It’s not cheap to start an Amazon FBA business, being in the thousands of dollars, but the higher price reduces the competition. Let’s talk dollars.
I get it all the time. I mean, if if I had a dollar everytime someone asked me “How much money will I need to start my Amazon business?” I’d be well and truly retired. 😅
The starting capital requirements
The straight-up answer is: You’re going to need at least $5,000 after your education. Ideally $10,000. Even better is $20,000.
Next you’re going to ask if that’s US dollars or Australian dollars. Let’s just say US dollars, just to make it even more realistic.
Suddenly not a cheap proposition is it? Selling on Amazon isn’t a cheap process, nor is it for people with limited funds. There are great alternatives such as Uber and Airtasker.
I’ve now poured in more than $50,000 into my two businesses. Yes, I’ve made a 2x return on that, though I continue to compound my profits for a 7-figure exit on both.
You know, it’s frustrating for me when I see some Amazon courses setting up their own students for failure. They’ll say things like “Get started for $700!!!” which is complete BS. The aim
I could release a course saying “Get started for $90!” which means, yes, you can get started for $90. Because you’ll pay that for a sample. 🤔
But what about every other conceivable cost before going live. I mean, $700 is certainly a low MOQ or short-order, which most suppliers won’t agree to unless there is a big premium payable.
No one gets rich or even breaks through to a consistent full-time income when starting so small. Years ago this may have been mildly possible, not today, with the greater amount of competition on Amazon FBA.
If you want to build a full-time income on Amazon, it’s almost impossible if starting with less than $5,000. Yes, and ‘those’ course teachers are going to chase me with the pitch-forks.
Breaking down those costs
We’re really going to need to invest into many things. It’s not just inventory, though that will take say 80% of your upfront capital.
There are things such as:
- Product research software such as JungleScout and ZonGuru ($65/month)
- Logo design. You can use basic Fiverr ($30) or 99Designs ($500+) for pros
- Sample costs, which can be up to $100 each inc shipping. Get 3 samples.
- Paying for your inventory. Let’s consider $4,000 USD as a bare minimum
- Getting an inspection done from V-Trust which is around $200 per inspector
- Freight from China to Amazon’s fulfilment centres in the USA ($500)
Oh shit! We’ve already spent $5,000.
I haven’t even included incidentals.
Let’s burn through more of the budget:
- Paying for barcodes (now mandatory for Amazon sellers)
- Trademarks so you can later get Enhanced Brand Content
- Product designers in case you want something more unique
- Photography for your product, as images are super important
- Custom packaging so you can differentiate from the competition
- Costs associated with totally lost inventory (it happened to me)
- Lodging patents so the Chinese don’t copy your product design
- Set up
of a company structure and ongoing accounting costs - Monthly bank account and Xero fees to reconcile business books
Margin for the 3% of customers who return products for no reason- Costs associated with using the Early Reviewer Program on Amazon
- Setting up a website and email address for your Amazon brand
- Amazon’s fees for unpacking your products at their warehouses
That is close to $10,000 or can even exceed $20,000 depending on your product type. I mean – trademarks alone have cost me $5,000+ this year. 😬
Oh yes, and we haven’t even made our first trip to the Canton Fair yet. This costs me $3,00 each time, mainly because I generally don’t fly economy.
It gets worse
We haven’t even spent a single dollar on ad-spend yet.
See, Amazon is becoming more and more expensive to advertise on. This is a key reason why I recommend optimizing your keywords. There are services that can do this for you, but you’ve probably exhausted your entire budget by this point.
Most sellers I know spend thousands each month on PPC directly on Amazon.
Then again, others want to get off Amazon. Starting on Shopify then brings with it more costs. Because then you’ll have to advertise on Instagram and Facebook.
Perhaps that will become frustrating and you’ll hire an agency. That brings with it even more costs.
If you don’t have the money, don’t start yet
That’s a tough pill to swallow. Those who don’t have the funds available right now shouldn’t start the journey just yet. I recommend driving for Uber, using Airtasker, getting a part-time job or saving like crazy.
Amazon is a goldmine, but unlike dropshipping, requires a lot more capital. It is, after all, a proper business with real products. These are products that you own, with the potential to bring you to a full-time income or 7 figure exit.
Many of the success stories you hear are those who secretly started with big dollars. That is – plenty of money in the bank account. Some of these then create courses to ‘sell the Amazon dream’ of making money in your sleep.
…To people with such limited money. “Get started for $700” absolutely frustrates me. I personally started with $7,000 and even that was a struggle. I’ve now poured in a whole lot more. Also, I will never advocate that you borrow money to start an Amazon business. Because starting out already behind is a recipe for disaster.
Am I warning people against Amazon? Nope. Well, actually, maybe I am.
I am more so simply bringing some realistic expectations to the table, unlike many others out there. This isn’t easy. You’ll need a decent amount of money, and you’ll have to keep reinvesting your profits. Many people will quit.
I’m doubt you’ll find anyone as realistic as me on the interwebs.
In summary
Getting started on Amazon can cost a few hundred dollars if you just want to look at some samples.
But when I say get started, I mean make money. I mean – we’re starting this journey to make some money, yes? To build the business of our dreams.
To achieve such greatness, we are going to need some decent starting capital. That’s $5,000 minimum and ideally $10,000. You’ll also be waiting months for that 1st sale. Even so, 2 to 3 years MINIMUM to potentially make a full-time income. It will probably take longer actually.
This journey isn’t easy. It’s sometimes not fun, and certainly not for the faint-hearted. It also can be very expensive too!
You’re sending money overseas to people you’ll never meet, to make a product you’ll never see. Then it gets sent to the US to a warehouse you’ll never visit, to later arrive in the hands of customers you’ll never see.
Absolutely crazy, causing many to lose the courage to start or continue. But some of us will continue to stick around. In fact, what thousands of us do right now to generate a great income, both now and well into the future.
If you’re still committed, I look forward to helping you with my realistic viewpoints.
