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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on March 14, 2023
Important elements to think about when starting your eBay business:
You May Also Wonder:
Is an eBay business profitable?
An eBay business can be profitable if you sell products that are in high demand. Look at what’s trending on eBay to help you select the products you want to offer.
What is the growth potential of an eBay business?
An eBay business can grow if you use good marketing strategies and have products that people are seeking. However, eBay itself has experienced a decline in users that is expected to continue.
Can you start an eBay business on the side?
An eBay business is the perfect side hustle. You can easily handle it just in the evenings on weekends.
Do I need a tax ID to start an eBay business?
You do not need a tax ID number unless your eBay business will have employees, or you form your business as a partnership, an LLC with more than one member, or a corporation. However, many banks require a tax ID number to open a business bank account.
eBay is an online auction and shopping website on which people and businesses can list items for sale, and buyers can bid on auction items or purchase items that have a set price. Sellers pay fees for listing items and a fee upon the sale of the items, or they can sign up for one of eBay’s paid subscription plans.
eBay is a way for entrepreneurs to sell items without setting up their own websites. It has more than 135 million users worldwide, so you’ll have a ready audience for your item listings. You won’t have to spend time and money getting traffic to your own site.
eBay is also simple to use and allows users to rate buyers and sellers, creating a level of trust among users.
You can list your items in either an auction format or with a buy-it-now price. With the auction format, you set a starting price, and buyers can bid until the highest bidder wins when the auction expires. If you choose the buy it now option, you’ll simply set a fixed price so that a buyer can purchase the item immediately. You can also sell items from an eBay store.
Trends
Challenges
Costs to start an eBay business vary greatly based on what you decide to sell and how much inventory you hold, but can range from $1,500 to $8,000.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $100 - $500 | $300 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100-$500 | $300 |
| Initial Marketing Budget | $200 - $500 | $350 |
| Initial Inventory | $500 - $5,000 | $2,750 |
| Computer | $500 - $1,000 | $750 |
| Total | $1,500 - $7,800 | $4,650 |
You’ll need a handful of items to successfully launch your eBay business, including boxes and packaging materials.
You should also understand how eBays fee structure works. You’ll be charged insertion fees when you create a listing and a final value fee when it sells. You can also pay a subscription fee for an eBay store.
How much you can earn depends on the items you sell and their price points. These calculations will assume that you’ll sell items for an average of $30 and have a profit margin of 40%.
In your first year or two, you could work from home and sell 3,000 products in a year, bringing in $90,000 in annual revenue. This would mean $36,000 in profit, assuming that 40% margin.
As your shop gains recognition, sales could climb to 10,000 products a year. At this stage, you’d rent a space for storage and distribution and hire staff, reducing your margin to 20%. With annual revenue of $300,000, you’d make a tidy profit of $60,000.
There are a few barriers to entry for an eBay business. Your biggest challenges will be:
Now that you know what’s involved in starting an eBay business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers, your competitors, and the broader business landscape.
Begin by considering what you’re passionate about or have knowledge in. Selling something you’re familiar with can give you an edge in customer service, product selection, and marketing.
Check out eBay’s “What to Sell” resources. It gives insights into popular categories and products. Moreover, use eBay’s completed listings filter to see what items have recently sold and at what prices. Platforms like Terapeak, WatchCount, and Goofbid can provide insights into what’s trending on eBay.
You’re looking for a market gap to fill. For instance, maybe the market is missing an eBay shop that sells handmade candles or custom jewelry.
Categories that generally do well are auto parts, clothing and accessories, collectibles, jewelry, and home and garden items. You’ll want to choose a category that is popular, but not overly competitive.
You might consider targeting a niche market, such as antique pottery auctions. A niche can help you better price your items as well.
Analyze competitors to gain a better understanding of the market and identify opportunities.
This should identify areas where you can improve your business and gain a competitive edge. It can also help you understand the market and make better business decisions.
Whatever products you decide to sell, you’ll need to find wholesalers or suppliers from whom to buy your inventory. This will involve doing some research and some comparison shopping. You’ll want to consider their prices, but also their minimum order, since you’ll likely want to start small to see how your sales go before you invest in inventory.
There are several wholesaler directories online, such as wholesalecentral, where you can search for suppliers or wholesalers of various product categories.
Some manufacturers and wholesalers offer dropshipping, which means that when you make a sale on eBay, they will ship the product directly to the customer. This means that you don’t have to invest in and hold inventory, or worry about shipping items yourself. The catch is that you’ll pay more for the items, thus reducing your profit margin.
Also, eBay states that “if you use drop shipping, you’re still responsible for the safe delivery of the item within the time frame stated in your listing and for the buyer’s overall satisfaction with their purchase”. That means that you’ll need to work with the dropshipper to ensure that they will ship items in a timely manner.
eBay also states “listing an item on eBay and then purchasing the item from another retailer or marketplace that ships directly to your customer is not allowed on eBay.”
Be sure to sell your goods at a price that will give you a good profit margin, while also being competitively priced compared to similar products on eBay.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will depend on the products you sell, and who is likely to buy them. Trendy clothes might have a younger target market, but remember that most eBay users are 31 to 64. You may want to promote your eBay store on Instagram or Facebook to target a 30-something crowd.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a facility for inventory storage and product distribution. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they’re available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation.
Your business name is one of the key differentiators that sets your business apart. Once you pick a name and start with the branding, it’s hard to change your business name. Therefore, it’s important to carefully consider your choice before moving forward.
