Tuesday, August 30, 2016

Turnover Tuesdays - Amazon Restrictions and the Future State of Amazon Selling

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

The previous posts in the series can be found at the bottom of this post.

Since I am a prophet, I decided to share my incite into the future direction of selling on Amazon.  Obviously I'm kidding, I wouldn't give away trade secrets like that.

On a more serious note, there have been some major (Minor? More on that later) changes for certain brands that a few people have noticed.  These brand restrictions may be the start of a serious negative trend for sellers that can vastly affect our bottom lines.

The Amazon Balancing Act - Sellers vs. Buyers

Tuesday, August 23, 2016

Turnover Tuesdays - The Buy Box

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

The previous posts in the series can be found at the bottom of this post.

The Buy Box

What is the Buy Box?  The Buy Box is the main page for any particular item on Amazon that features only one seller with the current price.

Here is a picture:

The Buy Box is Really Important

The Amazon Buy Box is probably the single most important factor in making sales on Amazon.  You will commonly see on various websites that 82% of sales on Amazon go directly through the Buy Box.  I couldn't find extremely reputable sources that give out this research but the percentage is definitely high, but knowing the factors that go into whether you may may "win" the Buy Box can really affect your sales and increase your profit on those sales.

Wednesday, August 17, 2016

Turnover Tuesdays - The Classic Deal Curve

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

The previous posts in the series can be found at the bottom of the post.

The Product - ZTE SPRO2

On March 30th, I bought 5 ZTE SPRO2s on eBay for $349.99.  They were going for about $450 at the time on Amazon.  That would have been about $415 after fees, which is $60-$65 after shipping.

Soon after buying from eBay the familiar Amazon race to the bottom started.  It wasn't too bad here, but prices bottomed out at about $380.  While not amazing, that would still be breakeven and if I had to settle for something like that to avoid long terms storage fess I would but that was only a couple of weeks later.

In this case, it wasn't an extremely popular deal and it was limited to 5 per customer on eBay so the number of sellers never went insane but it definitely increased.  You can see the Keepa chart below.  The top is the price and the bottom is the number of sellers.

It isn't quite as stark as the following Keepa chart on a different product I'm selling which came from a daily deals site.  I'll bet you can figure out what I think about those now.  It hasn't recovered yet but you can already see from the chart that the recovery has begun, though you wouldn't know it from the prices. Keepa charts can be an amazing pricing tool for that reason.


Already by June prices started to recover a bit so it took about 2 months for recovery.  I sold the first one for $499 which is actually even higher than the prices were before I purchased.  I saw the number of sellers continue to decrease and I took a chance and it worked.  

After I sold 2, I raised my price more.  I went to $539.99 and 3 days later it sold again.  That's incredible!  I still had 2 more left and I actually raised my price again.  Unfortunately prices didn't come with me, prices actually went down.  Eventually I sold the last 2 for $536.95.  I had one return that was in sellable condition and resold it again for $536.95.  

The return cost me $5 total since it was resold for the same price I only lost the return fee.  Had one of the earlier ones been returned I would have actually came out ahead since the price went up but I am not upset by this.  There are actually no more FBA sellers so I could have sold all of them for more but you never know what will happen when you go too high.

You can see from Inventory Lab that I earned between $109 and $140 per sale which is 30-40% return on investment.

The reason I did so well and I was able to raise my price even though I hadn't sold yet is because I had my eye on the charts.  Remember that prices lag behind the number of sellers.  There is often a lot of sellers around the lowest price so even though the number of sellers decreases until that glut of sellers is gone you won't see an increase in price.  If you are paying attention to the seller charts you can have a significant advantage over your competition.

Wednesday, August 10, 2016

Turnover Tuesdays - Access to Capital During Quarter 4

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

Tuesday, August 2, 2016

Turnover Tuesdays - Retirement Accounts

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

Being a small business owner provides a lot of extra taxes in this country (like self employment tax) but the tax code also provides some pretty good incentives to avoid some of those taxes while planning for your retirement at the same time.

This post is not about business expense tax deductions.  There are a lot of those for small business owners as well and maybe I'll have a post on that in the future.  This post is specifically an introduction into some of the retirement accounts available in this country that can lower your tax burden.

As I always write, I am not an accountant, in fact I paid an accountant this year to do my taxes (business expense!).  I have rudimentary knowledge in accounting and retirement accounts but hopefully this is enough to start a conversation and get those who are interested on the path towards responsible retirement planning and tax avoidance.  Please speak to your tax adviser about what works best for you.

