For those of you wanting to make the move towards self-sufficiency in a career, or for those who are just looking for extra income, I am writing about buying and selling as a source of income. I think with a little practice, anyone can learn to make money by reselling things. So far, I’ve provided some background on reselling from a theory perspective and information on my experience reselling, too.
Now let’s get started with details. Let’s compare your efforts buying and selling to that traditional institution, the pawn shop.
The Pawn Shop
Over the years, I have spent a fair amount of time in pawn shops looking for bargains. I have made friends with some of the owners, and they shared with me insight into the business. Most pawn shops I am familiar with tend to try to buy for about 25% or less of what they will price the item at for resale. (This results in a 400% or higher profit target.) This is true for the more “durable” goods, such as firearms, cameras, bicycles, tools, et cetera.
I was at a pawn shop recently when they bought a like-new Remington 870 shotgun from someone who walked in the door. They gave him $45 for it. A few weeks later, it was in their case for $325. Since that was more than the cost of a new one at Walmart, it stayed in the case a long time.
Incentive Not To Buy Stolen Merchandise
Here’s a thought about pawn shops, for those of you who mainly know about them from what you see on TV. Pawn shops have a reputation for buying stolen goods. I’m not sure about the laws in the rest of the country, but here pawn shops are required to log in whatever they buy and sit on anything they take in for 15 to 30 days. The police department goes around to all the pawn shops at least once a week and checks everything they take in against the list of items reported stolen. Pawn shops are out whatever they paid for an item, if the police take it. So, they have an incentive not to buy stolen merchandise.
Let’s get back to reselling. Long ago when I was earning my accounting degree, we learned about the concept of “Inventory Turnover”. Turnover helps explain high volume sales at low profit margins versus high profit margins and low volume sales.
The grocery store is a great example. A grocery store makes only a few pennies on every loaf of bread it sells. The reason it can stay in business is that it makes those few pennies every day selling to its customers. If a store buys a loaf for $1 and sells it for $1.05, it has made a nickel. That’s not a lot in the scheme of things, but here is where turnover comes in. If that store takes the $1.05 it made and purchases more loaves of bread to sell, and it turns over its inventory every two days (remember buying day old bread?) then at the end of a year, that dollar being reinvested at 5% every other day (less cost of goods sold) has generated close to a $400 profit.
Compare that to a pawn shop, which tries to get 500% return on investment but takes six months to do so. After a year, the $50 initial investment has grown to something like a $650 profit, if we assume they were able to reinvest and resell. The $650 isn’t bad, but if they were able to get the same inventory turnover as the grocery store, at a 5% profit per sale, it would have grown to over $18,000. (Those of you who are math majors or financial accountants give me a little slack. First off, these numbers are rounded, and second it has been around 35 years since I was taught this stuff.)
Fallacy of “What It Is Worth”
So why doesn’t the pawn shop sell for less? It is what I call the fallacy of “what it is worth”. The pawn broker thinks that he can eventually sell the $45 shotgun for $300 and wants to hold out for the maximum profit. You run across the same mindset with a lot of sellers. They complain when someone offers them less that “what it is worth”. I just saw a post on a reseller board complaining that they had bought a used blouse for $1, sold it for $25 and then later found out it was “worth” $100. To me, something I am trying to sell is not worth what I think it is; it is worth what a buyer is willing to give me for it. This is not to say that you should take lowball offers, but rather you should not hold out forever to try to make the absolute maximum sales price. Accept a reasonable offer, buy more items to sell, and move on.
Turnover Is Key to Profiting From Reselling
The concept of inventory turnover is not limited to a comparison of pawn shops and grocery stores. If you attend gun shows regularly, like I do, then you may not always recognize the dealer. However, you have seen the same guns on his table at premium prices for many years. Turnover is the key to successfully profiting from reselling.
Of course, you do have to be able to acquire inventory fast enough to turn it over in a reasonable time. That can be a problem for the casual reseller. Yet, the concept is still valid, even though you may not be able to make a 6800% return each year. Selling now at a reasonable profit and reinvesting is better than selling months from now at a slightly higher profit.
No Funds To Acquire Initial Inventory
I wanted to write this article as an academic exercise highlighting a number of different sources of products and different selling tools, not as a diary of my activities over a certain period of time. So, let’s begin. I submit that anyone can find something to sell, even if they have no funds to acquire an initial inventory.
Curb Pick Up
In the city where I live, someone is always putting stuff out at the curb prior to garbage pickup in the hopes that someone else will pick it up and they won’t have to buy a $5 sticker to have the garbage man haul it away. For example, with little effort I could probably pick up 20 or 30 non-running lawn mowers per year. Half of them would need something simple like cleaning the carb or replacing the spark plug. The others might need a fix requiring a bit more knowledge, like polishing rust off the magnetos or replacing the carburetor. BTW, the last carburetor I bought cost $15, so even that is not necessarily a major expense.
