Alright I'm starting my own business, its name is "Professional Transactions."--Already filed for a tax number.

Let me start off by saying I'm 19, and go to Indiana University.  I'm a sophomore and have taken many business classes.  (We are a top 10 business school in the country)

Here is a rundown of my business:

My hometown is named Santa Claus...This naturally attracts specific "Christmas/Holiday" themed businesses to the town and area.  There are also many high quality furniture factories around our area:  Kimball International, Best Chairs, Thermwood (makes machinery), etc...

Here is my plan:
I will contact these businesses and explain my plan to them.  Which is to take a small inventory of some of their inventories and photograph and take notes on their items.  Specificly those items which aren't selling very well or they are  overstocked.  I will then list the items on ebay.  If the items are successfully won by a buyer,  the buyer will pay me, I will send an invoice to the retailer, and they will then mail the items to the customer.

The buyer of course pays shipping and packaging.  

The markup will be:  1.10(retailer cost + retailer markup) +S&H

The .10 will be my cut.

I think this has potential especially with speciality stores and the factories.  I know for a fact that these factories have alot of extra materials which often are thrown away or given away to their employees.

So basically I have little risk (cost of starting a business + cost of listing items on Ebay)
and
The retailers have no risk (other than letting me see their inventories)

What does everyone think?  Where are the problems?  

What type of business entity did you set up?

There's little eBay stores around everywhere.
The only difference is that you call them and ask for items?

I really don't think the stores will go for that. If they could sell it on EBay, they would have already.

If you are planning on dealing with large stores or chain stores, you will have to deal with Corporate - not the store itself. Image going into a K-Mart or Wal-Mart and asking the store manager to sell their stock on EBay. They can't make that decision.

Av.

It will be a challenge for the retailer to invoice you with all costs and then ship to the final bidder.

How is sales tax computed?

Good luck, there is great satisfaction in being your own boss, but great pains in the ass also. Just remember, shit rolls up hill, no matter what you may have heard, you can't call in sick on yourself, everyone will think you are rich, and want you to lend them money. Again, good luck...Treeman  

I'll try to give some other analysis as I see it.

First I think the business idea is definitely worth a shot.  Others have questined the value-add of your idea, but I think it has merit.  I am not sure other businesses know how or want to spend time learning how to sell their stuff on eBay.  

Actually I think there ARE business who would love to sell overstock items but don't have the internal know-how of eBay/net sales and don't / won't spend the time learning it.  So your value to them is that you make it easy to make some $$ on items they otherwise would have sold at  a loss.  Having consulted for many businesses I can tell you they'd be delighted if you could reduce their write-offs/markdowns for them.

Bottom line?  You don't know for sure until you go out there and try.  And even if it doesn't turn into a pot of gold, you have learned a LOT and can apply that learning to other ventures in your life.  TRUST ME this learning is worth the hassle!

Here's what potential weaknesses are, and maybe your classes at IU -- which IS a top MBA program -- already taught you this:  

1) It is an easily replicable business.  If/when other people learn about this idea, they can copy you penalty-free, because eBay is so easy to use.  There are few startup costs, you have no patents or other IP that would slow the entrants.  And, if your clients learn how easy it is to do what you do, you may lose some/all of them since they may view your value-add as significantly low.

If other competitors enter the market, you may wind up competing on price, which is a tough position to be in.  So your .10 may drop to .08, .06 etc...can you stay in business on low margins?

On the other hand, if you can keep what your doing low profile, create excellent relationships with your clients (so all they have to do is let you pick up their stuff and hand them a check) you may be able to stave off the competition for a while, and in the meantime develop another value-add service for your business.  Or sell it!

2) It sounds like some of the businesses in your area deal in heavy or bulky items (thermwood, best chairs etc).  Can you arrange profitably to have these items picked up/stored/shipped?  Certainly these items can be and are shipped across the country, but it may require you learn some of the ins and outs of how bulk shipping works (including best rates, insurance, ship times, tracking methods, etc).