Just remember, it's not a crime to lower tax obligations.  You should avoid taxes when possible.  If you misrepresent your income to avoid taxes or claim tax deductions you aren't eligible for, that is a crime of tax fraud/tax evasion.  I can't stress this enough, you must always pay every penny of the tax you owe.  Our goal is to legitimately owe less.

Capital Constraints

Retirement accounts often have penalties if you withdraw the funds before they are eligible.  If you are funding retirement accounts, that money is staying there unless there are extenuating circumstances.  Selling on Amazon requires a lot of capital.  Don't put away money in quarter 1 that you will need for quarter 4.  You aren't saving that way.  If capital constraints are a problem, don't put away quite as much.  Saving for retirement hurts but withdrawing savings from retirements hurts even more.

The IRS has a list of all the possible retirement accounts and their details here.  I won't go through all of them since some don't apply to most people but they are good to know about.  If you are closer to retirement, you may be able to make "catch-up" contributions beyond the limits stated, depending on your age and the plan.

Basic Retirement Accounts

These retirement accounts are available to anyone who has income, not just business owners.


An IRA is an Individual Retirement Account (IRA).  You can open an IRA with any number of institutions and you should not be paying on fees to have your IRA administered.  Any money put into an IRA is free from income tax the year you contribute.  For example, if you make $100,000 a year and you contribute $5,000 towards an IRA, you now only pay income tax on $95,000 of income instead of $100,000 of income.  If your marginal tax rate is 30%, you will have saved $1,500 in taxes this year since you would have paid $1,500 of taxes on that $5,000 of income.

When you withdraw the money from the IRA you are now obligated to pay taxes on that income.  For example, if you decide to withdraw that $5,000 when you are 70 years old and retired and your marginal tax rate is now 10%, you will have to pay $500 of taxes on the withdrawal.

Limits - You can only contribute $5,500 a year under current limits

Keep in mind that the growth of the money is tax deferred but they are taxable.  If that $5,000 became $50,000 over 30 years, you will have to pay income tax on the entire $50,000 upon withdrawal like any regular capital gains.

Withdrawal Limitations - You can start to withdraw at age 59 and a 1/2 and if you withdraw early you will pay a 10% penalty aside from the income taxes you have to pay.

Income Limitations - None

Basics of an IRA

Roth IRA

Roth IRAs are trickier.  Roth IRAs work almost in the opposite way as regular IRAs.  Instead of lowering your current tax obligation, when you contribute to a Roth you owe the same amount of taxes during that year.  Your current taxable income doesn't change.  The advantage of the Roth is that any gains you incur are not taxable.

For example, if you contribute $5,000 and it turns into $50,000, you still only paid the tax on the original $5,000, not the $45,000 you earned over time.  In addition, if you are currently in a much lower tax bracket than you plan to be in during withdrawal, you can pay taxes at your current rate and avoid paying taxes on the principal and the gains at the higher rate as with a traditional IRA

Limits - $5,500 a year under current limits

Withdrawal Limitations - You can begin to withdraw without penalties if the money has been in the account for at least five years and you are 59 and a half or meet certain criteria.  It's more complicated so consult your tax adviser if you need to withdraw early

Income limitations - not everyone is eligible.  If you are single, you can contribute if you earn $132,000 or less and if you are married filing jointly you can contribute if you earn $194,000 or less.

Basics of a Roth IRA

Keep in mind that you cannot contribute to both an IRA and a Roth IRA maximally.  The limit of $5,500 applies to both IRAs combined.

Backdoor Roth IRA

The tax free growth of an IRA can be a benefit and many people might prefer to pay taxes on the income in exchange for the tax free growth.  The problem comes when your income no longer allows you to contribute to a Roth IRA.  What do you do then?

There are a couple of solutions I know of and one involves a 401(k) Roth but if you don't want a 401(k), there is another more "simple" solution.  It's called a "Backdoor Roth".  Under certain circumstances you can contribute to a traditional IRA which has no income limitations and convert that contribution into a Roth IRA contribution.  This is a complicated subject and can have other tax implications including paying taxes on the "income" withdrawn from the traditional IRA so, again, talk to your tax adviser before considering this option.


A Simplified Employee Pension (SEP) IRA is the first account that is geared towards employers.

A SEP IRA is similar to a traditional IRA in that the contributions lower your taxable income.  You are only eligible for a SEP IRA if you have self employment income.

The big advantage with a SEP IRA is that you can contribute up to 25% of your wages from the business's income, up to a maximum of $53,000.  There is no annual reporting to the IRS.

The big disadvantage is that you must contribute to your employees SEP IRA equally if you have employees (under specific guidelines).  If you contribute 20% of your salary, you need to contribute 20% of your employee's income toward their SEP IRA.  If you are the only employee and you plan to keep it that way, a SEP IRA can meet most people's retirement needs.   I set mine up in 5 minutes from Fidelity with no fees and they are available at most brokerages without fees.