First, you need to create an eBay account by going to the eBay home page and selecting “selling” from the eBay dropdown menu.
You’ll then select whether you want to set up a personal or business account, so choose business and fill out the registration form. Click “create account” or sign in with Google, Facebook, or Apple.
You’ll be automatically routed to the My eBay page, where you’ll again select “selling” from the drop down menu, which will take you to the item listing page. You’ll click list my item, and enter all the information.
Once you’ve entered the item information, it will not be published until you complete the seller registration page, which is where you will be routed.
After you’ve entered all the information, you’ll receive information about your account verification.
After your account is set up, from the selling page, go to your account and click on subscriptions.
Then you’ll click on “review store benefits” and will be taken to the subscription plan options.
You’ll simply select a plan, choose monthly or annually, and submit your order.
Now you’re ready to customize your store. You can create a store name, add your logo, add a billboard image, and create a store description.
You’ll also be able to categorize your listings and feature certain listings. You can also create marketing banners and even add a store video.
When it comes to design, simple is better. No one wants to see clutter on a website, so don’t try to overload your pages.
Your home page is extremely important, as you want people to know immediately what you have to offer. Your billboard image is the first thing they’ll see, so it should be eye-catching and communicate your brand identity.
You can also add your logo, and if you have yet to create a logo, you should. It should also reflect your brand identity.
Your store description is also important because it’s your chance to convince people why they should shop at your store. It should be short, but informative about what you’re offering.
Adding featured listings to your home page, which you can change any time, is a great way to entice purchases. Be sure to use quality photos in your listings.
Your product listings are your chance to convince buyers to buy, so your titles and descriptions need to be compelling. Short is better, but make sure that you include all relevant details about the product. If the customer is left with questions after looking at your listing, they may not bother asking you and just move on.
Great photos can increase sales dramatically. Be sure to highlight the item by putting it on a white or black backdrop, depending on the color of the item. Also, place the items so that lighting is adequate with no shadows or glare. High-resolution photos are also best.
Be sure to take multiple photos of the details of the item and show it from different angles.
Everybody loves a deal, so offering promotions and discounts can help you move your inventory faster. You can place a marketing banner in your eBay store at any time to announce your promotion. You can also share your promotions on social media.
eBay makes it easy to integrate your listings with certain shipping carriers, and you must use one of these carriers for your shipped items to be guaranteed delivery.
It’s often best to offer more than one shipping option so that the customer can choose their delivery method and speed.
You can also choose to use flat shipping rates or calculated rates with eBay’s shipping calculator.
Be sure to package your items very well to ensure that they make it to their destinations unscathed. Use quality boxes and bubble wrap, as well as good packaging tape. If your items are easily breakable, take extra care and mark the boxes as fragile.
When you set up your store, you can create policies regarding returns. These should include whether or not returns are allowed, and how returns are handled in terms of payment and shipping.
Be sure to address all customer issues immediately. An issue doesn’t have to mean a lost customer if you handle their problem in a timely and professional way. Remember, buyers can rate you, and you want to stay in good standing.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to eBay businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your eBay business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding an eBay business. You might also try crowdfunding if you have an innovative concept for your eBay store.
Whether you need a seller’s permit for running an eBay store depends on various factors, including the nature of your business, the types of products you sell, and the state in which you operate. Generally, a seller’s permit (or a similar type of license) is required for businesses that:
In the United States, sales tax laws vary significantly by state. Some states require all sellers, including those operating online stores like eBay, to collect and remit sales tax, while others do not. The obligation to collect sales tax also depends on whether you have a physical presence (or “nexus”) in a particular state. However, recent changes in sales tax laws (following the South Dakota v. Wayfair, Inc. Supreme Court case in 2018) have expanded the definition of nexus to include economic activities in a state, meaning that even sellers without a physical presence in a state may be required to collect and remit sales tax if their sales exceed certain thresholds.
eBay itself also collects and remits sales tax on behalf of sellers for transactions where buyers are located in certain states. This is due to marketplace facilitator laws that place the obligation on the platform to collect and remit sales tax.
A seller’s permit (also known as a sales tax permit or resale certificate) is typically required if you are doing business in a state that charges sales tax. This permit allows you to collect sales tax from customers and remit it to the state. The requirements for obtaining a seller’s permit vary by state.
In summary, laws regarding seller’s permits and sales tax are indeed different for each state, and you may need to comply with these laws if you run an eBay store. It is important to research the specific requirements in your state and consult with a tax professional if needed to ensure that you are in compliance.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes. Here we compared and ranked best business license services.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your eBay business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Linnworks or Zoho, to manage your inventory, listings, orders, and reporting.
Here are some powerful digital marketing strategies for business:
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand.
Traditional marketing is any form of marketing that uses offline media to reach an audience. There are various types of traditional marketing methods you could use for your eBay business.
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your eBay business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your eBay business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an eBay business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in an eBay business for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in eBay businesses. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an eBay business include:
Once your business starts rolling, you’ll likely need to fill both these positions. You might hire multiple workers for a single role or a single worker for multiple roles, depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might prefer a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Starting a business on eBay is terribly inexpensive, yet offers a world of possibilities. You could sell anything you can think of to a market of 135 million! It’s a ready-made platform where you can use the tools given to maximize sales and make a nice living.
You’ve done your business homework, so now it’s time to begin your eBay world domination!
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