That's all I have for now.  Go for it!  And let us know how it goes!

You would probably fair better by asking these places for there packing peanuts which they probably discard anyway and selling them on ebay. Lots of ebay sellers buy their shipping supplies off of ebay.

I agree, i think it's a decent (not great) idea and you will learn lots.
There is a lady around here who does ebay selling, but she charges a TON.  I wouldn't pay over 10% for it.
And for that 10% I would expect you to come get it, explain it and get rid of it and just send me a check.
It can add up to something, but not a ton, you'll have to do volume.
however, on the plus side, lots of expenses will now become deductible.  Your cell phone (business hone), your internet account, your ebay account, your high speed internet account.
you need a business checking account (and tie it to your paypal, etc)

I do think most business's don't want to deal with this stuff.  Esp retail stores just write everything off and sell it for pennies. So, if you can make 50 cents for them instead of 10 cents, that's a plus for them, plus they don't have to deal with it.  Ethics will be a huge item, they will have to trust you.  I would think that initially you might have to buy the extras off them, and then sell it and make the difference.  After you do that for a while you might be able to go and show them how much money you made, then they will hire you.

My thoughts.

The fed lends banks money, they in turn lend the general public money @ 1 to 2% OR what ever they can get over the rate its lent to them. I'd up your cut IMO.Good luck!...as said you'll learn alot!

Quoted: I agree, i think it's a decent (not great) idea and you will learn lots. There is a lady around here who does ebay selling, but she charges a TON.  I wouldn't pay over 10% for it. And for that 10% I would expect you to come get it, explain it and get rid of it and just send me a check. It can add up to something, but not a ton, you'll have to do volume. however, on the plus side, lots of expenses will now become deductible.  Your cell phone (business hone), your internet account, your ebay account, your high speed internet account. you need a business checking account (and tie it to your paypal, etc) I do think most business's don't want to deal with this stuff.  Esp retail stores just write everything off and sell it for pennies. So, if you can make 50 cents for them instead of 10 cents, that's a plus for them, plus they don't have to deal with it.  Ethics will be a huge item, they will have to trust you.  I would think that initially you might have to buy the extras off them, and then sell it and make the difference.  After you do that for a while you might be able to go and show them how much money you made, then they will hire you. My thoughts.

I'm not charging the retailers anything.  I list the item on Ebay for 10% more than the retailer wants to charge.  All cost is transfered to the buyer.

right, I get that.
But if you want to do real business like this, you have to basically have an account with them that says you took this stuff and sold it for X+10% and you kept the rest
and then you give them your money back.

so, initially you will probably have to outright buy the things from teh company and then you sell them and keep it all.  
The plus is you make more gross margin
The minus is your cash flow is horrible and you have to keep an inventory.

you want to get it to you are selling it for them while it's still in their inventory.

See what I'm saying?

The "ebay consignment seller" is a pretty good plan, but you are looking at the wrong clients. I think most businesses would either sell on ebay themselves, or prefer to sell through existing in-store channels for more profit. Also, retail prices are pretty much the maximum anyone will pay for new goods. If it is an overstocked/not selling item, who is going to pay retail+10%+S&H just for the pleasure of going through ebay, when they could just go local. You need to get rid of the extra 10%, and take a smaller retailer mark-up for yourself (like 75% instead of 100% markup), and undercut local prices with your lower expenses. Prices are set by the market, you increase profit by cutting expenses for the same price.

An alternative would be to go after all of the housewives/older people/etc, that have tons of stuff they don't need. They have stuff they just want to get rid of, but selling on ebay sounds too complicated for them to do for one or two things.

I've done this for some of my relatives, and it's easy to set up an "assembly line" for taking pictures, starting auctions, and then wrapping up to mail. The main problem is that people might want to get rid of their junk, but they also think it is more valuable than it really is.

I have heard of people renting self storage lockers, buying truckloads of pakistani rugs, and selling them for REDICULOUS prices.

You have drive, look into that.