Running The Numbers

Latest changes to this page: 08/06/2006, 10:44 PST

I recently received an email from a customer that was interested in my book, but had personal reservations about all things being marketed on the Internet.  Her message posed the following:

"I am considering online bookselling as a second income source, but I don't have money to waste and would like to know what the realistic cost of getting started would be before I even buy your book about it.  I have bought other "opportunity" books before and found them to be worthless because there is no way I could come up with the money to even get started, so anything you can tell me about the up front investment requirements, recurring costs, and how much of my time would really be required will help me decide if I am interested in buying your book.  Based on what you have posted on your website, you seem like an honest guy that is being straight, but I can't afford to be scammed again."

I appreciate your candor and understand your skepticism, I have read about many of the "opportunities" you eluded to in your email.

There are a few variables with respect to the start up costs that include:

Whether or not you have a computer, printer, and Internet connection.

Whether or not you have a cell phone.

Whether or not you already own some shelves to store the books you buy for inventory.

How many books you are able to buy for inventory, their cost, and their resale value.

Since you emailed me, I am going to assume you already have a computer, printer, and Internet connection, and since cell phones are so prolific now, I am going to assume you have one.

Lets assume you want to start with 300 books and will need to buy a bookshelf for them.  Lets also assume that you want to start on a shoestring budget and are willing to buy a bookshelf unit for $50 at a local thrift store.

The next thing we need to do is establish how much the books are going to cost you (and lets assume you are investing $25 for my book + S&H) so you can learn to distinguish the books that will sell online versus buying a bunch of expensive firewood.  By making these assumptions, and that the 300 books you are going to start with will cost you about $1.50 each, I have built a spreadsheet for you to see the numbers, but before we get to that I want to outline a few other things.

So, now you have 300 books and you are ready to put them online, so there is a seller's merchant account to consider that will cost you $40 per month and is worth paying if you are going to sell at least 40 books a month.  If you choose to start out smaller and sell fewer books while gradually building an inventory, you can list your books free, pay the same online sales commission, plus a $1.00 fee per book sold, this fee is not paid with the merchant account mentioned above, hence the discussion of 40 book sales per month making it worthwhile to to get a Pro Merchant account on Amazon.com.

Thus, your total investment would be on the order of:

Bookshelf                 $   50

My Book                   $   25

Inventory Books       $ 450

Merchant Account   $   40     (recurring)

Total                          $ 565

Now lets talk about how long it might take to recover your investment. 

This too requires a few assumptions such as:

What percent of new listings sell in a month: I personally see about 35% of my new listings sell the first month and 7.5% of the remaining books sell in each subsequent month.

How much profit per book will you realize after paying marketplace commissions.

How many books will you add to your inventory while selling others?  If you want to grow your business, you need to add more than you sell.

To demonstrate a realistic sales and business growth rate, I have made the following Excel spreadsheet and would be happy to email it to anyone that would like to put their own numbers in for the "Analysis Input Parameters" and monthly growth rates.

This scenario demonstrates that the initial inventory investment, the purchase of bookshelves, and the purchase of my book can be recovered in the first month.

I used what I felt was a reasonable growth rate and analysis input parameters that you can verify as being comparable to what others in online bookselling realize by doing your own Internet research.  That is, I am not trying to hype the business or inflate what is realistic.

You can also see that by the end of the first year, the monthly profit is up to $2,803.19, at the end of the second year it is $4,576.48, and the third is $5,172.21.

By the end of three years, using this growth scenario, you could realize a total profit of: $97,281.49.

Note, no consideration of taxes, profit from postage, or additional investments is accounted for in this analysis.  I only wanted to demonstrate that if you work at building your inventory, in a manner as shown in this example, you could have over 7,000 books in your inventory after three years and experience a profit of over $5,000.00 per month.  There is no reason to consider this a maximum growth rate by any means, in fact, I wanted to remain conservative in my analysis.  There are many home-based online booksellers that attend book sales regularly and maintain an inventory of 15,000 to 20,000 books.

I want to emphasize that there is no guarantee that you will realize this type of profit and/or growth, how your business grows and the profits you make will be dependent on you, your dedication of time to building the business, and how well you are able to locate the necessary books for your inventory.

In my book I address each variable in building your business to help you get started on the right track and maximize your profits.

If you would like your own copy of this spreadsheet to input variables of your own and see what you think are the numbers might be in your case, just send me an email with a subject header that reads, "Please Send Me Running the Numbers" or Click Here and an email will automatically be initiated with the subject line filled out.  I will email it to you.  It is not necessary for you to purchase my book to get this spreadsheet, I am making it available to anyone considering the business.

Click Here To Order Paperback Book

Click Here To Order CD-ROM Book