If you’ve been reading this blog for a while, thank you for that, I really appreciate your time, you will have heard me mention the term ROI i.e. Return On Investment. Everyone has at least heard of ROI.
How is it then that I have been speaking about ROI and hearing about it since Day One on our Book Arb journey and only now am I really starting to apply it properly?
It’s funny how we can think we know something and still not apply it or think we are applying it.
“There is nothing so useless as doing efficiently that which should not be done at all.” ~ Peter F Drucker
Let me explain how that plays out in Book Arb. Of course I have been familiar with the concept of buying and selling books and making a profit, I run an online bookstore after all.
However, I was applying the concept in a micro management way thinking that I was being “penny wise” i.e. looking after the profits on each book and that would take care of the overall profits.
Repricing (selling our books) is part of our daily work flow. When we reprice our books, it keeps our books competitive and ensures more sales, if you do it right!
“There seems to be some perverse human characteristic that likes to make easy things difficult.” ~ Warren Buffett
Now obviously making a profit on each book is important but because we were focused on getting as much profit out of each book individually we squandered time, momentum and compound interest.
Over the past year and half I have spent countless hours repricing our books daily. It’s part of the business and also shows Amazon, Big Daddy, that you are actively selling your stock as opposed to using Amazon as a warehouse for products that may or may not sell. This brings other benefits other than profits alone such as more exposure to more buyers thereby increasing your market share.
However, we were way too focused on holding onto our books to get a better price as opposed to selling as much stock daily for an overall ROI. We forgot to think about ROI on our overall investment monthly.
“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t, pays it.” ~ Albert Einstein
The chart below demonstrates how the same $10 compounding with only 20%, 25% & 30% profit over the course of a year way out performs holding out for a 100% profit every 8 weeks.
When I think about how much time I spent ‘nursing’ books i.e. repricing every day but not effectively I scratch my head. When I think about how much compound money I left on the table by not selling and turning over profits I am astonished.
For the record we have found that the longer our books are on the market, unless it’s a textbook season, the more inclined the price of the books are to decrease over time unless they are year round books. Hold that thought in your back pocket when repricing as it will serve you well. If you can sell for a profit today, sell.
Our strategy was ineffective on both a profitability and time wise front. Man, I didn’t really get it until recently. This business is about turning over as much inventory every month to compound the money for a staggeringly high year round ROI.
Can you see how ineffective our strategy was? We thought we were doing it right but man were we off?
Remember, it’s not about being busy, it’s about being effective. We have still made a lot of sales over the year but this one strategy slowed our progress big time.
I would add that it’s not to say that it’s not possible to make 100% profit on most books, it’s just don’t delay holding out for it. A bird in the hand philosophy in this business will serve you much better.
It’s just all about buying the right books at the right price at the right time. When and where to look for these books and knowing how to read the Keepa charts makes this easy.
Do not be the bottle neck in your business by being ineffective. Buy and sell books every day. Compound your money by selling as much as you can as quickly as you can and you will be astonished at your progress.
Now that we have corrected our approach to repricing our profits are already increasing exponentially and we have more time back to ourselves. Repricing used to take me hours every day. Now, it takes a lot less time. Less time and more money, who knew?
Next, I will discuss the power of streamlining daily tasks & how we are doing it in our business.