You may have seen one of the ways I was trying to raise money was through college textbook arbitrage.
Well, I have an update for you.
I purchase 2 more books for $95.16 and stand to make a difference of $10.91 or a total of $106.07 when I sell them. Woooo!
Usually I try to make at least $10 difference on a book to make it worth it. I used to think that I just had to worry about the difference and that would be my profit but my fiancee pointed out that this isn’t the proper way of doing it.
To me, making a $10.91 “profit” on an investment of $95.16 means that I “profited” 11.5%. Considering the stock market on average returns around 10%, this seemed like a good gain to me!
But to my fiancee, it was no bueno. Here’s her point: I already spent money on envelopes so to me its a sunk cost. But to her, each book will cost $1.69 for the envelope to ship. So on these transactions, I’m technically down $3.38 so my “profit” has now dwindled down to $7.53 or 8%. Doesn’t look like much by my “profit” is down basically a third.
She also mentioned all the time that I spent searching for and following the books all the way up until the auction ended. On average it probably takes about 2 minutes to search for each of these particular books. But when you go through about an hour’s worth of books a day, that adds up. Not to mention that it takes time and gas driving to drop off the books to either FedEx or UPS. Actually dropping the books off takes less than 5 minutes but it’s probably about a 20-25 minute round trip.
It’s starting to not seem worth it. Plus if I don’t receive the books the same day, I’d have to make 2 trips to drop them off. There’s just about an hour right there.
To make my estimate nice and round, let’s say it takes 30 minutes per trip and time that it took me to research each book for a total of an hour. So I’d make $7.53 for these 2 transactions. But then you have to add the cost of gas that I used up and the wear and tear on my car. It’s not crazy but what if I do 10 books? 20 books? It’ll surely add up then!
Moral of the story:
- Think about your sunk costs. (That’s how much each envelope will cost to ship a book)
- Stick to your values. My initial “profit” minimum was $10 per book. By ignoring this, I’m basically wasting my time.
- Think about your opportunity costs. So what if I spend an hour and make $7.53? That’s money I didn’t have before! Well, what could I have done in that hour that I can’t do now since I have to drop off those books? I could have done a million other more beneficial things with my time such as writing a blog post or doing something else that would bring me closer to my goal of being self-employed.
Oh well. You live and you learn. Hopefully you learned something from this too.