So your Amazon FBA business is ticking along nicely. You’re making a bit of money and more importantly, you’re loving it! It’s natural to want to grow your business.
It doesn’t take a genius to tell you that the more money you have at your disposable the more you can invest in new products and even new marketplaces. But what if you haven’t got the money yet?
This is a great question and I’m going to share with you my system, with some maths (simple maths… don’t worry!), to how I grew my business with limited money and without borrowing.
Step 1: Work out how much you need to buy a 3 month supply of your first product.
Let’s create a scenario. Jane is selling bath mats at $30 a pop. She buys them for $5 each. Her total fees from Amazon are $10. Profit per unit $15.
When it comes to ordering stock my goal is always to run out. Strange thing to say? Well, no. I’ve learnt the hard way that it’s much better to be out of stock than have 100’s of items just sitting in the FBA warehouse. So I advise ordering a small quantity to test the waters, say 100-300 units.
Back to Jane. Jane’s ordered 200 units at $5 each, giving her a total initial investment of $1,000. She sells all her units making her $6,000 (200 x $30) in sales. Her Amazon fees are $10 per item so a total of $2,000. This leaves Jane with $3,000 profit ($6,000 – $1,000 – $2,000).
Still with me?
The first batch of stock you sell tells you how many sales you’re going to make each day. This is valuable information because it can be used to infer how much stock you should order next time.
It takes Jane 40 days to sell her first batch of 200. That’s 5 sales per day.
I recommend holding 3 months (90 days) of stock. So 5 x 90 = 450. Now Jane knows she needs to have 450 units of stock for the next 3 months.
450 units will cost Jane $2,250 (450 x 5).
Step 2: Work out how much you have to invest.
We worked out Jane’s profit from her first batch of stock was $3,000.
Important note: Don’t forget to pay yourself! I always take out 10% of my profits as my salary. It’s easy to forget but all work and no play is a crappy place to be. So let’s assume Jane takes out $300 for herself.
How much does Jane have to go towards reinvesting in her second product?
$3,000- $300- $2,250 = $450.
That’s my simple system of growing your Amazon business without borrowing any money.
The two important things to remember are, pay yourself and be patient.
Good luck out there!