Q: I hear so much about people who started selling on eBay and eventually turned it into their full-time business. Is it really possible to build a profitable business just selling junk on eBay?

A: If Fred Sanford were alive today, I'm sure he'd be earning his ripple money by selling quality junk on eBay. While it's also true that one man's junk is another man's treasure (I have a garage full of treasure to prove this point), your chances of building a profitable business selling "junk" on eBay (or anywhere else, for that matter) are slim to none.

While there is a lot of junk/treasure for sale on eBay, it is typically sold by individuals who have "I brake for yard sales!" bumper stickers on their cars and not serious businesspeople.

For serious entrepreneurs, however, selling on eBay can be a good way to start a new business if you're willing to put in the time and energy required to make the business a success. eBay is also a good option for existing businesses to expand their reach by selling online.

Everyone-from small used car dealers to giant companies like Dell Computers-has discovered that eBay is an excellent place to hawk their wares simply due to the huge number of folks who visit the eBay site on a daily basis. Nowhere else on earth will you find such a large pool of potential customers.

Consider these numbers:

  • There are nearly 95 million eBay users who spend $894 per second.
  • Most eBay sellers are individuals and small businesses who sell everything from porcelain dolls to DVD players to Mercedes convertibles.
  • Every day, more than 2 million new items are added to the eBay marketplace, more than 10 million bids are placed, and more than 100,000 new people register to buy and sell on eBay.
  • At any given moment, eBay is conducting some 19 million auctions, divided into more than 45,000 different categories.
  • About 2 million new items are offered for sale every day.
  • One company is grossing more than $5 million per year selling brand-new pool tables on eBay. Their eBay store is so profitable that they've closed their retail location and now sell solely online. That's right, they're making $5 million by selling pool tables-proof that you can sell just about anything on eBay if you know how to do it.

Be aware, however, that eBay is no magic bullet. As any eBay Power Seller (a seller who has at least 100 feedback ratings-98 percent positive-and maintains at least $1,000 in average gross monthly sales for three months, amongst other criteria) will tell you, building a profitable eBay business takes hard work and requires long hours, and often the financial rewards do not make it worth the effort spent.

When it comes down to the mechanics of it all, running an eBay business is no different than running a brick-and-mortar business. You still have the same considerations regarding product selection, inventory purchasing, product pricing, inventory management, order processing, fulfillment, customer service and so on.

You must also consider the legal and accounting aspects of the business. Just because you're selling online does not mean that Uncle Sam won't expect his piece of the pie. Revenue generated by an eBay business is just as reportable and taxable as revenue generated from a brick-and-mortar store. And if you sell to customers within your state, you may also be responsible for collecting city, county or state sales tax.

One of the biggest obstacles to building a successful eBay business may be the stiffness of the competition. Many sellers sell identical items, and the price wars often get ugly, but that's to be expected in a free marketplace, which is exactly what eBay is.

You may be the only store in town that's selling that one-of-a-kind, custom-made Dale Earnhardt Memorial Bobble Head Action Figure (Earnhardt fans would string me up if I called it a doll), but do a quick search on eBay and you'll probably find a hundred others just like it.

So, can you build a profitable business selling on eBay? Certainly-thousands of people have done it and so can you. Here are a few tips to help get you started:

Sell quality products. Don't sell junk! Leave the knick-knacks and fake leather jackets to the less-informed. You should offer only quality products at a fair price.

Research the competition. Once you have your product in mind, don't invest a dime on inventory until you've spent some time on eBay to see what the competition is doing. If you want to sell motorcycle helmets, for example, you should look at current auctions to see how many others are selling similar helmets and what prices they are charging. This step is vital since you may discover that you can't compete with current sellers on price or there is simply no market for what you have to offer.

Start slowly. Many people believe that the more items they have for sale on eBay, the better. They will invest thousands in inventory and spent hundreds on listing fees. (Yes, eBay charges you to list items for sale and collects a final fee if the item sells.) Those are the folks that usually end up with 10,000 Ginsu knives forever in their garage.

Test, Test, Test. A fair portion of eBay auctions result in no sales, so it's best to test the waters before jumping in with both feet.

List a few items and see how they sell. If an item doesn't sell, list it at least twice more. Some items might not sell the first time, but may the second or third, then sell steadily from then on. If an item gets no bids the first time, consider adjusting your price or your terms. If an item sells well, keep it in stock and then experiment with another item.

Do your homework. eBay is too broad a subject to be covered fully here, but there are a multitude of books available that can help you start an eBay business. In fact, I bet you'll find most of them for sale at this very moment on eBay.

Tim W. Knox is the founder, president and CEO of four successful technology companies: B2Secure Inc., a Web-based hiring management software company; Digital Graphiti Inc., a software development company; and Sidebar Systems, a company that creates cutting-edge convergence software for broadcast media outlets; and Online Profits 4U, an e-business dedicated to helping online entrepreneurs start and prosper from an online, wholesale or drop-ship business.


The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.