7 Tips For Determining Profitability When Selling Tangible Products Online
When many people decide they want to start an online business, the thoughts generally turn to selling a physical product via web site and making a truckload of cash while doing it.
Many think it must be a easy to make money by selling things online.
Well, maybe this was so back in the early times of Internet commerce, but it sure isn't that way these days.
Running a successful business online is much like running a business offline.
The same basic principles need to be followed.
As with an offline business, your profitability on a particular tangible item or a group of tangible items will come down to a phrase you've likely heard before - buy low and sell high! Obviously, if you intend on owning a business that's going to be around for the long term, you can't be selling an item for less than what you paid for it.
Even it you operate a business where you make the products you sell - such as an artist - you're still going to incur costs to produce your product.
Before you even thing about starting a business online, you've got to take the following 7 tips into account before spending a dime on purchasing or producing a tangible product for resale.
1.
What is the cost of the item you will be purchasing or producing? 2.
Determine your overhead.
Calculate your costs for rent, payroll, transportation, utilities along with any other operational costs you'll be incurring.
3.
Determine if you'll be able to price your product or service so that you can make a profit.
After calculating your product cost as well as overhead, will you be able to make a profit at a price point that's competitive enough in your marketplace? 4.
Determine if shipping costs will diminish the competitive price point.
Consider having the customer pay the shipping costs.
5.
How many of each item do I need to sell to be profitable? This is key, because if you sell 50 of an item, but it turns out that you need to sell 100 a month to cover your costs and make a profit, you've got problems.
You need to know this before you get started, and not afterwards.
6.
How much traffic will I need to send to my site and how much will need to be converted to reach my sales and profit goals? You'll need to do some research to determine the average visitor conversion rates for the type of products you sell.
7.
Determine how much you will need to spend in order to drive the amount of traffic to your site that you'll need as determined in #6.
Many think it must be a easy to make money by selling things online.
Well, maybe this was so back in the early times of Internet commerce, but it sure isn't that way these days.
Running a successful business online is much like running a business offline.
The same basic principles need to be followed.
As with an offline business, your profitability on a particular tangible item or a group of tangible items will come down to a phrase you've likely heard before - buy low and sell high! Obviously, if you intend on owning a business that's going to be around for the long term, you can't be selling an item for less than what you paid for it.
Even it you operate a business where you make the products you sell - such as an artist - you're still going to incur costs to produce your product.
Before you even thing about starting a business online, you've got to take the following 7 tips into account before spending a dime on purchasing or producing a tangible product for resale.
1.
What is the cost of the item you will be purchasing or producing? 2.
Determine your overhead.
Calculate your costs for rent, payroll, transportation, utilities along with any other operational costs you'll be incurring.
3.
Determine if you'll be able to price your product or service so that you can make a profit.
After calculating your product cost as well as overhead, will you be able to make a profit at a price point that's competitive enough in your marketplace? 4.
Determine if shipping costs will diminish the competitive price point.
Consider having the customer pay the shipping costs.
5.
How many of each item do I need to sell to be profitable? This is key, because if you sell 50 of an item, but it turns out that you need to sell 100 a month to cover your costs and make a profit, you've got problems.
You need to know this before you get started, and not afterwards.
6.
How much traffic will I need to send to my site and how much will need to be converted to reach my sales and profit goals? You'll need to do some research to determine the average visitor conversion rates for the type of products you sell.
7.
Determine how much you will need to spend in order to drive the amount of traffic to your site that you'll need as determined in #6.
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