…So perhaps that’s exactly what you should do, too 🙂
Once you have at least $300-500, you should start focusing on your private label brand.
Arbitrage may be easy to get into, that ease comes at the expense of your profit margin.
But, controlling sourcing and branding, allows you to be the true master of the brands you sell. This makes private labeling (by far) the most lucrative and profitable of all the e-commerce business models.
If you’re not creating your own brand on Amazon yet, you can still make money.
Private labeling is buying a product from a third party supplier and creating your own brand that you use to sell that product.
It’s the difference between hustling for a few hundred bucks and having your brand make money for you while you sleep..
You don’t need a lot of money to sell on Amazon.
Someone that has $5,000 to start selling on Amazon tends to over spend and take unnecessary risks.
As a matter of fact:
We believe in the lean startup model. It forces you to manage costs and only make decisions that immediately grow your business. That way your break even point is reached quickly and you start seeing profits sooner.
First, we’re going to introduce all of the steps you need to take and how much everything should cost before teaching you in detail how to do everything.
Baseline Product Selection Requirements For Calculating Amazon Business Costs
You can run an Amazon FBA business from anywhere in the world. Therefore, we go over the exact steps you need to follow if you live outside the US later in the article.
For now, these are our assumptions
Our product is small, light, non-fragile, and can fit in a small box
We’re purchasing 15 units
We’re using express air shipping
The price selling on Amazon will be $25 USD
Our warehouse is Amazon FBA
We’re selling in the United States
Cost of Goods Sold is $5 USD per unit (manufacturing, labeling, shipping)
Now that we know what assumptions there are, we have to select a product. Product research is a topic that’s going to be covered later in this post. What we want to do is give you an overview of what things can potentially cost.
For this example we’re choosing a dog harness.
How Much Money Do You Need To Sell On Amazon
There are currently 5 costs directly associated with starting an Amazon business. These figures can range depending on how much you’re willing to invest and how much you’re willing to bootstrap some costs in the beginning to keep startup costs low:
Buying Initial Inventory
Opening an Amazon Account
Buying UPC Codes
Investing in Product Photography
Creating a Logo and Product Branding
Total Amazon Business Lean Startup Cost: $340
See how we calculated the startup cost below…
Cost #1: Buying Inventory
Thanks to our most popular article on sourcing products from China. We can show you the road map it takes to sell on Amazon. I want to show you the basic costs to start this process and grow your own business.
When we say the word samples we don’t mean free samples. We mean a small test order so you can sample the market for that product. You don’t want to buy $1,000 dollars worthof products only to find out that no one is willing to buy them.
We recommend finding your suppliers on Alibaba. Depending on who you talk to they will tell you that Alibaba is full of scams and to not trust the site. Alibaba is the largest supplier network on the planet and if you can’t trust them then who can you trust?
Take the necessary precautions to avoid scams on Alibaba and move forward. You want a supplier that you can communicate effectively with and is willing to create a partnership with you.
Not all suppliers do that but you should ask and it’s a way to get the small order for free! Then, ask your supplier: “Can you please use your express air shipping account” when requesting a quote. That way you get your products in 3 to 5 days.
Now just to give you an estimate…
On average, an order of 10-50 units weighing under 5 lbs each is going to cost around $40-160 to ship via air.
So for our example we can expect a shipping cost of at most $100 for 15 dog collars.
If you sell them for $25 dollars each so you’d profit $75-80 after all Amazon fees and costs. It might not seem like a lot but if you can break even on samples then you’re off to a fantastic start.
Selling these 15 units in a week or so proves an important fact to us:
The Demand is Real.
And that’s the point of validating a product like this, you’re not just testing out the product, you’re also testing out the supplier and measuring market demand with REAL SALES!
Cost#2: Opening An Amazon Account
You have to pay Amazon to sell on their platform. Small price to pay to have access to the largest pool of online buyers in the world.
We encourage most people to start small. The individual Amazon seller account allows you to pay $1 per item sold.
The professional seller account costs $40 per month so if you’re selling less than 40 items you can potentially save money in the beginning.
Once your sales volume increases then you can upgrade to a professional seller.
You can certainly save money with product photography. If you can spare it, getting a professional to take your Amazon product photos might be worth it.
When starting to sell on Amazon save the money but be aware that this option exists. $150 for 5 photos. Once you sell your samples and prove the concept of the product I would look for awesome professional photos for your Amazon listing.
Let’s say you did adequate product research and you’re confident you want to continue selling the dog collar.
It’s time to think about logo and branding design.
I want to include this in the beginning because you want to have this done with your next large order.
