Last year was a total let down starting this Amazon business. The learning curve seemed bigger for me than most, but I suffered through that curve and made some very key changes going into 2017.
One of those key changes was shifting to 100% wholesale based sourcing for inventory. It allowed me to make larger purchases in a fraction of the time and also allowed me to work/run my business from anywhere in the world, which I tested in Paris and Oregon earlier this year.
I went from struggling to spend $5,000 a month on decent inventory to spending $25,000+ each month on inventory that is consistently selling month after month with stable margins and profits.
Although the margins aren’t the best compared to another business model like Private Label, It’s super scalable and easy to get started with minimal risk involved.
Last year I did roughly $40,000 in sales, netting only a few thousand in profit. I basically made a dollar an hour. This year on the other hand, I find it a waste of time to work more than 20 hours a week on the business, mainly due to spending restraints that I am addressing actively, routinely do $25,000+ in sales each month and make enough to easily live off of and save while completing my Finance degree.
Don’t mind the MASSIVE drop in sales this past month. You can thank hurricane Irma, Chinese factories shutting down and backorders…. Such is the life of an Amazon seller.
So what does six-figures look like with a wholesale based Amazon account? Not that exciting actually. Sure you can make enough to live off of and you technically have the freedom to travel and live wherever, but It’s not enough to really do some financial damage.
Getting passed the $500,000 a year level in sales would allow you to easily live off your business’ earnings, save a great deal each month and live just about anywhere. Not to mention, if you’re reinvesting say 30% of your profits back into the business each month, you’re able to grow quite a bit month over month.
This is my next goal, although I’m actually aiming for $1MM in annual sales for 2018, which is a massive jump from where I intend on ending 2017 ($200k in sales).
Either way, I’ve accomplished a massive personal goal: starting and owning a company that does six-figures. It’s obviously not as fruitful as I would have hoped, but many companies fail a lot sooner. I’m proven the business model, now I just need to scale it ever higher, each and every month moving forward.
Moving forward I plan on routinely spending $100,000 a month on inventory, mainly restock rather than new, untested inventory. I’m currently able to spend $32,000 moving into Q4 with the addition and scale of some newer, high-volume inventory. Again, a massive jump, but totally doable over the next year.
This fourth quarter was amazing, to say the least and my first experiencing it. I’ve been told by other sellers how you can make 50-75% of your annual sales within this quarter alone. Now I see why.
I was able to hit $10,000 in sales in November and will exceed that amount by the end of December. As we come to the end of Q4 I’d like to start planning my strategy for 2017 and growing towards my actual monthly goal of $50,000 in sales.
This will be a bit tough, mainly due to capital restrictions. I’m currently 100% wholesale based and able to add 4+ new suppliers each month, but I don’t have the capital to sustain such large inventory levels yet. This will be the main focus of my strategy for 2017.
Let’s deep dive into what my strategy looks like starting now.
I’ve gone from averaging $100 a day to $600 a day in sales with a pretty small margin as I move some older inventory from the early RA/OA months. I expect this number to drop going into Q1 and away from the holidays. This means that my average purchase order per supplier will also go down, meaning I’ll need to add more suppliers and product lines than anticipated before.
My average sell price is $27.77 and doing $50,000 a month would mean $600,000 a year in sales needed.
$600,000 / $27.77 = 21,606 units annually or 1,800 a month.
That’s a ton of inventory to move each month. I’m currently moving roughly 360 units a month. That’s an 80% increase in volume. That’s also a massive increase in spending each month which I cannot currently sustain.
Given a year timeframe, I have no doubts in being able to acquire enough suppliers and inventory to reach this goal. The main issue is the cost each month so, this will be my main focus of growth for 2017. More capital to invest into inventory.
I’ve been focusing on increasing my spending limit by $5,000 each month and have so far been able to do so, but I’m stuck right at $10,000 a month. Not all inventory will move exactly within 30 days, so I cannot spend that total amount each month, but pretty close to it.
So far, I’ve found that if I spend $8,000 I will do $10,000 in sales. I’ll use this to better estimate how much I should need to spend each month.
