,264 in Revenue.

I created a break-even point calculator to help you calculate this really easily. Check out the break-even point calculator.

You can take this beyond the breakeven point and calculate how much revenue you need every month to earn a certain amount of revenue.

Example: Break-Even Analysis to Earn $200K a Year

Break-even point analysis can also be used to estimate how many units you need to sell to make a profit. Let’s continue with the previous example:

SP: $69

VC: $53.75

FC: $10,000

CM: $15.25

BEP (Units): 656

BEP ($): $45,246

GOAL SEEK = $200,000

Units Sold Goal: ___

Revenue Goal: ___

Units for $200K Profit = (GOAL SEEK / CM) + BEP (Units) = $200,000 / $15.25 + 656 Units = 13,114.75 Units + 656 Units = 13,770.754 Units

Revenue Goal =  Units Sold Goal x SP = 13,771 x $69 = $950,199

At this point, our break-even analysis has established that with a $69 sales price and $15.25 contribution margin, we will need 13,771 Units and $950,199 in revenue. This is helpful for business planning and establishing that you have enough inventory.

How to use the break-even formula with multiple products

As you research break-even analysis, you may find that it works best with a single product. Most companies sell more than one product, though. While this does not impact the fixed costs, it will impact the sales price, sales volume, and variable costs.

There are several ways to deal with these challenges, and we’ll discuss them below.

Adjusting Sales Price Based on Multiple Products

Best price concept

There are several ways to adjust the break-even analysis based on different sales prices. These are the two easiest ways:

  • Formula 1: When you’ve already made sales

Total Revenue / Total Number of All Units Sold = Average Sales Price Per Unit.

  • Formula 2: When you are forecasting using industry averages

Weighted Average: SP1*(Units 1 / Total Units) + SP2 *(Units 2 / Total Units) + SP3* (Units 3 / Total Units)…SP999* (Units 999 / Total Units)

The first equation is easiest to use if you have the actual sales dollars and the number of products sold, so they are easy to calculate. The second equation is more useful when you don’t have total revenues and specifically focus on forecasting. 

For instance, with over 50 years in the clothing industry, The Adair Group estimates the distribution of hoodies bought as

  • L: 30 percent
  • M: 28 percent
  • XL: 20 percent
  • XXL: 12 percent
  • S: 7 percent
  • XXXL: 2 percent
  • XS: 1 percent.

Those numbers make it so you can accurately estimate the sales price per unit for multiple products if you have a different selling price for each.

Variable Costs

A business’s break-even point will be impacted by the variable costs, and when you are selling multiple products, you have a few ways of dealing with this:

1. Divide Total Variable Costs by the Total Units Sold if you have a history of products sold.
2. Use a weighted average based on buyer behaviors. The formula would be (%1*VC1) + (%2*VC2) + … + (%999*VC999) = Total Weighted Cost.

In the table below, I used the hoodie front pricing to calculate it. Still, since the total percentage was only 99%, I divided the final weighted cost total by .99 to get $22.19, which raised the weighted cost by approximately 22 cents.

Price calculation table

Contribution Margin

You can use the same formulas as above to calculate contribution margin or use this nifty hack I like to use.

  1. Only carry similarly priced products.
  2. Choose a contribution margin strategy based on a specific dollar or % profit.
  3. Choose the highest-cost product. In our example above, it was the 3XL at $24.95.
  4. Establish how much you want to make on it. I use $10 for hoodies.
  5. Using the Etsy Pricing Calculator provided earlier, $56.60 would be the sales price.
  6. Make all your products the same $56.60
  7. Now you have both sales dollars and contribution margins that are easy to calculate.

Example

We’ll use the pricing that we discussed to do a break-even analysis using the following values:

Sales Price: $56.60

Variable cost per unit: $46.6

Total Fixed Costs: $10,000

Contribution Margin Per Unit: $10

Break Even Point (Units): ___

Break Even Point ($): ___

We’ll first solve for the breakeven point based on units using the formula below:

BEP (Units) = FC / CM = $10,000 / $10 = 1,000 Units

Notice how 1,00 is a nice round number. When you calculate how much revenue you need to cover, fixed and variable costs are quite simple. The formula is the $56.60 Sales Price multiplied by the 1,000 units. 

BEP ($) = SP*BEP (Units) = $56.60*1,000 = $56,600

This makes it where you have normalized your contribution margin, and it’s easy to figure out the break-even point. You can do the same thing with the contribution margin ratio if you’d prefer to do it that way. 

Conclusion

Small businesses can use this knowledge in various ways, including:

• Establishing production level targets
• Calculating the break-even price to establish the minimum product pricing
• Modeling how different decisions will impact the break-even point.

We’ve looked at terms that describe what break-even analysis shows, shown how to calculate break-even point, provided you with a calculator that simplifies how to find break-even point, and reviewed examples to find the dollar amount and units you would need to sell to break even.

We hope this knowledge helps you make better pricing and forecasting decisions. Have you used the break-even formula before? If so, how did it impact your decision-making?

 


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Wouldn't you like to boost the chances that a business you purchase is a lucrative cash cow instead of a money pit?

You want to make a good decision, and there are essential questions to ask when buying a business.

Budding business owners often buy a business without asking the right questions to become successful. You want to ask questions that reveal all the red flags and minefields that could cause the business to blow up in your face six months later.

We’ll discuss questions to ask yourself before and after approaching businesses and questions you need answered about any business’s history, finances, and the management of the business venture.

[su_note note_color="#dbeafc"]Read from start to finish or click any of the links below to jump right to the topic that interests you most.

There's a lot at stake here. So, sit down and come up with an exhaustive list of questions to ask that'll elicit the exact information you need. Equally important, write down the answers you receive so you have this knowledge when you most need it.

Buying an existing business checklist

Top-down shot of a checklist at a workspace next to a laptop, notebooks, pen, and a potted succulent

There are so many questions to ask before buying a business involved in any industry. You should probably have a checklist with you to verify that you have successfully asked all the due diligence questions to ask when buying a business. Download our buying a business checklist.

Ask yourself before buying an existing business…

1. How will the business further my goals?

You should have a reason for buying the business. Are you trying to acquire technology, customer lists, and employees or achieve other goals?

This question should impact how you evaluate every decision. If an answer doesn’t align with this goal, you may need to ask clarifying questions.

2. Is it better to start a new business instead of acquiring a business?

Do a sanity check before you go and buy a business. You don’t want to buy a business that’s a mess if you can save money by, for example, buying the equipment you want and starting your own business yourself.

3. Can you afford to buy the business?

Business partners sitting down with a laptop and paperwork discussing whether they can afford to buy a new business

You’ll need to establish whether you can afford to buy the business. You’ll have three options as a purchasing business owner:

  1. Buying with cash on hand
  2. Seeking a business loan
  3. Offering the current owner an equity deal

Analyze your current cash flow and figure out how much money you'll be able to spend on the business. Make sure you have enough money for the down payment. It's usually 10 to 20% of the purchase price.

Then, come up with a price tag and stick to it.

Pro Tip: Eager to buy a business but need more help? Bookmark our comprehensive How to Buy a Business With No Money guide.

4. Can your business manage the acquisition?

If you already own a business and are planning a merger, know that a business purchase can be disruptive to business operations. It takes management time away from both small business owners, and key employees from the newly acquired business will take time to acclimate to the new company culture.

5. Will the two cultures blend well?

Business owner and a consultant reviewing information on a tablet

Similarly, if you already own a business and want to grow by buying another, as a new owner, you’ll need to consider how the management team and employees of each organization will work together. Cultural differences can create real problems when you buy businesses.

6. What third-party consultants do I need to hire?

A business owner may need consultants when buying small businesses. You’ll probably need:

  • Contract lawyers
  • Financial analysts
  • Auditor
  • M&A marketing strategists
  • Cultural consultants
  • Human resource experts

7. Is this the best company to purchase currently?

Before buying a company, make sure that it is the best business to achieve your goals.

Keep reading for more questions to ask when buying a business.

Questions to ask a business owner about its history

QuickBooks blog post on tax forms, schedules, and resources on a desktop computer

You'll want to know about the history of the business you'll be buying. An honest business owner will talk about the mistakes the owner made during the business’s history. Hopefully, they'll share valuable pointers on how to avoid making the same mistakes during day-to-day operations.

That's why you should ask these questions about business history.

