Getting started

Please note: This article appeared on my original website (Woman on the Edge of Reality which no longer exists) back in 2008.

There are only two ways you can make money, whether on the Internet or in the real world. The first is to sell something that someone else has produced, whether that is a product or service; the second is to make something yourself or offer your own unique services. Either way, you need to be certain that the price youm are charging is realistic, both in terms of persuading customers to part with their cash and giving you a profit.

As an example, we’ll imagine you have a fictitious bookshop. You sell books at £5 each. You buy books from your supplier at £3 each, and the £2 difference is your profit. If your shop rent is £100 per month, you will need to sell at least 50 books each month just to cover the rent on the shop (50 x £2). Other expenses might include water, electricity and/or gas for heating and lighting, which might set you back an additional £30 each per month. Each of these costs comes out of your profit, and we haven’t even started on what you want to earn yourself yet (but we’ll assume you want £100 a week for now).

The costs for one month are then:

• Electricity £30.00
• Gas £30.00
• Water £30.00
• Rent £100.00
• Wages £400.00 (or thereabouts depending if it’s a five week month or not)

So far total costs are £590 meaning you need to sell 295 books (£590 divided by £2). But those books also cost money to buy that we haven’t factored in yet (adding another £885 on your costs). Therefore, to cover the first month you need to make £1475 and happily, selling 295 books at £5 each means that you make £1475. Congratulations, you have just broken even!

Breaking the above down even further means that you need to sell a minimum of ten books each day to cover all your costs.

That doesn’t mean it’s easier selling something you’ve made yourself. For instance if you’re making designer cushions, then you need a sewing machine, materials, thread, stuffing and embellishments at the least. You also need to know how long it takes to make one cushion, because this will tell you how many you can make (and thus sell) each week. Therefore, if you only make ten you will need to charge more for them than if you could make 20, or 30. These figures also determine the selling price of each cushion which, in turn, determines whether your customers can afford them.

I know you’re thinking what’s the point of that, I’m planning to make my millions on the Internet. The problem is that you still have costs to be taken into account and your stock or materials will be your biggest single outlay.