This is crazy:
You can hire a kick ass freelancer from freeeup for $12 dollars an hour or even more if you want and they can design a logo for you within a day.
Then you can use them anytime you need design work done.
They can help you with:
It’s such a simple process to hire one of these workers and their customer service is outstanding. Freeeup will recruit, interview, and hire online workers then place them into your business effectively saving you time to grow your company.
Let’s say it takes the designer 2 hours to design your logo. That’s $24 USD
Once you have products that you like, it’s necessary to see what the reviews are saying about your product. You don’t want to sell something that is trending negatively and you don’t want to sell something people don’t want.
We like the review analyzer app because you can use your customers exact words to create your product listing. You have the potential to sell exactly what your customers are looking for!
Check out the video below to see how the review analyzer app works.
This extremely useful tool is going to tell you how much profit is left after all the Amazon fees. Knowing this allows you to properly negotiate on Alibaba and plan for necessary expenses like shipping.
Check out the video below on how exactly to use the tool.
Thanks to our friends over at Sellics we’re able to show you a video demonstrating exactly how to use the Amazon Revenue Calculator.
A huge part of your product research is determining Amazon fees so you aren’t starting your business at a loss.
Where to Find a Supplier for Your Amazon FBA Product
Let’s look for suppliers. Looking for products on Alibaba can feel scary at first but there is nothing to worry about because we have tips to keep your information safe and protect you from losing money.
Self explanatory but search on Google for US suppliers.
Startupbros must have requirements in a supplier:
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At a minimum you want to make sure that your supplier has these prerequisites.
You never want to send money via western union or money-gram.
I’m sure there are some good suppliers that accept those but it’s not a headache we want you to deal with.
Let’s dive deeper into Alibaba payment methods:
Overview of Alibaba Payment Methods
That’s not set in stone but it’s a rule of thumb we like to follow.
Suppliers like to compete on price but some might be willing to offer you a better one.
finding a supplier making the exact product you found on Amazon is crucial. You’ll see that sometimes the pictures are even the same ones that are selling on Amazon.
Side Note: We’re not doing that when we list our product!
Finding a supplier that communicates well is going to be extremely important moving forward. Especially when you decide to place a logo on your products.
How to Create an Alibaba Account
Creating an account on Alibaba is more straight forward than you might think. We created this video below to explain the process and make sure that any question you need answered gets answered.
One of the most common questions we get is: “Do you need to have a legal company or LLC to open an Alibaba account”. And the answer to that is no!
How to open an Alibaba account.
Now we’re at the midway point of the article. If you’ve followed along the way here are the steps you should have completed. If you haven’t completed these steps stop here and finish before moving on!
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You’ve done your Amazon product research and met the criteria
Calculated Amazon revenue
Opened your Alibaba accoun
Found 3 suppliers that make your product and accept proper payment channels
Next, let’s negotiate with our suppliers and see if we can get a lower cost for our small orders. Best case scenario we can even get a credit back on the sample products.
If you see on the bottom right hand side of the photo you can click on “contact supplier”.
You don’t order right away on Alibaba. You need to contact the supplier and explain to them what you want and to give you an estimate.
Contacting the supplier starts the conversation
We’re not going to leave this to chance. We’ve tested so many emails to suppliers and we’re going to share one of the best emails you can send.
The idea is to create an open line of communication between you and your supplier.
People become very nervous at this step but suppliers are people too and just need to know how they can help you.
Introduce yourself first and then you can let them know that “your boss” is unhappy with your current supplier and would like to move to another supplier.
Copy and Personalize This:
Alibaba Supplier Negotiation Template
Dear NAME, As I am sure you can understand, we cannot divulge secretive information like monthly sales volume. Based on what you have told me / what I have seen , your volume is enough for us to be interested in your factory, especially given your broad range of products and your focus on quality control. However, my boss is not willing to switch accounts / my boss is not willing pay for samples to any new supplier until we prove things out by moving slowly. The steps he would like to follow are:
We test a normal and high capacity cartridge internally in the field with our 20 sales reps = 40 Then we test on a broader scale with 100 units, preferably with a different printer line =100 After, we move to 1,000 units to test happiness with customers in our many channels of distribution =1,000 Assuming all goes well, we go to 5,000-10,000 units and really begin to migrate to your factory fully for that line = $
Your factory seems like a great potential partner for our company, and we’re excited to do business with you. But this is our company’s standard procedure for new products and suppliers. Please let me know if you’d like to do business together, and I’ll let my boss know immediately.
Look forward to working together, YOUR NAME
Set The Proper Expectations
If you do this and maintain your position as an assistant or purchasing manager, it will give you the necessary negotiating strength to get started.