8. Why are you selling?

You might learn about recent problems the owner is having. The beauty of this question is that it's blunt and might tell you exactly what you need to know.

However, you might get an answer like “I want to retire” or “It's time to see the world.” Although these answers can be truthful, business owners frequently use them to cover up red flags when buying a business.

That's why it's up to you to dig deeper to uncover why the business owner is looking for an exit strategy. Sometimes, you'll just have to trust your intuition.

9. How long have you owned the business?

Woman business owner in an apron with boxes, shelves, and a laptop in the background

When a current owner has operated a business for a long time, you'll probably be buying a company with a loyal customer base and brand recognition.

Past longevity is an excellent indicator of business success. So, if the proprietor has been in business for three decades, you're probably purchasing a valuable asset that'll continue to be a cash cow for you, too.

10. Why did you originally start or buy the business?

This question helps establish the mindset of the current owner. It might also show differences in motivations that could be impacted if a company grows.

Keep reading for financial questions to ask when buying a business.

Questions about the company’s finances

You'll want hard financial data, right? Here are some questions to ask to get the numbers you need:

11. What's the annual gross revenue?

This will tell you how much money you'll be able to pull in with the existing business. But probably even more important is the next question…

12. What are the ongoing costs?

This business question will help you establish how much working capital the company has.

Asking this question and the next one together can be a good way to establish how well the business owner manages its financial statements.

13. How much profit have you made over the years?

Daily calendar next to stacks of hundred dollar bills

Look closely at these figures. High gross revenues and low profit margins indicate high overhead—which is either a red flag or an opportunity.

14. What is your profit margin?

While this may seem the same as the last question, you want to ask questions differently to see if you get consistent answers.

15. Will I be taking on any liabilities?

When you are buying a business, you could also be picking up undisclosed outstanding debt. This could significantly jack up what you'll pay. That's why it's so important to ask about legal obligations!

Any legal obligations and liabilities you will not assume need to be paid off before closing. Don't let the owner say he'll pay them off later because the legal doctrine of “successor liability” means you become liable after business purchasing.

Pro Tip: A better way to handle liabilities is to subtract them from the offer you make when purchasing the business from the previous owner.

16. Can I view the cash flow statements?

Once you start seriously considering buying a business, you'll want to get the financial statements verified by an independent auditor.

This individual will scour the books with a proverbial fine-tooth comb to confirm that what the owner told you is the truth.

And if your auditor does their job right, they’ll leave no stone unturned.

Questions about selling price

Young man with disheveled hair looking up toward a thought bubble with a dollar sign in it

Ask questions that'll help you get to a more precise determination as to how much the small business is worth. This information will help you pay a reasonable price for the company so you're not swindled. If you overpay, this could leave you in dire financial straits, which could ultimately lead to the failure of your business.

Questions to ask about price include:

17. How much are you asking?

Try to get at least a ballpark figure for how much the owner wants. This will let you know if proceeding to the negotiation stage will be worth it. The price should be no more than three times the annual profits.

18. How did you arrive at the purchase price?

Again, this is the kind of question that'll give you a little peek into the mind of the owner. Listen carefully, and then decide whether you think their answers are trustworthy.

19. What assets am I getting?

Man unloading boxes from a work van surrounded by social media icons including Facebook, X, Instagram, and YouTube

This includes both tangible (things like delivery trucks, cooking equipment) and intangible (goodwill generated, social media accounts) assets of the existing business. You want a comprehensive inventory of every single thing you'll be getting in the sale.

20. Have you ever had the business appraised by an independent auditor?

An independent appraisal will give you the best idea of how much you should pay. So, if one hasn't been performed, you should think about having it done before you buy. This way, you'll know the value of the business you're thinking about acquiring.

21. How much access will my auditor have to your books?

You'll want to make sure that you or your financial professional can look at the business's financial statements for the last three to five years. These include tax returns, income statements, balance sheets, cash flow statements, and any current contracts or leases. If you're going to have an independent auditor look at them, make sure you hire a reputable one.

While it would be nice to trust a business's own financial analysis, it's best to be sure the statements have been vetted by accounting professionals. If the owner refuses, he may have something to hide. In that case, it would be best to just walk away from the deal.

22. What do you think the goodwill value of your business is?

There might be a lot of intangible things that go into the owner's personal valuation of their existing business that the hard financial data won’t reveal. These include things like the reputation of the company, customer lists, and employee expertise.

Questions about financing

Man in glasses and a casual sweater sitting at a desk reviewing financial paperwork with coins flying overhead

The following questions will help clarify your financing options:

23. Are you willing to finance the transaction yourself?

This will indicate whether the owner believes in you and the small business. Seller financing usually covers 10% to 25% of the purchase price of a company. It can be used to add to a down payment.

If you can get your seller to put some money on the line by financing the sale, it might serve as an indication of the seller's confidence in the future of the small business. They know more about the business than you do, and if they're not willing to gamble on its success, why should you?

24. What financing options do you recommend?

The current owner might know sources that you don't know about. It doesn't hurt to ask!

25. Are you willing to take a standby position?

Most small business loan lenders loans insist that sellers take a standby position for about two years. This means the seller won't receive any payments during that time. If your seller won't finance the entire transaction, find out if he'd be willing to take a standby position so that the rest of the deal can be funded.

Questions about day-to-day management

Casually dressed woman business owner jotting a note while holding folders and steno pads

Devise a series of carefully written questions to ask that'll help you figure out how the small business generates revenue and how it's run on a daily basis. The better you understand all this, the more confidently you can operate your new business. Businesses with a steady revenue stream are the safest bet.

Ask questions like:

26. How does the business generate revenue?

You'll want to know how you'll get paid—whether that's a one-time payment, through a subscription, or some other means. Some businesses have unique ways of generating revenue that might not be familiar to you.

27. Does the business have a list of profitable clients?

If the small business you're thinking about acquiring has one, ask to take a look at it. This list could be a goldmine for you, making it one more reason to buy the small business.

28. What's your marketing plan?

Screenshot of Fortune article on creating a marketing strategy for small business

Ask the owner what kind of marketing he's done in the past—and what worked and what didn't. This way, you'll get valuable feedback on the marketing that'll get the most bang for your buck.

29. Exactly how many hours do you work each week?

This is an indication of how much of your time your business will eat up. Even the most die-hard entrepreneurs will want to get away once in a while. So, find out how often the current owner was able to get away. You want to know what you're getting yourself into!

30. Are you currently paying yourself?

If the owner isn't getting paid, this is a red flag. You want your venture to generate enough profits that you can draw a salary.

31. How quickly does the business get paid for services and goods?

Stacks of quarters next to a white alarm clock

If there's a time delay between the delivery of merchandise and payment, there might be a supply chain problem. You might want to take a closer look at that before you agree to buy the business.

32. Can you stay on for a short time to ensure a smooth transition?

Buying an existing small business isn't like making other large purchases. No matter how much you know about what you'll be selling, there's probably going to be at least a bit of a learning curve. That's why it would be great if the owner could stay on for six to 12 months to help you learn the ropes.

33. Who are your competitors?

Many businesses fail because they don't meticulously study their competition. You need to know your competitors inside and out so you can effectively compete against them after buying a business.

34. How much of the success of the business is due to the owner's personality?

Smartly dressed business woman standing in front of a cityscape

If the answer is “a lot,” you might think twice about buying this business. That's because this is something that'll be hard to replicate, even with hard work.

35. May I talk to customers, employees, suppliers, and others to independently verify the information I've learned from you?

You need to get your information from secondary sources—not just the owner. This way, you can make sure it's as accurate and truthful as possible.

36. Do you have any tips on how to make the business as successful as possible?

This question will help the owner formulate in his mind precisely what he's done over the years to make his business successful. The answer might result in valuable information you can replicate so that you're successful, too.

Miscellaneous questions

Woman in a casual orange sweater and jeans with a thinking face holding a tablet and surrounded by question marks on a blue background

37. What licenses or permits will I need to get?

You'll want to make sure you comply with the law. Also find out how many of the current owner’s licenses and permits will transfer over to you.

38. Are there any pending lawsuits?

If legal matters are hanging over the business's head, this is definitely a red flag. Issues like that can quickly drain you of your financial resources.

39. Are you a member of any industry organizations?

If they are, ask which memberships have been the most beneficial for them, and don’t hesitate to ask for introductions.

