It’s easy to make money on eBay, but it’s not so easy to make profit.

Years ago, my mother would hold yard sales in the summer. At the end of those sales, she always had fistfuls of cash and she would talk about how much money she had made. I’d reply by telling her that even though she had made money, there wasn’t any profit in selling $50 shoes for $2, no matter how many pairs she sold.

Too many people look at eBay as my mother looked at yard sales – they mistake money for profit. They start selling on eBay by cleaning out their garage or attic and selling items they no longer want. After seeing fistfuls of cash from their eBay sales, they think, “This is so easy I could start a business!”

To determine whether you can profit from eBay sales, you first have to know what it is you intend to sell. What is your product?

Second, go to eBay and search for the product you want to sell. Go to the left sidebar and check “Completed Listings” located under the Search Options heading. Click “Show Items”. When the completed listings appear, sort them by price. The items with a red price didn’t sell; the items with a green price sold. The range of green prices is the highest and lowest price the product you intend to sell recently sold for on eBay.

Third, list all out-of-pocket costs to sell the product on eBay. These costs include:

1. Your payment for the product
2. eBay’s fees (e.g., listing, final value, PayPal)
3. Shipping costs (e.g., postage, boxes, bubble wrap, labels, transportation to the shipping point)
4. Taxes

Don’t guess at these costs because most people guess them to be lower than they actually are. Take time to investigate and make sure the costs you list are accurate.

Finally, take the total costs of your product and compare it to the “Completed Listings” sold items (green price) you found earlier. Be sure you are comparing apples with apples and oranges with oranges by noting the condition of the items sold. If you’re going to sell only new products, then compare total costs only with Completed Listings items in new condition. Likewise, if your product will be in used condition, compare your total costs only with Completed Listings items in similar used condition.

Hold on, we’re almost finished! Assuming your total out-of-pocket costs for the product is less than what it recently sold for on eBay, congratulations! You can make money on eBay selling this product. But you still might not make a profit because of the 800-pound gorilla in the room called “opportunity cost”.

Opportunity cost is the value of what you give up by deciding to do something else. If you are otherwise unemployable, you probably have no opportunity cost in deciding to sell your product on eBay. If, however, you could get paid to work for someone else, even if its only minimum wage, your opportunity cost is whatever you could earn working for someone else that you don’t earn because you choose to work on eBay.

For example, if you work 20 hours per week selling on eBay and you make $100 from your sales after all other costs, you earn $5 per hour. Now, if you aren’t giving up other income to sell on eBay, then your profit is also $5 per hour. However, if you could bag groceries for $7.50 an hour instead of selling on eBay, you don’t have any profit because your opportunity cost is $150 – you gave up the opportunity to earn $150 in wages to earn $100 from sales.