by Meghan M.M. Trimm
If you’ve ever been to an auction you know really cool items often go for a fraction of their retail price. This phenomenon is a catalyst for many auction lovers to get into resale. Resale businesses can take many forms from antique booths to virtual storefronts. We asked a few successful re-sellers who frequent Beloit Auction to share their tips of the trade. Here are their top suggestions for starting a resale business.
The first thing you should do if you are thinking of becoming a re-seller is think twice. Ultimately what sounds like a fun hobby is harder than it looks. It takes discipline, organization, and a keen eye for what customers want to make this type of venture work.
One man who learned the antique business from his parents said, “If you don’t love it, you won’t succeed.” So, question your real motivations. If it’s a get rich quick idea, maybe re-selling is not for you. If you have patience, passion, and a level head, read on.
Find Your Thing & The Customers Who Will Love It
The best entrepreneurial advice I’ve heard was from professor of Economics at Beloit College, Warren Palmer. He said, “Do something you love for people you like.” With that in mind, choose specialty and customer segment that align with your own tastes. That way, you will enjoy the job and have a keener eye for quality. Plus, if you love what you do, and you end up stuck with an item, there’s no harm in holding on to it for a little while.
That being said, you should be getting into business to make money. There are no brownie points if you buy a bunch of stuff that you can’t sell and fill your house with it. Take your choice seriously and get to know your customers well.
- Start by thinking about what items you love. Narrow it down to a few specific things. Is it vintage rings circa 1910-1930? Is it power tools? Classic cars?
- Next, can you name ten people who might be interested in buying? Can they help you name people?
- Most importantly, go talk to the people you think might be potential customers to gage their interests. Call them up! Find out if you were right about their interests. What other kinds of items are they interested in? Would they be willing to buy from you if you happened to find what they were looking for?
There is no point in guessing. Asking real people about their interest in your business is the only way to know if you are onto a good money making idea or if you are just a hoarder projecting.
With a few customers in mind, it should be easy to make your first few sales. Buy things you know they will want at prices you know they will like (because you’ve talked to them). Get used to buying and selling and getting to know and gage new customers before you invest in renting space or collecting tons of inventory.
Focus on making sales immediately. As a beginner your mantra should be small, simple, fast. Use this stage of your business to learn quickly about pricing and selling. Make that process better and smoother every time. Become an expert on what you are selling, the industry, the history, the people who buy and sell it. Build a reputation for reliability, honesty, convenience.
Once you get a few of these hand-to-mouth sales under your belt, you will begin to feel that you have a handle on your business. Only at that point should you allow yourself to generalize. That means you might not have an actual person in mind who explicitly told you they wanted an item, but you know your customer segment well enough to know that someone is out there who will buy and you know where to find them. Once you can anticipate your customer segment’s wants and successfully sell items this way, then you can begin investing in inventory.
Balance Your Inventory with Your Sales
Inventory refers to the items you are holding before they are sold. Planning to sell each item should not be hypothetical; you should know generally to whom each item will sell and roughly when the sale will take place. Things should not sit in inventory forever, and you should not continue to invest in inventory if it is not selling. If your inventory is growing it might mean you’ve spent more money than you are making in sales. If that is the case, you no longer have a business; you have an expensive hobby.
Underneath the three hundred sweet-looking Hummels and the life-size C3PO collectible, is a real problem. The temptation that befalls many re-sellers is to keep buying in hopes that you’ll have the right thing when the right customer shows up. You can’t afford the space that takes up. It’s important to limit the amount you buy to a ratio with the amount you sell.
Some resellers recommend giving your item sell-by dates. If they are not sold in time, try lowering your price. Others recommend limiting yourself to a closet’s worth of space for inventory. Simply do not buy more until you’ve made room by selling what you have. Another strategy is a 50% ratio. For example, if you sell $20 worth of items, buy $10 worth of inventory. Excess inventory can always be resold at auction, if you don’t find the right customers before you want to invest in new merchandise.
Sell Things for More than You Spend
While it’s important to balance inventory, it’s also important to keep track of how much you spend on an item, and to make sure you sell it for more than you paid. Selling an item for more than you spent on it is how you make profit. After all, you can’t go out of business if you’re making money. Keep records of your inventory on a spreadsheet so you know how low your prices can go without loosing money.
Another part of making a profit is knowing how much to pay for something to begin with. In order to bid the right price you should know how much your customers are willing to pay in return. Get to know your market. Research how much items go at auction versus at retail. Choose wisely.
Avoid Renting Space Until You Are Ready
Finally, what’s the most important part of running a business? Well, it might just be your point of sale. That weight might be why so many level headed people lose their marbles when it comes to renting space to sell. The top tip: don’t rent…yet.
The profit from all of your sales combined (gross profit margin) has to be enough to cover the cost of renting (expense) with some left over for you (net profit). When you are just getting started, that kind of expense could kill your cash flow. You will have more flexibility to serve your customers if you stay virtual.
- Face-to-Face: Virtual sales can mean you office out of your home and meet customers at coffee shops to make the sale. This is the cheapest and most reliable option. It’s the minimum amount of investment of time, money, and resources required to still test your business idea. It’s the MVP, meaning minimum viable product, but it’s the Most Valuable Piece of advice we have. You can save thousands of dollars by letting the vanity of an antique booth or shiny new store front wait.
- Online: You can also sell online. While there is an expense, it is much more affordable than renting booth space. Everything from creating your own website to selling on eBay is available for free with options up to a few hundred dollars a year. It is a great middle ground. Additionally, selling online will require more cataloging work from you, but it can afford you a national audience with the right know-how.
So when is the right time to rent? If you will make more sales by renting (either by reaching new customers or by conveniencing current customers) AND the sales are enough to pay for the cost of rent plus pay yourself, go for it. Again, don’t guess. Get your calculator or excel spreadsheet out and run the numbers. Ultimately, with renting (and with your resale business in general), if you find your transition is not paying off, pivot away and try something else.
Finally, your business should be your pleasure. Your natural enthusiasm will attract customers and lend itself to better decision making. Lean into the excitement—any business that starts at an auction is going to be fun.
See you at the auction!