For this, I get a total of $40,000 a month in spending. That’s quite a bit more than I’m currently spending. Not by much, though.
Once I’m close to reaching this goal, I’ll need to outsource or automate some of the added administrative time. My time increase will mainly be used for reordering inventory each month which can really add up.
Instead, I’ve already begun to use a restocking tool called ReStockPro.com which does the majority of the math and calculations for me, but I’ll still need someone to actually place the orders and ensure their accuracy. I’ll most likely need to make my first important hire for this business. Once completed, this business should essentially run itself in maintenance mode.
Here are the major milestones for me to hit in 2017 as quickly as possible:
Spend $40,000 a month on inventory
Sell 1,800 units each month
In order to hit these goals, I’ll break them down even further to make them easier to accomplish. Instead of focusing on spending $40,000 each month, I’ll focus on Increasing my spending limit by a minimum of $5,000 each month. Doing this, starting with $10,000, would allow me to spend $70,000 each month by the end of the year. That sounds great to me!
Next, instead of focusing on selling 1,800 units each month, I won’t focus on it at all. It’s really not something I can control, to be honest and it’s simply the outcome of the first milestone above. If I’m sourcing great inventory that moves well and has great profit margins, the volume will happen as an outcome.
This is how you easily break down your goals into something much easier to track and take action on. Now my only focus is to spend the capital that I have each month, increase spending limit by $5,000 each month and ensure that I have enough suppliers to purchase that amount of inventory from each month.
Such an interesting topic to begin with. Timothy Ferriss’ bestselling book The 4 Hour Work Week blew people’s minds all over the world. It turned cubicle slaves into full-fledged entrepreneurs and vagabonds. Although the book was written around ten years ago, a question has always plagued my mind — Does the Muse still exist?
A Muse is a business with a sole purpose to provide consistent cash flow for the owner. It’s not going to change the world and it isn’t brought to life to create a new job for the owner. It’s about solving your resource requirements to live the ideal life you want to live. Thousands of people have created successful Muse businesses since the publication of the book, but the success of the business model always eluded me.
With a sense of envy, I watched others build their successful Muse businesses from dropshipping to informational products. I was grateful to create two profitable courses that pre-sold for $1,000 each before I ever lifted a finger, but after the launch, nothing. Zero sales and no idea where to go, the cash flow became non-existent. I just about gave up on the idea that someone could start a cash flow business without much effort and live the life they conceived as ideal.
It wasn’t until I started this Amazon business that I really began to see a modern rendition of a Muse business. At first, this business requires a lot of time, mainly doing Retail Arbitrage (sourcing products from local stores), processing the products and then shipping them into Amazon. But even this business model is quite something, as once I ship products into Amazon, I have nothing left to do but watch sales come pouring in.
But I want to run this business from a laptop anywhere in the world. For that to happen I’ll need to eliminate myself from the very tasks that ensure I have sufficient inventory to make enough sales each month.
Removing Yourself From the Equation
How to rapidly scale an Amazon FBA business without touching a single piece of inventory
I knew there was a way to tweak this business model into a full-fledge Muse business and I recently developed the system. If you’re in this business you’ll notice early on that the bulk of your work is sourcing and processing, all things that are easily outsourceable.
If we start with sourcing we can easily break down how to outsource the whole process to scale into sourcing thousands of units each month. I’ve gotten to a decent area in my business where I know I can spend a whole day and spend 100% of the capital I have reserved for inventory. That’s great, but the issue is not being able to replicate myself properly and the fact that I’m constantly sourcing new products.
The quick fix for this is to hire a VA (Virtual Assistant) to do all preliminary sourcing for you for roughly $4 an hour (if not cheaper!) and eliminate yourself from the grunt work. I’m currently training a VA I worked with years ago to do just this. The way it works is quite simple enough. My VA will search through all products on a given website and check if they meet my criteria. For this the product must make a minimum of $5 in profit per unit, meet all category ranking criteria and provide at least 50% ROI, plus a few other requirements to be considered.
