A question about Time VS. Money

Discussion in 'Growing and Managing a Business' started by Chrisanova, Apr 27, 2011.

  1. Chrisanova

    Chrisanova
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    I sell merchandise on eBay.

    Now, if I posted my item as an Auction, starting at $1 and for 7-days length, it may end up selling at high bid for $15, $20, or $25 dollars 7 days later.........

    Now, let's say I have that same item posted as a "Buy It Now" for $100, because I don't want to take low money (the $15-$25).

    A Buy It Now can sometimes have the right buyer come along in hours or days, and pay you the $100, or offer you (with the "Best Offer" function) $90, $75, etc........
    ORRR the item can sit there for MONTHS at a time, while waiting for the right person, who wants to pay the right money.

    I am writing a business plan for investors, and I am dying to know what this economic concept/terminology is called ---- when you have to "sit" on inventory for sometimes a verrrrryyyy long time before it sells for that higher price.

    I am also trying to justify it as profitable, since my product take little space to store, and my overhead/expenses are low.
    It is well worth it for me to list something for 6 months to get $75-$100, as opposed to doing a 7-day auction, and get only $15-$25 because the right people were not FIGHTING for it.

    Terminologies, or a shove to the right Wiki page, would be most appreciated.

    Thanks,
    Chrisanova
     
  2. Fergal

    Fergal
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    Welcome to Business Advice Forum Chrisanova!

    What kind of product or service are you selling on eBay?

    Are you confident that what you are selling is worth $100 to the buyer?

    In what ways is your offer better than those of your competitors?

    I know that's a lot of questions, but answering them should help you, even if you don't want to post the answers here. Plus we will be able to help you more if you can please give us a little more info.
     
  3. Chrisanova

    Chrisanova
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    Thanks for the welcome.

    I didn't explain myself fully.
    I've been doing this for 5 years already.

    When things went haywire in the U.S. in 2007, I stopped selling things by "Auction" format,
    because the easy-money bottom fell out of eBay, and auction prices since then will only do 20%, 30%, mayyybe 40% what a "Buy It Now" will get.

    I already know what works.

    All I would like to know is what is the economic term called, aside from "Time VS. Money",
    when you choose to retain inventory longer, in order to make more on it.

    Thanks
     
  4. ArcSine

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    Chrisanova, you're already pretty close. The concept to which you refer goes by different names, depending on the specifics, but probably the most ubiquitous is "time value of money". Google that phrase, as is, and you'll rake in plenty of bedtime reading material.

    In your context, suppose you could sell an item today for 10 (dollars, euros, whatever). You choose instead to hold out for a higher price. Suppose further that the "hold out" decision results in your selling the item two months later for 25.

    Economically, you've invested 10 today (the forgone price of selling today) in a deal that cashes out at 25 in two months.

    The phrase "Time Value of Money" is descriptive here, because it refers to the fact that 25 received two months from today is more valuable than 10 received today. Why? Because had you chosen to take the immediate sale price of 10, it's highly unlikely that you could find anywhere to invest it such that it would grow to 25 within two months.
     
  5. Chrisanova

    Chrisanova
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    THAT is a fantastic reply, and a great start in the right direction.
    Thanks.
     
  6. ArcSine

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    Glad it helped a bit, amigo, and best of luck with the investor pitch. Take care,
     

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