You are limited in your investment vehicles including the inability to invest in real estate or life insurance and you cannot take a loan from the SEP IRA like you can from the 401(k).

Withdrawal Limitations - Same as traditional IRAs.  Penalties if withdrawn before 59 and a half.

Income Limitation - No income limitations.  The only limitations are the amount that you can contribute which is a maximum of 25% or $53,000 (whichever is lower) for 2015.

Basics of a SEP IRA

You can contribute to both a traditional or Roth IRA and a SEP IRA since this is considered an employer sponsored plan and the regular IRAs are employee sponsored


A 401(k) plan is a bit more complicated, especially if you have employees.  Often times there is a plan administrator with annual fees and fees to have the plan drawn up.   Employees can contribute up to $18,000 a year and there may or may not be some sort of employer match on those funds.  Employers can contribute up to $53,000 a year, of which $18,000 are employee deferrals and decrease their taxable income but not their self employment taxes (Social security, Medicare and Medicaid).  The other $35,000 do not have self employment taxes.  The funds and their growth are tax deferred until withdrawal, similar to a traditional IRA.

Withdrawal Limitations - funds cannot be withdrawn before 59 and a half without penalty.

Income Limitations - None, just a maximum contribution of $18,000 for employees and $53,000 for employers.

Basics of a 401(k)

As opposed to a SEP IRA, you can buy life insurance and invest in real estate (under certain conditions) with 401(k) contributions.

Another big advantage of a 401(k) is that you can borrow money from the 401(k) without paying a penalty.  That money must be paid back to the 401(k) with interest.  The interest is not significant since you own the 401(k) you are paying yourself but it still needs to go into the plan for retirement.  This can be a good way to increase your short term available capital (think Q4).  This is usually limited to a maximum of 50% or $50,000.

401(k) Roth

A 401(k) Roth is similar to a Roth IRA in that you contribute with after-tax dollars so it doesn't lower your current tax burden.  Instead the money grows tax free and the gains can be withdrawn tax free.  The contribution limits are the same as a 401(k):  $18,000 for employees, $53,000 for employers.  You cannot contribute to both a 401(k) and a 401(k) Roth to the maximum contribution levels.  You can do a maximum of $18,000/$53,000 between the two accounts.

Withdrawal Limitations - Similar to a Roth IRA, you cannot withdraw the money penalty free before the money has been there for 5 years unless you are 59 in a half or met certain criteria.

Income limitations - There are no income limitations.  This is a big difference between an IRA Roth and a 401(k) Roth.

This chart is from the IRS website


A Health Spending Account (HSA) is an account that you can use to pay qualified medical expenses with pretax dollars.  Any money contributed to your HSA lowers your taxable income like a traditional IRA.  If you use the money on qualified medical expenses you are not taxed upon withdrawal like a Roth IRA.  You are also not taxed on the income as it grows like a traditional IRA.

As opposed to an FSA, the money contributed is not lost year to year if it isn't spent.  Everyone knows that friend buying $3,000 worth of glasses and Band-Aids at the end of the year ;)

In addition, if you make it to retirement without using the money for healthcare spending, you can withdraw the money like a traditional IRA. If you use the money for medical expenses in retirement you don't pay taxes on the growth.  If you withdraw for non medical related expenses, you will pay taxes on the growth upon withdrawal like a regular IRA.

This is actually one of the potentially best accounts in terms of taxes.  The White Coat Investor actually calls it a Stealth IRA.

A big drawback is that you need to have a high deductible health plan (HDHP) to qualify.

HSA contribution limits (from Wikipedia)

Defined Benefit Plan

A defined benefit plan is mostly designed for those who are 50 and older and would like to contribute very large sums every year until retirement (think $200,000+ annually)

This is when actuarial calculations come into play and is very complicated.  Beyond the scope of this post.

In general, all of the accounts are relatively cheap and can be done on your own or with minimal help including a single employee 401(k).

If you have W2 employees besides yourself or you want a Defined Benefit Plan, that probably should not be done on your own.

If you are interested in a referral for a tax lawyer who administers these accounts, please email me at orensmoneysaver @ gmail.com and I can forward over the information (I earn no commission on the referral).

I hope that this can provide some basis with which to talk to your accountant or tax adviser but please, please don't make tax decisions based on this.  That wouldn't be smart.  That being said, there are lots of ways to lower tax burden and you should maximize decreasing your taxes when possible.

Any important retirement accounts I'm missing that you are contributing to?  Let me know in the comments.