I’ve created a simple spreadsheet that my VA will input all relevant data once she’s found a great product for us to purchase. I also have her run the data for the product to formulate how many units of that specific product we can sell each month and how much total profit adding that one new product would add to our business.
All that is left for me to do is go through that spreadsheet and pick the products that are really worth our time and which aren’t. The ones that are, are added to a master inventory list for repeated purchasing each month. Although I’ll be personally making the purchases, I could easily outsourcing this task as each month I’ll need to refill my inventory to keep sales consistent. A VA can easily use my master list, go through inventory numbers and determine how much of each product needs to be purchased and when. But for now, I’ll keep this as my sole role until comfortable enough to make the handoff.
At this point all inventory is shipped directly to me for listing, quality control and shipping into an Amazon warehouse facility. This work isn’t that terrible, but it is quite tedious over time.
Luckily, in dealing with a larger quantity of the same product, efficiency kicks in and time required is decreased. The issue with me personally doing this work is that I have to be home to do it. I can’t run this business from my laptop in Argentina or spend a whole week in the mountains with my girlfriend. The solution to this is quite simple and actually included within Tim’s book. A fulfillment center is nothing new, but a new model of the business has been created just for Amazon based businesses. Instead of shipping inventory to myself, I can send it into a “Prep” center who will receive, repackage to Amazon’s standards, label and ship the product for me. All of this for roughly $1.35 per unit.
I’m potentially giving up a decent amount of my profit, but with my sourcing requirements, taking out $1.35 per unit still leaves me with quite a bit of profit and decreasing my workload by more than half.
The only work left for me to personally do is repurchase inventory each month of products that are consistently selling (again, easily outsourced as well) and go over my VA’s list of potential new products to add for increased revenue and profit. All easily done from my laptop anywhere in the world.
There is a resurgence of a Muse business model using existing channels instead of creating your own website and paying for traffic. This vastly decreases the cost of muse creation and allows you to quickly set up and scale your muse business to cover everything listed on your Dreamline.
Life becomes incredibly interesting when you match travel hacking with a Muse business ran from a laptop. Suddenly the global world opens up to you. Not only can you travel for near free thanks to travel hacking, but you can do so for increased periods of time thanks to the cash flow provided by your Muse business. I’m so close to achieving one of my yearly goals in creating a business that generates $10,000 a month in income while in college, but I’ll be reinvesting all of my profits back into expanding inventory to scale up 10x faster each month.
Vendrive is a CRM tool that helps me manage all of my suppliers and build an actual pipeline to put potential suppliers through. Instead of relying on spreadsheet after spreadsheet, I use Vendrive to manage it all for me and have my VA enter suppliers here.
Aura is a new breed of repricing tools. Instead of charging outrageous fees for high performance or offer discounted tiers for lower performance, it gives the highest performance for a lower cost compared to the competition like Informed or BQool.
Man that came to a halt quicker than I had anticipated. I became so good at sourcing products locally that I ran out of money and had to stop! If you read my last post on 6 months to 6 figures, one of my goals was to source product five days a week no matter what.
Unfortunately that’s kind of hard to do if you have no capital to spend on product.
So I have to adjust a few things and move forward with the my current situation. Most people, including my previous self would just accept this fate and let sales slowly die out, but not this time. I’m making the necessary changes that reflect reality of make it happen.
The struggle is definitely real in an Amazon FBA business. Don’t get me wrong, once I ship product to Amazon, sales just magically appear and all is right in the world. At some point though, you have to stop buying product which puts you on hold.
I’m currently doing a little more than $100 a day in sales, but I know this will come to a fast halt once I run out of inventory. The issue is that I have to wait for the sales revenue to come through before I can buy more product. This is very typically in any resell based business model, but the major issue is the growth rate of the business.
This is very typically in any resell based business model, but the major issue is the growth rate of the business.
Sales for the first 8 days of the August
Unfortunately, I can’t spend $5,000 a month on the awesome product inventory that is around me because I don’t have the liquid capital. So I’ll need to build that capital over time, which also means no profits for a decent amount of time.
