š„(it's hell of a lot more than you think)š„
Nobody telling you how to pick products mentions the giant cost of marketing your products - it is the biggest operational expense you'll have.
If you want to be profitable, it is likely going to take you multiple orders before that happens.
This means you'll need a lot more money set aside (probably double or triple what you think you need) to make this work.
Letās plan for the real price of entry to start this venture and not fail. Ā You aren't going to quit your job in 6 months. Ā Instead grab a pen and notepad. This post is for newbies and experienced folks.....but especially for those of you newer to the cold reality of working for yourself.
The 3 essential pieces to an FBA business.... (that you've either already screwed up or ignored)
In any business - online, offline, retail, info product, whateverā¦. You need a minimum of 3 things to make a business work and without all 3, you WILL fail. You need to have a plan for all 3 in place BEFORE YOU SPEND A DIME!
1ļøā£ Deliverable ā this would be your product. Ā Even though this is the most spoken of topic in the FBA seller forums, you likely have approached this completely wrong. Have you considered...
- a. Whom are you aiming to service as end users of the product idea?
- b. What is the underserviced gap in the needs of those end users that the product is supposed to fill?
- c. What makes this a solid solution to those needs that is better or positionable as a strong alternative to what they are already using?
- d. What are a few of the angles or points of value that we are aiming to use or address directly with the product, and from where did we find those ideas?
- e. What are the things they don't like about the solutions already available to them for the problem we are aiming to address?
- f. What have they already tried and what are the reasons they are giving for still not being able to resolve the underserviced gap we are aiming to address with our product offering?
If you can't answer EVERY SINGLE ONE of those questions, then you're going to have serious problems.
The reason is simple: All of the Amazon product research tools (H10, Jungle Scout, etc.) tell you ZERO about what reasoning in the end user market is driving the purchase demand.
Even KW volume tells you nothing because search terms don't have anything to do with what needs people are addressing with their product purchases from the platform
š£Friends, please realize our products are ONLY one of the possible solutions available to a targeted group of end users. Ā Your product offering will ONLY perform as well as how good you are at seeing an underserviced area of a specific market and matching your offering to those needs.
šWithout a defined end user first, you can't optimize features, or the listing copy itself toward those people whom you want to get to trust and buy from you.
2ļøā£ Traffic Sources ā do you have a viable and planned path toward getting as many QUALIFIED eyes, as cheaply as possible on your product? These things are Amazon organic and PPC sales, an Email list, social media channels, an SEO optimized content website with niche specific information, etc.
How well do you understand these pieces and how to fit them together to your advantage?
Do you even have a map for sales creation or profitability?
š„ Pro tip: Start building an audience and email list first. Ā You'll make a better product and become profitable WAY faster with less wasted cash.
If you need some help on this subject, click the link below and get my Full Funnel Framework (beginner friendly) to help you get a better picture of how the pieces fit together.šš
3ļøā£ Financing: How are you going to pay to market and get enough eyes on your product so that you can still turn a profit?
You need to plan advertising as part of your budget when starting any venture. Itās the one thing I see that most folks donāt mention or think about.
We all see countless posts and YouTube videos about product research and margins, or what tricks you can do to find profitable products on Jungle Scout.
Hell, there are a ton of gurus out there that have ācoursesā on making it rich on Amazon and all it really is comprised of is how to set Jungle Scout filters and find the magic $30k a month product and some basic info beyond that.
What most fail to mention, and that nobody tells you about going into business for yourself, is that marketing is going to be your biggest expense. Flat out.
You need to plan a realistic budget for marketing into your profitability calculations when doing Product Research. It will help to determine that golden question ā how much $ do you need to start Amazon or is this product even worth it?
What you aren't hearing about starting the FBA private label model is your ad spend to profit ratio is going to be MUCH higher initially.
It might come down as you rank better and get reviews, but you need to plan to absorb the breakeven (or negative cashflow) for a few months while getting your business off the ground.
If you aren't ready for this ongoing expense of marketing, this game will quickly eat you alive and make that job you hate look pretty good by comparison.
You also need to understand you need to spend money long term and consistently to keep the sales moving - it is more than just organic sales on page 1 post launch.
EXAMPLE SCENARIO: Letās say Iām looking at a product:
- Cost - $4 per unit + Shipping - $2 per unit = $6 per unit landed
- Amazon FBA fees - $6 per unit
- Sale price - $24 (absolute minimum is 4x landed cost)
- Units to move ā 1000 units (you DO NOT want to get going and then have to re-order immediately as the delay in logistics will screw over your whole operation)
The Number one question in this space is how much money do I need to start amazon? Well, that depends on your goals and how aggressive you are.
If you look at the above scenario and use the cost of product and shipping ā most are looking at that and thinking $6,000 (1000 units x $4 to make the products + $2 to ship to amazon)ā¦ā¦well friends, you forgot the marketing money it takes to move the product and also having a pool of cash to reorder BEFORE you run out of stock.
And we havenāt even talked about the extra money necessary for product launch (thatās another post entirely). Ā Remember, you aren't Nike shoes - nobody knows or cares who you are....(YET!)
Letās say in the above scenario it costs you $8 per unit to sell. Ā At a $24 price point, that leaves you $4 per unit of of profit after all things considered. (just under 18% NET profit is relatively normal)
Did you realize that you need to spend another $8000 AFTER you have bought and shipped your products to make the capital back plus some profit? Ā PLAN FOR IT AHEAD OF TIME if you really want to make this a business!
By the time you move all of those units, Amazon will be paying you a total of $24,000 back but youāll need to reorder and ship more product and reset your advertising budget for the next round.
That $4k you would keep as profit ā it may realistically take you 2 to 3 orders to get there, and it may even require launching a second product to make that stable!
Which means by the time it's all done, you may have 2 products that are moving, and you may have reordered 3 to 4 times each and be 8 months in BEFORE you can take money out for yourself to pay for a few things in your personal life.
Iāve been in business for myself long enough to have been caught with my pants down once or twice.
If I were looking at the above scenario and wanted to be prepared and come out swinging at launch, I would have the $6,000 for the product, plus another $2,500 for advertising up front, AND a $2000 reserve in case I need to have a few hundred units ship over while I wait the 2 weeks it takes amazon to pay me.
Again, your product is what people want - tell them why in your listing (sell the problem you are fixing, not the features).
Traffic Sources are easy to identify but you need to dive into how they work and which ones are right for you.
Planning to finance your marketing is going to make all the difference in whether or not your racecar has enough fuel to get you across the finish line to the better life you seek.
If you liked this article, see more like it below and tell me what you think in our Community, where I talk about this sort of thing with over 10k sellers every day!
And if you really want the inside track...ššš