Additional questions to ask yourself

Also, put yourself in the hot seat and ask yourself some probing questions, like:

40. Is this the kind of business that'll bore me to tears a few months in?

Purchasing a business because you're bored isn't a good reason. Get a hobby instead. Running a business can be tedious, and it definitely is hard work.

41. Is my significant other going to be supportive?

For better or for worse, being an entrepreneur is going to affect your relationship with your spouse. They will be going along for the ride, whether they want to or not. Have a frank discussion to make sure they’ll be able to put up with you working long days.

42. How can I improve the business to make it more profitable?

Man in a suit with a question mark hovering overhead staring up at stacks of coins while scratching his head

This is one of the most important questions to ask when buying into a business because it will ultimately tell you whether the asking price is worth paying. The more you can help the company grow, the more valuable it will be when buying small business operations.

43. Do I have the skills for success?

Take a good look at your professional repertoire and make sure you have the skills you need to make the business you're thinking about buying a resounding success.

For example, if you're buying a restaurant, it’s a darn good idea to have some experience actually working in one beforehand.

44. What kind of financial picture do the financial documents paint?

Take a look at all the financial documents with your certified financial professional. These are things like the tax returns for three years, balance sheets, and cash flow statements.

Then, decide whether the business is fiscally healthy enough to make purchasing it a sound idea.

45. How much have similar businesses recently sold for?

Sold sign next to wood block storefronts

To get this information, visit local county offices to see which commercial properties recently had a change in ownership. There are also online resources that can help you find this information.

46. Do I really need financing, or can I find creative ways to do an all-cash deal?

There might be some circumstances under which an all-cash deal makes sense. However, consider the following question, too…

47. Is an all-cash deal even a good idea?

Few buyers can afford an all-cash deal. Even if you could, incurring that level of risk might not be for the best.

48. Have I come up with a business plan I can show to potential lenders?

UpFlip’s How to write a business plan blog post on a laptop

A business plan shows that you're serious about your business. It'll also reveal how feasible it is. These are two things potential lenders are going to want to know.

49. Will I keep all the employees?

Try to figure out which ones will be indispensable assets to the business and try to sweet-talk them into staying. It's also a good idea to meet with the employees once it looks like the sale's going to happen. Make time to answer any of their questions regarding your future plans for the business.

Don’t forget to download our free checklist

Download our free business buying checklist if you haven’t already.

How to buy an existing business

Woman reading UpFlip’s how to buy a business blog post on a tablet

The questions to ask when buying an existing business are part of the due diligence process that will be conducted as the purchase unfolds.

The process of buying a business includes:

  1. Find a business to buy
  2. Determine your budget and financing options
  3. Perform due diligence
  4. Establish business value
  5. Create and enter into a business sale agreement

Check out our blog about buying businesses for more information.

Are you ready to buy a business?

If you've had a lifelong dream of buying a business, asking the right questions can make all the difference when buying a new business venture. The best way to know what questions to ask when buying a business is to come prepared with a list, which we provided for you.

Don't let either the owner or yourself off the hook.

You're buying a business that will be a significant investment of time and money. Asking the right questions will help you to get a business for a fair price, prepare you for the difficulties of ownership, and ensure your long-term success.

So, before you buy, download your free list of questions. You don't have to limit yourself to the questions we’ve prepared. Modify the list as you go!

Which of these questions are most beneficial for getting the information you need to make a decision? Let us know in the comments!

Have you ever wondered how to sell on eBay? eBay selling can make over $400K in revenue, and you can start with the money in your pocket. Mike Wilson started Rideshare Reseller and the Golden State Picker social media channel after 30 years of owning a retail furniture store. Now, he’s bringing in revenue of $30,000-$35,000 a month selling on eBay. He shares his tips for success, including where he finds the items he sells today and how to price products.  We’ll share everything you need to know, from setting up your eBay seller account to finding the best products. We’ll even do a guided walk-through where I actually list an item and set up a shop. Once you’ve read this you’ll be confident you can start selling products.

How to Sell on eBay for Beginners

Before we give you a guided walk-through of how to sell on eBay, it’s important to understand why becoming an eBay seller is attractive. We’ll answer questions like:

Is It Worth It to Sell on eBay?

Yes. Selling on eBay can be highly profitable. Mike told us: [su_quote]I’ll find items for free I can sell for $100.[/su_quote] Check out our interview with Mike below:
The average eBay shopper spent $550 in 2021, and the average seller made approximately $4,600, according to Business of Apps. Many sellers only sell a few items, while the top 100 sellers all sell more than 5,000 items per month. Mike hasn’t reached top 100 status yet, but his $30K+ monthly revenue equals about 1,000 products per month at $30 per item.

How Old to Sell on eBay

According to eBay’s Underage User Policy, the seller must be 18 or older to open an eBay store. If parents start an account so kids can sell online before turning 18, the parents are still responsible for following the eBay selling rules. 

How Much Does It Cost to Be a Seller on eBay?

Screenshot of sellers fee from eBay website Starting an eBay store is free. As of January 2023, you can currently list up to 250 items each month at no charge, but eBay may change its terms over time. You can get subscriptions that come with more features for prices ranging from $4.95 per month to $2,995 per month. There are five levels:
  1. Starter
  2. Basic
  3. Premium
  4. Anchor
  5. Enterprise
Most users will not need to go past Basic or Premium subscriptions, at least not starting off. View the table below for the costs and benefits of the eBay store subscription plans. I would just start selling with the free listings, though. The table below is a condensed version of the one found on the eBay Subscriptions page. [su_table responsive="yes" alternate="no" fixed="yes"]
EBAY Subscription Plans
Starter Basic Premium Anchor Enterprise
Yearly subscription converted to monthly rate $4.95 $21.95 $59.95 $299.95 $2,999.95
Monthly subscription $7.95 $27.95 $74.95 $349.95 -
Free fixed price insertions 250 /mo 1,000 /mo 10,000 /mo 25,000 /mo 100,000 /mo
Free auctions in Collectibles and Fashion 250 /mo 250 /mo 500 /mo 1,000 /Mo 2,500 /mo
Additional fixed price insertion $0.30 $0.25 $0.10 $0.05 $0.05
Additional auction insertion $0.30 $0.25 $0.15 $0.10 $0.10
Final Value Fee 3.0% - 15.00% 2.5% - 15.00% 2.5% - 15.00% 2.5% - 15.00% 2.5% - 15.00%
Insertion fee credits for auction-style items that sell not included Yes Yes Yes Yes
Promotions Manager Yes Yes Yes Yes Yes
Markdown Manager Yes Yes Yes Yes Yes
Subscriber discounts Yes Yes Yes Yes Yes
Store home page Yes Yes Yes Yes Yes
Link to eBay Store on listings Yes Yes Yes Yes Yes
Terapeak sourcing insights not included Yes Yes Yes Yes
Dedicated customer support not included not included not included Yes Yes
10,000 fixed price listing allowance with zero insertion fee not included not included not included not included $250.00 /mo
50,000 fixed price listing allowance with zero insertion fee not included not included not included not included $1,000.00 /mo
Best for sellers who Best for sellers who have a handful of products and want a storefront to brand and promote their business. Unlock more zero insertion fee listings, Final Value Fee discounts, and a coupon for eBay-branded shipping supplies each quarter. If you have an extensive product assortment, a Premium Store subscription gives you substantially more zero insertion fee listings. For high volume sellers who have an extensive product catalog or are running a business that would benefit from dedicated customer support. For high volume sellers who have an extensive product catalog or are running a business that would benefit from dedicated customer support.
Eligibility Have an eBay seller account.
[/su_table]

How much are eBay final value fees?

You will pay final value fees on transactions that range from 2.35% to 15% and sometimes include a $.30 transaction fee.  This fee is based on the:
  • Item price
  • Handling charges
  • Shipping service the buyer selects
  • Sales tax
  • Any other applicable fees
You can find the full list of eBay selling fees on the eBay store selling fees page, but I would recommend assuming 15% for all transactions. Mike suggests buying each product for less than 30% of the lowest comparable eBay sales price. 

How to sell on eBay for free

You can’t sell on eBay for completely free, but you can start posting products to sell in your eBay store for free and then just pay the seller fees when the product sells.

Who Pays for Shipping on eBay?