I planned on living off this income within the near future, but as my runway dwindles I’m forced to look elsewhere for income. I’ve been playing with the idea of getting my real estate license and going full force on that front during the week and running my Amazon business as lean and automated as possible.
With such a large amount of successful real estate agents in my network of family and friends and built in mentors, it makes sense to pair my sales and customer service skills learned from working in a grocery store and as a personal trainer into something with a larger commission payout.
We shall see what the near future holds.
In the meantime, I need to reformat my business strategy with Amazon. If I’m going to be able to juggle so many things, I need to use the 4 Hour Work Week methodology.
Although there are great products locally for me to source, it takes too much time. Instead, focusing on building wholesale accounts which allows me to do everything from a laptop keeps me flexible with time and also lends to outsourcing the ordering process over time to a virtual assistant.
I’ve been trying to build wholesale accounts and find products, but haven’t found anything yet. Instead of figuring this out on my own, I think I’ll jump into the Proven Wholesale Course which is only $97 and gives a straightforward strategy of acquiring wholesale accounts.
I’ll source locally as much as I possibly can, but depending on my class schedule this next semester and if I go full force with real estate I may only have a few hours each week.
It’s always important to know when you need to make a change and do it before you put yourself too far into a trench that gets deeper and deeper each month.
So I’m really in this now. I lost my job, am living off my savings and attempting to build this Amazon FBA business full time and I couldn’t be more happier!
I am a little worried though… After all, I only have a certain amount of runway until I’ll need to get a job to cover my bills.
One of my recent scanning trips
Instead of freaking out I glanced over at my bookshelf for some reassurance. The book that quickly grabbed my attention was 6 Months to 6 figures by Peter Voogd. Although this book isn’t the best when it comes to formatting, it is a great illustration for reverse engineering your life and business.
The strategy is quite simple and it starts with a question – Where do you want to be in 6 months?
I’ve recently become a massive fan of doing 30 day sprints. This allows you to go full force and then pull back a bit to recover, analyze and reproach your strategy. The book is also great at forcing you to become hyper focused on a finite amount of goals and then breaking them down even further each month.
Here is what that breakdown looks like for my Amazon FBA business:
Have enough capital ($5,000) to strategically grow wholesale accounts
So this is the 6 month plan of attack. The author takes it a step further by making you focus in on what your 3 month goals are.
Top 3 Goals For Next 90 Days:
Send in 2,000 units
Bring in $2,000 in profit each month
Have 3 wholesale accounts
Now let’s break it down month by month to become hyper-focused.
Top 3 Goals For Month 1:
Source product 5 days a week no matter what
Find replenishable products to consistently purchase
Send shipments every Monday
Top 3 Goals For Month 2:
Increase purchased units per day
Find and secure 1 wholesale account
Increase average shipment from 3 boxes to 7 boxes every Monday
Top 3 Goals For Month 3:
Add 2 new wholesale accounts
Raise inventory from 2,000 units to 3,500 units
Increase efficiency of labeling, packing and shipping product.
By the end of the 3 months I should have a very profitable and vastly growing business with minor systems to lend to scalability. At the end of the 6 months I hope to reach my total laid of goals for this business – 10 wholesale accounts, $5,000 per month in profit and maintain a minimum of 3,000 units of available inventory.
This isn’t going to be easy at all, but I have the time and resources to make it happen. I even drug my girlfriend along after class earlier today to scan at Toys ‘R Us which I was able to come out with another $100 in profitable products.
I believe the real key to having a large-scale Amazon business is wholesaling and private labeling and for now I’ll grow as quickly as I can into securing wholesale accounts. Instead of me going from store to store, scanning every item I lay my eyes on, I can scan an email and have 1,000 units delivered directly to me.
This will greatly reduce the amount of time required to maintain and even build this business over the next year.
If you have any questions about starting an Amazon FBA business I’d love to hear from you in the comments. I’m not a pro, but I’m putting this thing into hyperdrive!