Wednesday, September 14, 2016

Know your numbers!

When I started selling, I gauged my success on whether I had cash left over after a sale.  Did I get my original purchase price back as well as covering any fees?  If so, then I was good to go.  As I started growing my business, things got a little muddled and I knew I had to do something to get things organized.  I also knew that I was going to have to up my game to a full fledged business as my income rose.  Keeping track of tax information seemed rather daunting.  But it really is fairly simple to track all of this with a simple spreadsheet.

 There are certain things that have to be tracked for taxes, and some things you don't think about that need tracked as well.  Things like mileage, meals while out sourcing, cost of goods, sales tax paid, etc.  It doesn't take long to loose control if you're not organized.  And the last thing you want is to have to pay more taxes than you should because you got lazy.  Paying lower taxes is like getting a raise!  So how do you track all of this in an easy to follow format?

First you are going to need a spreadsheet program.  Either Microsoft Excel, Open Office spreadsheets, etc. will do the trick.  Next you are going to want to make a couple of "books" within the spreadsheet.  Books are the tabs along the bottom that allow you to have multiple spreadsheets in one file.  One would be named mileage, one expenses, and one for inventory.  You are going to want to create formulas to be able to track totals in real time.  I use this one for mileage:  =SUM(B1*54.5).  Put your formula in the D column.  Put your date in A1 and mileage in B1.  Now, move your mouse over the lower right corner of the D1 column and you will see your courser turn into a + sign.  Click and drag down the D column as far as you think you'll need.  I normally start with 100 rows.

As you input your mileage, you will see the D row automatically calculate the amount of your mileage deduction.  Once the year is finished, you can do a auto-sum on the entire column and get the total of your annual mileage deductions.  You can do the same thing for your expenses sheet.  There are more calculations you can do to further simplify things, but this will get you started and give you a foundation to build on.  But what about inventory?  How do you track your purchases and your selling expenses?  That is a little more involved, but still fairly simple.

On your third sheet, you are going to want to create several columns.  Date, description, purchase price, sale price, ebay fee, paypal fee, shipping fee if you do free shipping and a profit column.  I use formulas for most of these columns so I know exactly what my profit is per item.  When an item sells, I open this up and enter the sale price.  Using my formulas, excel then does the math to deduct my ebay fees and my papal fees in addition to subtracting my purchase price.  My profit column now shows what's left.  I also have an ROI column that shows my percentage of ROI.  So here is an example of what should be in this sheet.


As I add in sales amounts, everything is automated so I know at a glance if I am profitable, and by how much.  You can go one step further and add in a sale date and a formula to calculate how long it took an item to sell.  This is good info to know how fast certain items are selling.  There are a number of ways to manipulate the data.  Let's say you want to know if a sale is above a certain ROI level.  Simply write a formula to change the color of your ROI number if it is above say 80%.  The possibilities are endless.  At the end of the year, you can hand a copy over to your CPA and your job is done.

In addition to knowing your numbers, you can use this spreadsheet (or create a new one) and use it to calculate a selling price based on your ROI.  Use the following formula based on cost being in the A column, and desired ROI in the ROI column, as a decimal (i.e. .75 for 75%) =SUM(A2/(1-B2)).  As an example, I buy an item for $4.95.  I want a 75% ROI on that item.  I simply input my $4.95 into my A2 cell, and column C2 automatically sets the price to $19.80.  Easy way to see what you need to charge for a product based on purchase price.  If you have excel on your mobile phone, you can use this while you are sourcing to see if there is enough profit in an item to make it worth buying.

Now you know how to track your business.  Having this information is ammunition you need when sourcing products to sell.  It does no good to have small profit items, or items that take months to sell...unless that is a strategy.  I'll cover that in another post, but for now this will suffice.  Stay diligent and keep track of everything.  You'll be glad you did.

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