Screenshot of eBay customer service This is a complicated question. You are ultimately charging the customer for the shipping costs when you include a shipping price or if you offer free shipping. Even though the customer covers the cost, you are actually the one who pays UPS, FedEx, or USPS for the shipping cost.  Learn more about eBay shipping.  Mike told us: [su_quote]People generally make their mistakes with shipping.[/su_quote] He also told us: [su_quote]I add my time and packaging costs to shipping to make it more profitable.[/su_quote]

Decide What to Sell on eBay

[su_quote]You don’t want to buy just to buy. Only buy something you know you can sell fast.[/su_quote] Before you start selling on eBay, you’ll want to understand what an eBay business can sell. In general, it is more difficult to sell items like:
  • Items that show nudity or sexual content
  • Alcohol
  • Guns
  • Historical Artifacts
  • Software
  • Counterfeits
  • Medical Equipment
  • Prescriptions
  • Illegal Products
Potential eBay sellers should review the full list of prohibited and restricted items You can sell almost anything else on eBay. Mike told us: [su_quote]The best products to resell are the ones that you know about. From sealed VHS tapes, to electronics, and clothes. Use your life experiences to establish what it’s worth and you’ll make a great living.[/su_quote]

What Can I Sell on eBay?

Screenshot of home & garden from eBay website It’s easiest to make eBay sales if you get the products that sell the most on eBay. The best-selling products tend to be used items like:
  1. Parts and Accessories
  2. Consumer Electronics
  3. Home and Garden
Mike told us:  [su_quote]People will pay a lot of money for vintage record players and you can buy broken ones for cheap. The most common problem is the belt and it costs $5 to fix.[/su_quote]

How do beginners sell on eBay?

Beginners need to avoid scams and selling fakes. If you aren’t sure, don’t buy it. Mike told us: [su_quote]You don’t want to know what someone is asking for the product, but what people are paying for on eBay.[/su_quote]
Want to know more about what sells the most on eBay?
Consider this list. Each item sells fairly easily and you probably have some at home, which makes it easy selling on eBay for beginners.
  • Clothes
  • Shoes
  • Pokemon Cards
  • Cars
  • Books 
  • Music
  • Movies
  • Other Collectibles
  • And More!
Now that we’ve discussed what items sell best on eBay, let’s look at each of these categories.

How to sell Pokemon cards on eBay

Screenshot of pokemon card from eBay website Pokemon cards are a popular item to sell on eBay. There are currently nearly 1.4 million Pokemon active listings by eBay sellers. The pricing ranges from $.01 in auctions to $4 million for a Pikachu Illustrator PSA 9 in mint condition. You’ll want to include the following information in the listing:
  1. Language
  2. Card Condition
  3. Set
  4. Rarity
  5. Character 
  6. Finish
  7. Pictures
  8. Other information to help buyers know more about the card.
Sellers tend to sell these cards used and for under $40 using the “Buy It Now” feature.

How to sell shoes on eBay

You can follow our guide for posting to help you sell shoes on eBay. Remember to specify whether they are men's, women’s, or kid's shoes. Be sure to include the sizing and whether it is in US or EU sizing.

How to sell books on eBay

Screenshot of selling books from eBay website Selling books on eBay is easy because you can start with the International Standard Book Number (ISBN), a unique identifier for books. When you do this, eBay will pull up all the books with that ISBN. Here’s what it looks like. All you’ll have to do is change simple portions like the description, condition, and price.

How to sell baseball cards on eBay

Baseball cards (and other collectible cards) have a grading system that you need to understand before selling them. Unless the item is extraordinarily rare, don’t expect much for any condition less than near-mint. Companies like PSA Grading will certify your cards’ condition to give buyers reassurance.

How to sell clothes on eBay

You can sell used clothes on eBay as long as the listing clearly states “the clothes are used and have been washed.” Remember to include:
  • A title that clearly describes the product
  • Front and back pictures
  • Sizing information
  • Care information
  • Materials that the product includes
  • Other relevant information
Make sure to review the eBay used clothing policy, and counterfeit goods so you don’t break the rules of the site.

How to sell car on eBay

Screenshot of selling parts and accessories from eBay website If you’ve ever wondered how to sell a car on eBay, they have a whole page dedicated to eBay used car sales. You’ll need to:
  1. Register the VIN with eBay Vin Decoder.
  2. If the VIN does not show up, explain why. The most common reasons are the vehicle:
    • Is a pre-1980 model.
    • Was manufactured outside of North America.
    • Was not originally intended for street-legal use.
  3. Use  Autocheck for eBay. (It’s like CarFax but specifically for eBay sellers.)
  4. Create your listing. Use this checklist from eBay to make it easier.
  5. Use an Escrow.com account to give buyers peace of mind between purchase and delivery.
  6. Accept an offer.
  7. Deliver the vehicle.
  8. Request positive feedback.
Next, let’s look at how much it costs to sell the car.
How much does it cost to sell a car on eBay?
Selling a car on eBay will involve the following costs: [su_note note_color="#dbeafc"]
  1. Monthly Fees: $4.99 to $2,999.95
  2. Autocheck: $24.99
  3. Listing Fee: $19 to $79 per car (See what’s included in the table below.)
  4. Deposit Fee: 2.8%
  5. International Fee (optional) 1.65%
  6. Escrow.com Fee: $10 to $890 depending on escrow amount up to $100K.
  7. Total Potential Fees: $60 to $8,500 assuming the vehicle is under $100K.
  8. Accurate Shipping Costs: $1,300-$2,000 (Estimated using a car carrier from Las Vegas to New York City. Pricing will vary based on distance, gas prices, and other factors.)
[/su_note] Learn more about eBay Motors Fees. [su_table responsive="yes" alternate="no" fixed="yes"]
Listing Type Basic Package: $19 Plus Package: $49 Premium Package: $79
Auctioned Cars 12 photos 18 photos Gallery Plus upgrade
Auction up to 7 days Auction up to 7 days Auction up to 10 days
AutoCheck (cars & trucks listings only) Reserve price up to $20,000 (cars & trucks, other vehicles & trailers, and boats listings) Unlimited Reserve price
Reserve price up to $10,000 (motorcycles and powersports listings) Add 'Buy It Now'
AutoCheck (cars & trucks listings only) AutoCheck (cars & trucks listings only)
Bold title and subtitle upgrades
Fixed Price Cars 12 photos 18 photos 24 photos
Duration up to 7 days Duration up to 30 days Gallery Plus upgrade
Vehicle price up to $10,000 (cars & trucks, other vehicles & trailers, and boats listings) Vehicle price up to $20,000 (cars & trucks, other vehicles & trailers, and boats listings) Duration up to 30 days
Vehicle price up to $5,000 (motorcycles and powersports listings) Vehicle price up to $10,000 (motorcycles and powersports listings) Unlimited vehicle price
AutoCheck (cars & trucks listings only) AutoCheck (cars & trucks listings only) AutoCheck (cars & trucks listings only)
Bold title and subtitle upgrades
[/su_table]

How to Setup eBay Account to Sell

If you don’t already have an eBay account you’ll want to:
  1. Go to the eBay Home Page.
  2. Create an Account. 
  3. Start a Seller Account.
  4. Go Through the Guided Tutorial.
  5. Add Payment and Billing Methods.
  6. Set Shipping Preferences.

Step 1. Go to the eBay Homepage

Screenshot-of-eBay-website Go to the eBay homepage here. Click “sign in” or “register” in the top left corner. If you already have an account, jump to Step 3 (because you likely already know how to create an account); otherwise, go to Step 2.

Step 2. Create an eBay Account 

When you click “Register,” your screen will look something like the one below. Choose “Business Account” and sign up with Google, Facebook, Apple, or email. Whichever you choose should follow a similar process. Screenshot of business account from eBay website Next, you’ll confirm the information and click the “Create an account” button. Screenshot of create an account from eBay website You’ll need to fill out your contact information and submit it.  Screenshot of contact information from eBay website Then, go to your email and verify your new eBay account. If other pages show that you need to verify your account, go to Account Settings. You will be able to verify through there as well.

Step 3. Start a Seller Account

Go to ebay.com/sellerhub, which will look like the picture below: Screenshot-of-eBay-website Click the “Start using Seller Hub” button, and you will go to a screen that prompts you to use the guided tutorial. Screenshot-of-eBay-website

Step 4. Go Through the Guided Tutorial

Once you are in the seller hub, which is often called my e bay, you will go through a short guided walkthrough about selling things on eBay.

