When you first begin to scout for books, the math can be confusing. You know what each book costs and you know what it sells for on Amazon, but what about the rest of the variables? In this lesson, we are going to give you two examples of the basic math that will help you understand the costs and potential profit when buying a book.
At the time of writing this lesson, Amazon.com charges three fees per book sold. First, they charge fifteen percent of the sales price as a commission. They also charge $1.35 as a closing fee. Lastly, they charge 99¢ as a per-transaction fee to anyone who has not signed up with their Pro Merchant program (it’s a good idea to sign up for the Pro Merchant program if you will be scouting regularly–you only need to sell 40 books a month to make up the difference and then its money in your pocket). Remember that on Amazon, the buyer pays for shipping. In fact, when you get to the shipping lessons we will teach you a trick or two so that you keep some of the shipping money as additional profit.
Example 1:
You find a book for sale at a thrift store for $2.50. You look it up on your scouting tool, and it is selling on Amazon for $22.00. Is it worth buying?
Lets do the math. First, we need to figure that Amazon is going to take fifteen percent off the top. Fifteen percent of $22.00 is $3.30. (You will become very accustomed to estimating this kind of math in your head. Figure that fifteen percent of $20.00 is $3.00 and estimate up or down from there.) So Amazon takes $3.30 plus the closing cost, which is $1.35, bring the total to $4.65. We are figuring that you have signed up with the Pro Merchant account so we are not figuring in the per-transaction fee. Your mental math will go look like this:
Book value $22.00
- $2.50 cost to buy
$19.50
- $3.30 fifteen percent commission
$16.20
- $1.35 closing fee
Your profit $14.85
As you can see you have the potential to profit from this purchase at a return of $14.85. Not bad at all. If you consider that you might find ten books with that kind of value in a single store, you see that the potential for profit is huge.
If you have not chosen to sign up with the Pro Merchant program, you will simply need to subtract 99¢ from your profit. $13.86 looks pretty good, too.
Example 2:
In this example, let’s figure out whether it would be worth buying that same book for $2.50 if your scouting tool showed an Amazon price at $10.00. In this case, the 15% commission is only $1.05, while the closing cost remains at $1.35. Again, we are going to figure that you are a member of Amazon’s Pro Merchant program so we will ignore the per-transaction fee. Your mental math will go like this:
Book is worth $10.00
- $2.50 cost to buy
$7.50
- $1.50 fifteen percent commission
$6.00
- $1.35 closing fee
Your profit $4.65
We see that this book provides the potential for $4.65 in profit. Some booksellers skip these books in favor of higher value stock, but when you figure the value of selling fifteen or twenty of these books per day, you see that the potential for huge profit is there.
Happy hunting!
Next lesson, Buying books, where.