One of our suburbs has a week in the Spring and another in the Fall when residents can put almost anything out at the curb for collection without any additional fee. Driving around the neighborhoods during the cleanup week can yield quite a few things to resell. You can also find lumber, furniture, and even working appliances curb side.
Craig’s list also has a free curbside category. However, from what I hear, you need to move quickly after it is posted or someone will beat you to it. You do need to be careful with what you pick up. I remember reading about someone who picked up a wooden bed frame from the curb andended up with a bed bug infestation. I was going to use a lawn mower as the basis of this article, but then a neighbor put an older electric log splitter out at the curb. That seemed like a good starting point.
Electric Log Splitter
First, I cleaned it up a bit, gave it a try, and then found out it worked. It needed a little hydraulic fluid. I took some pictures, researched it on the Internet, including checking sold items on eBay to help with the description and asking price, and posted it on Craig’s list, which is a free listing. Although the research showed folks asking up to $125 for this model, I posted it for $75. I got a call or a text from several folks, including a couple of obvious scams, and ended up selling it after a week for $65 to a gentleman who wanted it to keep by the wood stove in one of his out buildings. My total investment was a few cents worth of hydraulic fluid and about 30 minutes of my time to clean it up. When selling on Craig’s List, expect people to want to talk you down. I usually ask more than what I will sell something for, let them talk me down to what I want, and then we both end up happy.
Stihl Concrete Saw and Wheeled Carriage
With the $65 from the first sale, I looked around for somewhere to buy more inventory. I made my usual round of weekly pawn shop visits and found a non-working Stihl concrete saw and wheeled carriage at one for $30. They had paid probably $5 for it. It was missing some parts and had no compression; however, the same saw in running condition sells for around $300. My original intention was to disassemble it and part it out on eBay. This is a great strategy for those of you who are mechanically inclined, as parting out items can yield up to three or four times what selling the complete item does. I thought about it and considered my options.
Tomorrow, I will tell you what I did. I’ll also move on to other ways to acquire inventory.
- 1 – Making A Living As A Reseller- Part 1, by BIF
- 3 – Making A Living As A Reseller- Part 3, by BIF (Active on 9/20/18)
- 4 – Making A Living As A Reseller- Part 4, by BIF (Active on 9/21/18)
SurvivalBlog Writing Contest
This has been part two of a four part entry for Round 78 of the SurvivalBlog non-fiction writing contest. The nearly $11,000 worth of prizes for this round include:
- A $3000 gift certificate towards a Sol-Ark Solar Generator from Veteran owned Portable Solar LLC. The only EMP Hardened Solar Generator System available to the public.
- A Gunsite Academy Three Day Course Certificate. This can be used for any one, two, or three day course (a $1,095 value),
- A course certificate from onPoint Tactical for the prize winner’s choice of three-day civilian courses, excluding those restricted for military or government teams. Three day onPoint courses normally cost $795,
- DRD Tactical is providing a 5.56 NATO QD Billet upper. These have hammer forged, chrome-lined barrels and a hard case, to go with your own AR lower. It will allow any standard AR-type rifle to have a quick change barrel. This can be assembled in less than one minute without the use of any tools. It also provides a compact carry capability in a hard case or in 3-day pack (an $1,100 value),
- Two cases of Mountain House freeze-dried assorted entrees in #10 cans, courtesy of Ready Made Resources (a $350 value),
- A $250 gift certificate good for any product from Sunflower Ammo,
- American Gunsmithing Institute (AGI) is providing a $300 certificate good towards any of their DVD training courses.
- A Model 175 Series Solar Generator provided by Quantum Harvest LLC (a $439 value),
- A Glock form factor SIRT laser training pistol and a SIRT AR-15/M4 Laser Training Bolt, courtesy of Next Level Training, which have a combined retail value of $589,
- A gift certificate for any two or three-day class from Max Velocity Tactical (a $600 value),
- A transferable certificate for a two-day Ultimate Bug Out Course from Florida Firearms Training (a $400 value),
- A Three-Day Deluxe Emergency Kit from Emergency Essentials (a $190 value),
- A $200 gift certificate good towards any books published by PrepperPress.com,
- RepackBox is providing a $300 gift certificate to their site.
- A Royal Berkey water filter, courtesy of Directive 21 (a $275 value),
- A large handmade clothes drying rack, a washboard, and a Homesteading for Beginners DVD, all courtesy of The Homestead Store, with a combined value of $206,
- Expanded sets of both washable feminine pads and liners, donated by Naturally Cozy (a $185 retail value),
- Two Super Survival Pack seed collections, a $150 value, courtesy of Seed for Security, LLC,
- Mayflower Trading is donating a $200 gift certificate for homesteading appliances, and
- Two 1,000-foot spools of full mil-spec U.S.-made 750 paracord (in-stock colors only) from www.TOUGHGRID.com (a $240 value).
Round 78 ends on September 30th, so get busy writing and e-mail us your entry. Remember that there is a 1,500-word minimum, and that articles on practical “how to” skills for survival have an advantage in the judging.