The seller hub is the business account portal. First, it will show you how to customize your screen. 

Screenshot of customize your screen from eBay website You can get by without customizing your layout for now, but once you start selling, I’d recommend setting it up with the Sales, Orders, and Feedback as the top three spaces.

Next, it shows you that you can go to listings from anywhere in the seller's portal.

Screenshot-of-eBay-website The guided walkthrough also shows you where to find orders (right next to listings in the picture above).

Next, you can view your messages

The messages are in the top right corner of your screen as shown in the picture below: Screenshot-of-eBay-website

eBay Seller Hub overview

There are five rows of default data blocks. We’ll cover each row to help you understand more about what you can view from your eBay business screen.
Seller Hub Row 1
The first row of eBay’s seller hub includes the following sections from left to right, as seen in the picture above:
  • Get Started: This section includes a New Business Seller Guide, Subscription Options, New Listings Video, Listings Best Practices, and other useful resources.
  • Tasks: This section starts empty and adds tasks as you need to do something.
  • Sales: This section shows how much you’ve made in the last 7 days, 31 days, and 90 days.
Watch eBay’s selling video guide: [su_youtube url="https://youtu.be/ZoJbi8f2gzI"]
Seller Hub Row 2
  • Orders: This section includes orders that need to be shipped, returns, cancellation, ones waiting for payment, orders waiting for feedback, and orders that can count as combined purchases.
  • Listings: Create listings, and view active listings, scheduled listings, and unsold closed listings.
  • Traffic: Learn how many people are seeing your listing, clicking on it (clickthrough rate), viewing the page, and the percent of page views that result in sales (conversions).
Screenshot-of-eBay-website You can see the second and third rows in the picture above.
Seller Hub Row 3 
This row includes three really important areas of the seller's hub.
  • Seller Level: You can be top-rated, above average, and below standard. Once you reach top-rated or top-rated plus, you’ll have an easier time competing against other sellers. We’ll talk about how to become top-rated later in the blog.
  • eBay Academy: This is critical because an established seller can get lazy. Both top and new sellers should continue to learn how to sell stuff on eBay faster.
  • Feedback: Buying and selling on eBay requires trust. That’s why reviews matter. You want to pay attention to your reviews because they impact how your items are displayed in comparison to other sellers. Make sure to provide feedback to your buyers and respond to any feedback you are given.
Seller Hub Row 4 
[su_youtube url="https://youtu.be/DG7WaXXG0CE"]
The default setup for seller hub row four includes:
  • Research: Learn which products sell better on eBay using TeraPeak.
  • Shortcuts: These are just useful links for people selling items on eBay.
  • Selling Tools: Integrate eBay with other programs like Quickbooks, eBay Seller Capital, and automate your responses.
You can see row four and five below: Screenshot-of-eBay-website
Seller Hub Row 5
This row is focused on announcements from eBay. 
  • Announcements: You’ll find updates from eBay to let you know what they have released.
  • Promotional Offers: You’ll find special promotions eBay is offering. At the time of writing, they offered 200 listings without insertion fees.
  • Monthly Limits (Account Summary): (This section might be labeled with either title.) It summarizes how many more listings you have under your plan.

Step 5. Add Payment and Billing Methods

The next step a new seller will need to do is add their payment and billing methods. You’ll need to be signed in to add your payment options, but you can add a:
  • Personal bank account
  • Business checking account
  • Paypal account
  • Credit card
  • Debit card 
Use this link (only works if you are signed in) to go directly to the page to add payment and billing options. They send the payments to your preferred account.

Step 6. Set Up Your Shipping Preferences

You’ll want to set up your shipping preferences. The page will look like the one below: Screenshot of eBay website You can make the following changes:
  1. Enroll in the Global Shipping Program: Over 50% of eBay sales are to overseas customers, so you’ll probably want to join it.
  2. Exclude Shipping Locations: You can choose to limit potential buyers based on the continent, region, or country. 
  3. Create Shipping Rate Tables: Create default rates to charge when a product is purchased.
  4. Offer Other Shipping Options: Use calculated shipping, combined payments, flat shipping rates, and other shipping options. 
Go to shipping and tracking for eBay sellers to learn more about shipping details. Shipping options are a complicated subject. I suggest looking at how other eBay stores structure their domestic and international shipping options before deciding the rules for your shipping labels. Screenshot of shipping and tracking from eBay website Now that you know how to become an eBay seller, it’s time to discuss how to find items to sell on eBay.

Find Items You’ll Be Selling on eBay

You’ll need to find products to sell. Mike suggested: [su_quote]Start by selling stuff you don’t want in your home.[/su_quote] Most people have a ton of junk they don’t want or need. You can create an eBay listing with low risk while learning the eBay platform. After you have a better understanding of the platform, you can look for items to resell by visiting places like: Mike also told us: [su_quote]Network with other pickers to build your own brand. They will see things that you like and reach out to you.[/su_quote] It gets better! He shared advice on ways to find out the price products sell for on eBay.

Tools to Estimate eBay Sales Price

Screenshot of worthpoint website Mike suggested trying software like WorthPoint, but you can also use the eBay app to check prices on your phone. If you want to be able to calculate your profit in the field, consider using a tool like the eProfit eBay Profit Calculator on iPhone or Android. Once you have found an item worth selling on eBay, it’s time to create your eBay listing.

Create Product Photos

Product photography is critical for selling on eBay and other ecommerce platforms. Most eCommerce platforms suggest white backgrounds for your photos. There are two main ways of accomplishing plain white photos.
  1. Use a product photography box like the one below.
  2. Use a background removal tool. 
Screenshot of light box from Amazon website eBay has a background removal tool, but it’s not that good.  I personally prefer Canva’s background removal tool. It works way better than most I have tried.

How to Post on eBay

When you are ready, start a new listing in the seller portal. It’s near the top of the hub. Just click where it says “Create Listing.”  Then, you’ll go through the following process:
  1. Explain What You’re Selling.
  2. Add Pictures.
  3. Add the Title.
  4. Set the Item Category.
  5. Provide Additional Details.
  6. Describe the Condition of the Product.
  7. Provide the Description of the Product.
  8. Set Pricing.
  9. Set Shipping Rates.
  10. Set Preferences.
  11. List it!
We’ll cover each of these steps to help you prepare using an example. I created one with one of my kid’s old The Rolling Stones 1975-US Tour Replica T-shirts. Before we dig in further, check out the best practices video by eBay: [su_youtube url="https://youtu.be/ZoJbi8f2gzI"]

Step 1. Explain What You Are Selling

First, eBay will want to know about your listing. It will look like the image below. If you are too precise it might not show up. For instance, mine did not show up using the term: “Black the Rolling Stones 1975 US Tour Replica T-shirt Kids Medium,” which is the most accurate description of the shirt.  They also have a way to use templates, but you have to create them. You won’t have a template when doing your first listing. You should probably create templates as you list items for simplicity later. Screenshot-of-eBay-website

Step 2. Add Pictures

Screenshot of eBay website You can add up to 24 pictures for free or choose Gallery Plus for $.35. You can also add videos. eBay’s policies on pictures require:
  • A minimum of a single image per listing.
  • Keep sizing at least 500 pixels on the long side and less than 12,000 pixels calculated using height plus width.
  • Images must be JPG (all but GIF convert to JPG), BMP, GIF, TIF, or PNG no more than 12 MB file size. Just save a JPG quality 90+ and save space on your computer or phone.
  • Do not add borders to images.
  • Do not add text or artwork to pictures.
  • eBay catalog stock photos cannot be the primary photo for a used item. Books, movies, or video games are exceptions.

Some pictures don’t work right on eBay

In addition, your photos will not work correctly if you use: [su_note note_color="#dbeafc"]
  • GIF87 format: These will not show at all.
  • TIFs with transparent background: This format might result in a black image.
  • CMYK color: You’ll need to convert to RGB. eBay suggests using  cmyk2rgb.com to convert your photos.
  • PNG: eBay converts transparencies to a white background and saves them as JPG. 
[/su_note] If you host your own pictures, they might fail to show if you do not follow eBay’s photo rules. 