Just be sure to set reasonable expectations of growth and have them understand that there are validation and inspection processes to go through in order for them to earn your company’s business.
Once you send the initial inquiry you’ll come to this screen and you’ve made contact with your first supplier!
Remember a small order can be anywhere from 5 to 20 units. It depends on your level of risk tolerance.
Expect to pay around $100 to the supplier for door to door small test orders.
Pro Tip: Ship the products to your house. You don’t worry about customs, duty, or freight forwarders. Small orders are declared as samples by the supplier. Stop thinking and start doing.
Here’s the crazy part:
New! The de minimis value for e-commerce parcles to the USA was raised to $800 USD in March 2016.
Therefore international courier shipments and/or international parcel deliveries can be cleared without duty and taxes!
“When setting up an account, you’ll go through a Taxpayer Wizard which will generate an IRS tax form for you to complete. Foreign sellers still need to complete the tax interview, and it’s likely that the form which is generated for you is a W9-BEN form, which means you’ll be exempt from U.S. tax reporting requirements.
This is good news, because foreign persons are not subject to U.S. income tax withholding if performing the work outside the U.S. Of course, you may stillhave to pay tax on this income in your own country. And if you set up a US-based corporation or LLC, that entity will be considered a US “person” and therefore subject to paying income tax.
So the decision to make here is whether to create a business entity in the US, or maintain status as a foreign individual seller. Be sure to consult a tax professional to determine the best action in your case.”
Selling on Amazon from the UK
Sam Priestly from The Arbing Blog tells us a little bit about selling on Amazon from the UK:
“Selling on Amazon US from the UK isn’t as difficult as people might think. While I recommend starting out selling in the geographic area closest to you to get the hang of things, one of the best parts is expanding. When we have things manufactured for my table tennis company, we have shipments made to the various countries that we sell in and make sure to set amounts accordingly. It really just becomes a matter of logistics and organization.”
There’s no need to make it more complicated than it is. With Amazon FBA selling from different countries comes down to logistics and not differences in the Amazon platform. It’s the exact same process from anywhere!
We’re going to go over later in the article how to ship your product directly to Amazon FBA warehouses instead of your home country!
It’s Easy Dealing With Amazon Customer Returns
If you’re selling outside the US hopefully you are selling with Amazon FBA to simplify the process.
Amazon will deal with your returns and if the product is still in good condition you can sell it on Amazon again.
You can select the option to have Amazon review your products in your seller central dashboard.
The other option you have if Amazon can’t sell your items is to have them destroy the returned/defective product. Amazon charges 0.10 cents per unit to destroy a product.
It doesn’t make sense to have the product shipped back to you in your home country.
Pro Tip: **Don’t worry about customer returns before you even make any sales.**
Work hard in the beginning to spend less time doing the things you don’t like later.
Head over to that article and find out exactly how to make sure your Amazon products are perfectly showcased to make sure you start off on the right foot!
Pro Tip: You can list an item to sell on Amazon by merchant and then convert it to be Fulfilled by Amazon once it’s listed. That way, it won’t sell until received at a FBA warehouse. The item will go into your Inactive Inventory until it is received into the FBA warehouse.
Pro Tip: ***Suppliers from China do not ship products to Amazon FBA for you!*** Follow the post guidelines and ship to your house first.
How to Ship Products To Your Home
If you live in the US shipping is as easy as sending the products into Amazon FBA using the third party companies that we mention below.
It’s not your responsibility to figure out all the intricacies of freight forwarding. Quickly understand all the methods of shipping from China to Amazon FBA and move on. Suppliers won’t ship directly but instead use middlemen.
Your supplier figures out how to send products to your home address and they’re the professionals.
It’s your responsibility to make sure that when the products arrive at your house that you inspect them and prep them for FBA.
Use the FBA guidelines that are completely detailed in the link and avoid any returned inventory.
Dealing With Shipping Costs
Startupbros rules to live by:
Product research is more beneficial to the profit margin than trying to lower your shipping costs.
Anywhere from $50 to $150 is reasonable for shipping costs
If we’re asking them to express ship it via air then we should expect a higher shipping cost
Keep this in mind when receiving a quote from a supplier and consider a new product before thinking $50 to $150 in shipping costs is unreasonable. Lets recap what you should complete by this point.
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Everything you need to start selling on Amazon and make your first sale has been covered.
Shipping is something that most people make more complicated than it needs to be. We’re breaking it down so that nothing gets lost in the wash.
We cover everything having to do with shipping in our huge Shipping Guide. We think you’ll love it!