Review the eBay App Picture Links

You may also want to review the following links.
  • Adding Images to Listings: eBay explains how to add photos and use the background removal tool to create white images.
  • Photo Tips: Learn how to take photos to make selling on eBay easier.
  • Picture Policy: Make sure you don’t break their policies. The most important ones are:
    • Photos must accurately represent the item.
    • Placeholder images are not allowed.
    • Used, damaged, and broken items must be accurately represented.
    • Do not add any text, callouts, or other items to the photos. Only include the item or items for sale.
eBay has a background removal tool, but it’s not that good. If you want great product photos, either:
  1. Use a product photography box.
  2. Use Canva background removal tool. It works way better.
Next, you may want to adjust your title.

Step 3. Add an Item Title to Your eBay Store Store Listing

The title should include relevant keywords at the front because it is the first thing people see. eBay allows titles up to 80 characters long. This includes spaces. For additional listing fees, you can add:
  • Bold Titles: $2.00
  • Subtitle: $1.50 for up to 55 characters
  • Custom Label or SKU: Free. (Make it easy to track orders and packages with SKUs up to 50 characters.)
Below you can see a comparison of a standard listing and one with the add-on title features. Screenshot of eBay website Next, we’ll discuss the item categories.

Step 4. Set the Product Category

The product category is used to help eBay and customers identify what kind of product you are selling. You need to make sure this is correct because it will limit how fast an item sells if you misclassify it.  There are over 20,000 different product categories from which to choose, and they are updated twice per year. The last update was in September 2022 and there were 438 new categories, 230 retired categories, and 204 changes.  The listing page will help you find categories, but sometimes they aren’t intuitive. I would have expected a teen’s t-shirt to be under clothes, but I had to go with the following category: Entertainment Memorabilia > Music Memorabilia > Rock & Pop > Artists R > Rolling Stones If you can’t find what you’re looking for on the Complete Your Listing Page, you’ll want to use the following page to find the best option for your product: Preview Category Changes.

Step 5. Provide Additional Details

Make sure to provide as many item specifics as possible. The more you know about the product and item specifics, the better your sell-through rate will be. Use TeraPeak (mentioned above) to establish more information that will help your listing appear in search results. Screenshot of eBay website

Step 6. Describe Condition of Product

Selling on eBay requires providing potential buyers with information about the condition of the product. A buyer pays what they feel the product is worth based on the condition. If you misrepresent your products, you aren’t going to do well selling on eBay because you’ll have lower customer satisfaction and negative feedback. This will make you rank lower in search results.  Just be honest. People don’t expect inexpensive items to be perfect, but they want to know what they will be getting. You have up to 1,000 characters to describe the condition of the item you’re selling on eBay. Screenshot of eBay website

Step 7. Describe Product

In the product description, you’ll want to describe the item using the same keywords you include in the product title and subtitle. Add additional information that goes beyond what people can see in the search results. Also, describe any features or stories that make the item unique. 

Step 8. Set Pricing

Even with a great item description, title, and positive feedback, you won’t get more sales if your pricing is too high. There are two main pricing strategies for selling on eBay:
  1. Auction Format
  2. Buy It Now Listings 
We’ll discuss each of them so you understand how to sell something on eBay.

Auction Style Listings

This selling format is used for products that have a large demand and for which it might be hard to establish a reasonable price. Auction style listings can be highly profitable.The highest selling auctions have included yachts, towns, homes, and lunch with Warren Buffet. You can set the following conditions with an auction:
  • Duration: You can choose three, five, seven, or 10 days.
  • Starting Bid: Set the starting price as low as one cent. The lower the opening bid, the better odds of creating a multi-bidder battle that can create extremely profitable products. While writing this section, the auction with the most bids started at 99 cents and has seven bidders competing for a competitive price that is currently around $75 dollars.
  • Buy It Now Option: You can set a price where people can bypass the auction, but it needs to be 30% over the starting bid. If you have a reserve price, make sure the “Buy It Now” function is above the reserve price.
  • Reserve Price: You can set a price that the auction must exceed. You have to pay a 7.5% fee to enable a reserve price, but it minimizes your losses if demand isn’t there for the product.
  • Allow Offers: People can choose to send you an offer and you can auto-accept, accept, counter, or reject the offer. 
  • Schedule Listing: Set a specific time and date for the listing to begin.
  • Sell as Lot: Sell multiple items together. If you have multiple items you think buyers will want collectively, you can include them in a single listing to stay under your monthly selling limits. (The free plan is 250 listings per month and $20,000 starting off). This is helpful for sellers with lots of products.
  • Autorelist Checkbox: If you have listings that don’t sell during the auction period, you can use this feature to relist them up to eight times. Be careful with this. It can eat profit really quickly.
  • Private Listing: Some buyers may not want everyone to see what they buy with their personal account. This checkbox lets them bid without showing who they are to the public.
Mike warned: [su_quote]I prefer the Buy it Now option because it would become unmanageable to manage 1,500 auctions.[/su_quote] Let’s look at the Buy it Now options next.

Buy It Now (Fixed Price) Listings

You can choose “Buy It Now” as the preferred sales method in the quick listing tool. It makes it so someone can buy the products for your listings immediately. Buy It Now has fewer listing options than the Auction method, but has one highly beneficial feature that auctions don’t. [su_table responsive="yes" alternate="no" fixed="yes"]
Buy It Now Benefits Fields Missing From Buy It Now
List multiples of the same item with the quick listing tool No Duration field
Less fields to fill out No Starting Bid field
Volume pricing for larger buyers No Reserve field
Great for online retailers
[/su_table] These make selling on eBay much easier than the early days when you had to sell everything in an auction. It also makes it so new products can be sold easier, but only about 20% of sold items are new products. According to eBay.com/help, you can list multiple of the same product with only one insertion fee by using the quantity field.  You’ll still have to pay the final transaction fee for all sold listings, but if you carry multiples of a single product it will save money by avoiding insertion fees. 

Step 9. Set Shipping Rates

eBay offers numerous shipping options. You’ll start by choosing whether you will offer:
  1. Standard Shipping
  2. Freight
  3. Local Pickup Only
Screenshot of eBay website Each of these has different options you can choose. We’ll go through each separately to help you understand your options.

eBay Standard Shipping Options

Standard shipping is for small to medium size packages. You can specify the weight and dimensions of the package or you can use eBay’s suggested shipping details. For odd-shaped boxes, you can mark it as an irregular package. Screenshot of shipping options from eBay website Once you put in these details, you will need to make changes regarding domestic and international shipping. 
Domestic Standard Shipping on eBay
The default setting is “Calculated” using USPS First Class and the customer pays for the shipping. You can edit this to fixed-rate pricing, allow free shipping, provide a calculated shipping rule, or add services.  You’ll find that it is easiest to use their default settings, but it may not be the most profitable.  Changing these settings can be more profitable, but you’re going to have to learn more about shipping. Most consumers (90%) cite free shipping as the main reason they shop online and it shows with 30% higher ticket values. Check out an eBay price calculator to help you make a profit on completed listings with free shipping. You can also add a handling fee to cover time and materials for packing.
eBay International Shipping
If you sell to an international customer base, you’ll want to use the Global Shipping Program. You just follow this simple process:
  1. Pack the product in your packaging.
  2. Attach the shipping label.
  3. Mail the package to eBay’s global shipper. 
  4. Global shippers handle the international portion of the shipping.
You can also add other shipping services, but the Global Shipping Program helps create a better shipping record because you get rated five stars for shipping as long as you:
  • Provide free domestic shipping.
  • Handle the order in a same-day or one-day time frame.
  • Meet the sizing and value limitation.
Screenshot of international shiping from eBay website You can also offer Local Pickup if you wish. Next, we’ll discuss how to ship freight on eBay.

eBay Shipping Freight 

Screenshot of shipping freight from eBay website Freight is for heavier items and doesn’t offer as many options. Just add the weight, dimensions, and excluded locations. Then, the shipping amount will be billed to the customer on purchase. You can see what it looks like in the picture below:

eBay Local Pickup Only

You can set items where people can only pick them up locally. This might be helpful if you are selling large equipment or cars, but it somewhat defeats the purpose of selling on an online marketplace. Screenshot of local pickup from eBay website

Step 10. Set Preferences

There are a few preferences you can set on an eBay listing including:
  • Payment Types: There are four options for a payment method.
  • Returns: You can choose to accept or reject returns for domestic and international customers.
  • Item Location: If people want search results near them, they’ll want to be able to see where the product is located.
Screenshot of setup up preferences from eBay website These are fairly intuitive, but you may want to know more about the payment method options you can set. 

Automatic Payment Methods

eBay has the following automatic payment method options:
  • Apple Pay
  • Credit card 
  • Debit card
  • eBay gift card, voucher, or bucks
  • Google Pay
  • PayPal account
  • PayPal credit
  • Pay upon pickup
  • Spendable Funds
  • Wire transfer for select eBay categories 
By default, your customers will be able to choose which automatic payment method they prefer.
Additional Payment Options
Some categories also allow you to add additional payment options like:
  • Bank account transfers (bank cash transfers or bank wire transfers)
  • Cash on pickup
  • Checks
  • Money orders
  • Online payment services including:
    • Escrow.com
    • XOOM
    • Allpay.net
    • Fiserv
    • CertaPay
    • Nochex.com
In the trial listing, it only allowed cash on pickup, checks, money orders, and required payment immediately with “Buy It Now.” Screenshot of payment options from eBay website Read eBay’s payment method page for more details on payment options. Make sure you understand which payment options qualify for the eBay money-back guarantee. Large purchases and payments outside of the eBay platform are the most common exceptions.

Step 11. List it!

All you have to do now is click Submit Listing and you have completed the posting guide. You’ve created a listing! If you have more products to sell, repeat the process until you are done listing everything. Screenshot of manage active listings from eBay website

How much can you sell on eBay before you pay taxes?

You can sell $600 before the Internal Revenue Service requires eBay to send you a 1099-K. This is a dramatic change from 2021 when you could earn up to $20,000. Make sure to review your business details each year (especially for 2022 because I suspect a lot of sellers will get a surprise tax bill). Learn more about sales tax and income tax for eBay sellers. Next, we’ll discuss how to successfully sell on eBay.

How to Sell on eBay Successfully

Mike gave us some input on how to become a successful eBay seller including the following advice: [su_quote]If you want to know how to sell fast on eBay, only buy things people are buying.[/su_quote] He also emphasized excellent customer service: [su_quote]Answer people’s questions, focus on Buy It Now items, and be prompt with sending out products.[/su_quote] Next, we’ll answer some of the most commonly asked questions.

eBay FAQs

With such a vast platform, it is no surprise how many questions people ask about selling on eBay. Find answers to the common ones here:

How much does it cost to be a seller on eBay?

You can list up to 250 items for free, but you should expect that 15% of the final ticket price will go to eBay. In addition, eBay has monthly plans ranging from about $4.99 to nearly $3,000. Jump to the eBay seller costs section of the blog for more information.

How to use my eBay garage?

eBay Garage is the automotive portion of eBay. eBay makes it really easy to find parts that fit your car after you add the following data.
  • Year 
  • Make
  • Model
  • Trim 
  • Engine
You’ll see a page that looks like the picture below: Screenshot of eBay garage from eBay website I will warn you that while researching this blog, I had an acquaintance go out of his way to warn me about the risks of using eBay for cars. Here’s the conversation: Philip Plastina: “I've tried doing this twice in my life and it's been a total disaster. eBay took a ton of money from me [and] it took forever for me to get it back. The car delivery service brought the car to the wrong city to drop it off. Your best bet is to put it on auto trader and Facebook Marketplace. Craigslist is shot too; don’t use it.” Question about selling car on eBay website On a sidebar, if you like electronic dance music, check out Phil’s group Dancetronauts.

How to increase sell limit on eBay?

In case you exceed your selling limit which starts at 350 items and $20,000 per month, there are three ways to increase your selling limit on eBay:
  1. Get great feedback. (Free)
  2. Request a higher limit. (Free)
  3. Upgrade your plan. (Increased monthly fees)
I suggest pursuing the options in this order because getting great feedback just means doing a good job, while a request is as simple as an email, but the plan upgrades cost money. Learn more about eBay selling limits.

How to sell on eBay without PayPal?

You do not need PayPal to sell on eBay since eBay ended its partnership with PayPal in June 2021. They still allow you to accept PayPal but also accept:
  • Apple Pay
  • Credit card 
  • Debit card
  • eBay gift card, voucher, or bucks
  • Google Pay
  • PayPal credit
  • Pay upon pickup
  • Spendable Funds
  • Wire transfer for select eBay categories 

How to sell multiple items on eBay?

You can either sell multiple different items in a single batch or you can list multiples of single items and set a quantity available. The process is basically the same for each with slight variations. View the process for each in the table below. The main differences are colored orange: [su_table responsive="yes" alternate="no" fixed="yes"]
Step Number Multiple Items in Single Batch Sell Multiple of a Single Item Individually
1. Describe Your Item Describe Your Item
2. Add Pictures. Add Pictures.
3.  Add Title. Add Title.
4. Set The Item Category. Set The Item Category.
5. Provide Additional Details. Provide Additional Details.
6. Describe Condition of Each Product.in Lot Describe Condition of Product.
7. Provide Description of Each Product. Provide Description of Product.
8. Set Pricing. Maybe Auction or Buy It Now. Mark “Sell As A Lot.” Set Pricing. Must Buy It Now. Set Quantity.
9. Set Shipping Rates. Set Shipping Rates.
10. Set Preferences. Set Preferences.
11. List it! List it!
[/su_table]

Did We Succeed at Showing You How to Sell on eBay?

We try to make it as easy to succeed as possible. When we get an opportunity to provide a guide that can easily be followed anywhere, it excites me personally. We hope you actually find them easy to use. Did you find this step-by-step eBay selling guide useful? What can we improve? Are there other platforms you’d like us to cover?
Did you know it can cost over $100,000 to develop a new product and up to $1.5 million over the next five years to bring a successful new product to market? That's a lot of money to spend on an unproven idea. That’s why it's important to conduct market validation before investing that kind of money. Paul Akers has launched hundreds of new products with FastCap and he shared his wisdom with us. He shared tips on validating your idea, showing it to others, what not to do, how to perform lean market validation, and how to know whether the first reaction is just being nice or telling you that you hit the jackpot. We'll walk you through everything you need to know to gain a deeper understanding of market validation including the types of validation, validation strategies, the process you'll go through, and finally judging whether or not you have a winner. Get ready to become a market validation ninja!

What is market validation?

Market validation is the process of verifying that there is a demand for a product, service, or business in your target market. The process is similar for all validating ideas, but depending on what you are trying to validate, there are slightly different steps that will need to occur before you go all-in on a product, business, or service.

What is idea validation?

Idea validation is simply confirming that potential customers agree you have a brilliant idea that will solve problems and eliminate pain points.  You'll want to talk to people you trust and verify that they don't think you are crazy. If they are potential users and they don't think it makes sense, you can stop there with no money spent.

How to validate a product idea

When attempting to validate a product idea, the process will be similar to all other types of validation, but you will need to create either a minimum viable product (MVP) or a prototype. For those not familiar with the terms:
  • MVP – a product that can be sold and meet the minimum expectations of the target market
  • Prototype – a product meant to represent what the finished product will be like, but may not be as functional as an MVP
The difference is most noticeable in software products and other digital products. This is because pictures representing the product can be created for $500-$10,000, but the final product could cost as much as $1M. This is the most important part that conserves resources as you validate product ideas.

How to validate a business idea

A man at a desk typing on his laptop Validating a business idea should be primarily focused on whether there is value to the idea, meaning does the business save others time, money, or other resources. In addition, business validation should attempt to identify the size of the target market. For entertainment products, the validation should be whether the product entertains people and for how long. These are unique because the problem being solved is boredom and they are trying to fill the most time. If the business involves a product, product validation should be conducted to establish the scope of the problem the product solves. This type of validation is typically going to be for smaller companies with more limited resources that are looking to create a unique value proposition.

How to validate a startup idea

If you are trying to create a product or service that will change the world, you'll want to use a similar market validation process to other types of market validation. It will be on a much larger scale because your target market goes from 370 million to 7 billion people.  When you think of companies like Tesla and Uber, their target audience is global with far-reaching demands, and they play by different rules. You may have to validate the concept in multiple countries due to the different cultures and expectations. If you have a startup idea, the prospective customers should be in the millions (or billions) and the payback period can be far longer because the solution has to grow globally before it can focus on profitability. This type of company might not test a single product, but an entire local market to validate whether the idea will work in a region. Product idea testing will need to be on a much larger scale for the purpose of testing whether the expected customer base has an appetite for the solution.

What is business model validation?