Let’s talk high level right now:
Sea freight: The standard lead time for shipments by cargo ship tend to be 21 days from port to port. Depending on where you are in the United States it might take an extra 7 to 10 days to reach your house. So, if you are fulfilling through Amazon FBA then it would most likely get to the warehouse faster than that.
Air freight: If you tell your supplier to use their express air shipping account then you can receive a shipment at the latest 7 to 10 days from placing the order.
Save sea shipping for your bulk orders when you have more than enough time to wait for your Amazon products to arrive.
You want to make sure the products you’re ordering arrive properly packaged and that they don’t damage on arrival.
This is not the first thing you need to do but there are aspects about selling on Amazon that require you to have a registered brand.
It also allows you to create a trusted relationship between you and your customers.
Why Should You Sign Up For Amazon Brand Registry?
Amazon brand registry is strictly for the person who either manufactures their own product or sells their own branded product.
Do you need to register a brand to start selling on Amazon? No!
Pro Tip: If you aren’t making consistent sales you shouldn’t worry about registering your brand on Amazon. Create a name to sell your products under and it can be a generic name to start.
If you’re at the point where you want to register your brand to protect your sales then let’s dive deeper.
1. You Want to Protect Your Brand and Listings From Hijackers
We have an incredible article about protecting yourself from Amazon Hijackers. If someone tries to hijack your product listing because Amazon will immediately have that seller removed
The biggest fear that people have when starting to sell on Amazon is that someone is going to steal their products, their brand, and more importantly their money.
Amazon Brand Registry allows you to have the buy box because only you own your brand. People without registered brands work so hard to win the buy box and now you would automatically be entitled to it.
2. You Control Your Product Listing
It’s your branded product so you can influence all of the product details in a way that non registered sellers can’t.
Normally when you list a product on Amazon you need to accept the product details Amazon has for that product. When you’re listing under your own brand it becomes your product and you can optimize it as you see fit.
Government Registered Principal Trademark Registration or Serial Number. For USPTO marks, the Mark Drawing Type must be equal to one of the following and the text must match the brand name: “1 – TYPESET WORD(S)/LETTER(S)/NUMBER(S)” “3 – AN ILLUSTRATION DRAWING WHICH INCLUDES WORD(S), LETTER(S)/NUMBER(S)” “4 – STANDARD CHARACTER MARK” “5 – WORDS, LETTERS, OR NUMBERS IN A STYLIZED FORM”
Images of products and packaging that carry the trademarked brand name. If the product is not branded, the packaging must be branded.
A list of product categories (e.g., apparel, sporting goods, electronics) in which the brand should be listed.
List of product categories (e.g., apparel, sporting goods, electronics) in which the brand should be listed.
A list of countries where the brand’s products are manufactured and distributed.
You can’t do anything without getting the registered trademark. Keep on making sales and don’t allow registering your brand stop you from continuing your business.
Go to brandregistry.amazon.com and select Enroll a new brand. If you have all of the requirements listed above then you just need to follow the steps. Once you register your brand you can protect your listings from being hijacked.
Getting Your FBA Business Ready for Tax Time
Remaining compliant with the IRS is probably the biggest fear people have and one of our most email topics.
How much money do I need to make selling with Amazon FBA to file taxes?
What forms do I need to file for my Amazon FBA business with the IRS?
I’m not in the US what forms do I need to file for my Amazon FBA business with the IRS?
What software can I use to file my taxes?
How do I handle Amazon FBA sales taxes?
Here’s the truth:
You don’t file for taxes and you don’t file any forms with the IRS unless you make 1 sale.
Most people don’t start selling on Amazon FBA because they’re afraid of doing something illegal. They’re afraid of not “registering” the business with the IRS.
Pro Tip: The IRS doesn’t even know who you are unless you’re making money.
Think about all the steps you need to properly take before even making 1 sale.
Taxes are something you should be excited to do later because it means you’re making sales!
Shift your perspective from someone trying to make sure that you’re following all the rules to someone who’s only focus is to make a sale because nothing else should matter.
Everything in this article is meant to motivate you to take action and limit the barriers you think are in your way.
If you take everything in this article and apply it we can guarantee that you can learn to sell on Amazon and make your first sale.
We define success as making your first sale on Amazon.
You don’t need anything else to succeed on Amazon. We believe that we addressed anything that would prevent you from starting.
And, your going to run into obstacles so keep coming back and checking on the updates we’re going to make.
Ask questions and keep this conversation going in the comment section below.
Find me on Twitter and let's talk! Mechanical engineer that left the corporate world to become a digital marketer and write about all things tech, leadership, and marketing. Usually working on my laptop at a Starbucks in Florida and Director of Product Development here at StartupBros.