The business model validation process is focused on a holistic view of the company and how it will operate. One of the best ways of planning it is Alex Osterwalder’s Business Model Canvas which consists of nine blocks:
  • Key Partners – Who or what is the company teamed with and what benefits do they receive because of the partnership?
  • Key Activities – What actions should the company take to deliver the value proposition?
  • Key Resources – What resources are absolutely necessary to deliver the value proposition?
  • Value Proposition – Products, Services, and what makes the company different. This is the center of the Canvas because everything revolves around it.
A chart showing different value propositions
  • Customer Relationships –How will the company interact with customers? Transactional, long-term relationship building, allow customers to serve themselves for a fee?
  • Channels – What are the lines of communication and distribution that deliver customer value?
  • Customer Segments – Which segments of the market do you serve and what is each customer segment like?
  • Cost Structure – What are the financial costs that are absolutely necessary including fixed costs, variable costs, and costs associated with scaling?
  • Revenue Streams – How will the company make money? One-time fee, pay as you go, subscription model?
Now that you know about the main types of market validation, let's look at how to perform market validation research.

How to perform lean market validation research

Market validation research consists of a few main steps:
  1. Document the strategy.
  2. Identify the target market.
  3. Create tests.
  4. Get input from the target market.
  5. Analyze the results.
  6. Revise assumptions if necessary.
  7. Accept or reject assumptions.
Let's discuss documenting the validation strategy

Step 1. Document the validation strategy

While doing research, I found two really phenomenal resources that I feel, when taken together, really communicate the essence of market validation and the differences in strategies that people can take. The first is an article by Ryan Robinson and explains how he took an idea and $500 to test his product concept of a California trails guide. It explains the entire market validation process phenomenally well, but at 25,000+ words it is a long read. At UpFlip we try to pack as much value in 1/10th of the words. The other is a PDF from Florida State University that spells out the entire market validation process in three steps:
  1. Document your assumptions with the business model canvas.
  2. Test your assumption by performing customer interviews, and keep revising your assumption until you get validation.
  3. Prove market traction through customer reviews.
The most important aspect of creating a strategy for market validation is providing a clear vision of the problem you are trying to solve, the product idea, the assumptions, and the market validation process.  Like other plans, a market validation plan should be in writing, but be flexible enough you can change it as you learn more about the market reception. Keep reading to learn how to identify the target market.

 Step 2. Identify the target market

A man drawing a red dart board on a white sketch pad You probably have a general idea of what the target market is, but you'll need to do some online research to establish a more defined target market. At a minimum you'll need to establish the following information:
  • Is your target market people or businesses?
  • What industry and/or job title are the people?
  • Age range
  • Sex
  • Household income
  • Special circumstances that apply to your target market. For instance, a wheelchair maker should be concerned with what people who need wheelchairs think about the product.
These should help you start creating user personas (fictional representations of your target demographic), but expect to revise each user persona throughout the process. Despite the benefits these create, Paul told us: [su_quote]If you aren't already an expert in the field, you are probably going to have a hard time creating a product without throwing a lot of money at marketing. Even then it's no guarantee.[/su_quote] Revising as you go is an important part of running a business because you will never have complete data. Once you have this information, it's time to move to the next step, creating tests.

Step 3. Create tests

There are a variety of tests that can be used for market validation. The most common are:
  1. Surveys – A list of unbiased questions to get opinions from the target market online or through the mail
  2. Interviews – Like a survey, but administered by a person via phone, video chat, or in-person
  3. A/B tests – A test comparing two different choices that are normally performed in two different ways:
    1. Show a person two alternatives to see which they like better. Similar to how eye tests work.
    2. Have two different landing pages and send some people to one and others to the other to test which design people like more for software development or written content.
  4. Prototypes and MVPs – Tools to establish whether people actually like the product as designed before spending more on mass production
  5. Check Google TrendsA website that analyzes trending searches on Google to verify if there is demand for what you are trying to create
Paul Akers told us: [su_quote]Test the product yourself first. If you find yourself using the old one, it’s no good. If you automatically go for the new one, you’re on the right track.[/su_quote] Check out our interview with him about how to come up with great ideas and validate them. [su_youtube url="https://www.youtube.com/watch?v=CdxKZWfD4fA&list=PLaU6uY9Yy7Xk4vDr2zIpwASueoPTh1MFg"] Paul also talks about market research in the video so we'll discuss it for a minute.

Performing Market Research

You need to understand a little about market research to perform market validation, so here's some tips. 
  • Open-ended questions tend to get people to talk more.
  • Too many interviews increase costs, while too few increase the margin of error.
  • You want to know "What problem does the product solve?"
  • Those with the deepest knowledge on a subject give the best input.
We went into much more detail about surveys and interviews in our Hub article about how to perform market research, but it should be noted: For most companies, you'll want to use each method during different stages of validation. For instance, you might want to start with online surveys before designing a prototype, then do interviews so the participants can try the prototype. Then use a style of A/B testing to verify which type of packaging, pricing, or web design works better. Check out our hub article about how to perform market research for more detail about surveys and interviews. Next, we'll provide some sample questions to include during surveys.
Survey Questions
Some of the questions you might want to ask include:
  1. How would you expect to use this product?
  2. How often would you use this product? Why?
  3. What features do you think should be added to this product?
  4. What features do you think should be removed from this product?
  5. Where would you expect to find this product?
  6. How much would you pay for this product?
Once the questions and other tests are ready, it's time to get input from your target audience.

Step 4. Get input from your target audience

The next step is to share information with your target audience. Using Facebook ads, your current mailing list, or your personal network is normally a good way to start as long as they fall within your target market. Existing companies should consider paying customers that use a current product or service for input. Customer input is crucial for a new product concept or feature because they are part of your target market. Real users will already be familiar with your pricing model and can give better information about the product-market fit. If you are using Facebook ads, make sure you are collecting their name, email, and phone number so that you can follow up with them. This is especially important if you are using a longitudinal study that tracks people's perceptions over time.

Why is customer feedback valuable during market validation?

When users provide feedback about the solution through multiple phases of the market validation you:
  • Reduce costs
  • increase users' knowledge
  • Provide the team with in-depth interviews and insights 
You might find this very valuable because the users will already be more familiar with the feature set than getting new users after the first few interviews. After you have gathered data, the next step is to analyze the results.

Step 5. Analyze the results

A team around a brown desk talking about analysis After you have gathered data from interviewing people, it's time for the product team to analyze the data from interviewing customers and other prospective users. Most information will be qualitative data, such as what new feature would be best for a good product-market fit. There may be some difficult math involved when testing how features and pricing will impact customers' perceptions, product success, and revenue. Those calculations are the topic for another blog though. (If you want a blog about mathematical modeling let us know!) Once you've analyzed the results of the interview questions, it's time to determine if the testing validated whether your concept has value, doesn't have value, or needs more feedback.

Step 6. Revise Assumptions (If Necessary)

After analyzing the results of your market validation, you may find that you don’t have a solid yes or no answer. In that case, you need to look at your assumptions and see if you can narrow them down. This may include:
  • Following up on interviews
  • Looking for patterns you may have missed
  • Considering if there is a target market that you should add or subtract
  • Using a different form of market validation
If you need to do this, make sure to do it. While the additional cost may seem too expensive, it is far less expensive than manufacturing and marketing a product that will flop. 

Step 7. Did you get market validation?

You now have feedback on your solution and are ready to decide if users validated your idea or not. While you may have a sense that the test should be either a yes or no answer, this is not the case. There are actually three possibilities that should signal success during the testing: A man holding a white iPad
  • The test is a success if the feedback shows there is no market fit during early-stage research.
  • The market validation is a success if the product-market fit shows that the product solves users' pain points. This means the project can continue to the next phase in the strategy.
  • Testing shows more questions need to be asked before the product manager passes the project on to manufacturing.
Paul gave the following example: "When you ask someone what they think, they are likely to give you three answers:
  1.  'It doesn't make sense,' 
  2. 'That's cool,'
  3.  'How much can I buy it for?'
 Only one is a real winner because when people say 'that's cool' they might be trying not to hurt your feelings."

What to do after you get market validation

We hope this information helps you test to see if your business is market-ready. If you decide to move forward with your business idea, you should read our blog on how to write a business plan. Alternatively, check out our blog on how to start a business or return to the business hub. We love readers’ feedback. What market validation techniques have you found the most success using?

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