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. In case one is running under loss, you can get a guide to exit your business or even find out where your business stands financially.
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.
The Roadmap to $50,000 a Month
Making your goals actionable and simple
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.
I’m currently writing this post from my girlfriend’s mother’s house without power, living out of a single backpack and on my old 2008 Macbook Pro. Hurricane Matthew made us evacuate our home and with little time to spare, I quickly became a minimalist.
Another major problem came up during our evacuation – Running my Amazon FBA business. My business is not currently location independent like most private label companies. Instead, I focus on local retail arbitrage and online arbitrage to source my inventory.
Luckily, I was able to source during our evacuation and bring the inventory back home. Although I was able to still turn a profit during the hurricane, I wouldn’t be able to successfully run my business if gone longer than a week. I’m currently behind on sending in inventory, but not in a major way like I could be.
Working from my 2008 Macbook Pro in Tifton, Georgia….
This has led me to two very important realizations that can dramatically increase and streamline the quality of your life.
The Case For Minimalism
How to live out of a backpack
I’ve always loved the idea of being a minimalist, but never really attempted to make the transition. I’ve been toying with the idea for the last few months and have been slowly getting rid of as much useless things possible. I’m now at the point where I’m having to make some really tough decisions to get lower than 100 material possessions. My desktop computer….. wasteful. One-third of my current clothing….. wasteful. Something interesting happens mentally when you begin to question the value of everything you own and and why you own it. Even better is when you begin to ask yourself exactly what you need to live and be happy.
That’s what I’ve been doing and it’s made me question everything. Why do I keep building my book collection when I could easily buy an Amazon Kindle for $50 and keep all of books digitally. I could easily trade 100+ pounds of material possessions for less than a pound. I’ve had a strange curiosity to strive to live a “one bag” lifestyle. the idea is pretty self explanatory, but is often used by long-term travelers and digital nomads.
I don’t want to live out of one backpack, but a few would do. The main idea for me is to live a light and easily movable life. This lifestyle becomes incredibly valuable say, when a natural disaster hits your home and you need to leave and don’t want to lose anything. Or, perhaps when you decide to move and travel more frequently. This light lifestyle lends to flexibility, freedom and incredibly low living expenses.
I challenge you to look further into minimalism and find the right amount of material needs to make you happy. Anything over your baseline, should be considered waste and either donated or thrown out. The best way to get started is to take stock of everything you own and then start prioritizing everything into the following three groups: Things you couldn’t live without, Things you haven’t used in the last 6 months and should get rid of and things you aren’t really sure what to do with.
Once you have your three piles, get rid of the things that you know are wasteful. This should include everything you currently own. No exceptions. Next, really think about your “can’t live without” pile and get rid of 20% of what’s there.
Your maybe pile should be put into boxes and put somewhere that isn’t easily accessible. This is to test everything in that pile. Over the next three months, anything you haven’t needed to take out of those boxes should be donated or thrown away immediately. Do this and you’ll be able to eliminate more than 50% of your material belongings and see how flexible and free your lifestyle becomes as an outcome.
Although I don’t travel as frequently as I would like to, I still use minimalist travel ideas to streamline my life both physically as I stated above and digitally.
Why You Need A Location Independent Business
Running your whole business from a laptop anywhere in the world
A strong desire of mine has always been to run a successful business that I can run completely from my laptop anywhere in the world. This is easier said than done, like most things in life, but any business, including a brick and mortar can be ran from a laptop with the right systems and tools in place. The hard part, of course, is figuring out which systems to put into place and ensuring they increase profitability without making things more complicated.
My business is not ran in this fashion, At least, not yet. I’m working on shifting my sourcing system from local retail arbitrage to online arbitrage that can be done via my laptop and wholesale sourcing which can be done in the same way from my laptop. I’m tested the waters in hiring a virtual assistant to assist in sourcing products for me online, but quickly realized this is a fool’s job without giving my VA the right tools.
Unfortunately, the combination of the required tools and the cost of employment is just too much for my small business. Instead of continuing with my VAs I put them on pause so I could shift my capital towards to cost of the tools to do things myself. But, as profits grow I’ll quickly add on my VAs again to use the tools and quickly scale up.
Being taken away from where I did my work that included my desktop Mac that kept me moving quickly and the garage I prepped, labeled and packed all of my inventory really puts me in a difficult place. I don’t have the access to my logistical system, which is a major issue.
Here’s the damage we came home to. No power and no Wifi. How would I live?
The easy solution here is to start using a prep company who will handle all of my inventory sourced online. This won’t do anything for me in regards to my local sourcing methods, but does dramatically off-set my logistical requirements and efficiency, which is key to scaling a business.
I’m including systems of scale within my business as capital becomes available and revenues grow. Things will not happen overnight and you need to have the capital to cover the sunk-costs that come along with adding new systems to your business. Outsourcing my inventory logistics and hiring a sourcing staff will be the key to taking my business to the next level and creating enough cash flow to begin heavily invest in even more growth of my business.
I challenge you to think of what you would do if you have to donate or throw away 50% of your belongings. I also challenge you to consider what you would do if you were given a laptop, moved to a new city and had to run your business successfully. This challenge will make you think in ways you’ve never done before. It will challenge what you think is possible, but more importantly, it will show you the pathway to true freedom, both in location and financially.
Tools and Resources
Tips, Tricks and Further Reading…
How Minimalism Brought Me Freedom and Joy by James Altucher
A thought randomly occurred to me one morning while checking on my current sales numbers and replying to a message left from my VA – There are systems I’m currently using that when put together make incredible results possible. With system stacking, no longer did 2 + 2 = 4, instead 2 + 2 = 10…
I’m going to break down the current systems I use on a monthly basis to travel for free whenever I want, automate a growing cash flow business and build my wealth.
How To Create The Ultimate Trifecta of Systems
Stacking travel, business and automation for 10x output
If you’ve ever tried losing weight you may have started with simply working out a few days a week. This may have helped you make progress, but something profound happened when you paired working out with a better diet – Your results most likely would have doubled because of the two working together. This is the idea behind System Stacking. It’s taking two already amazing things, but then pairing them together in a way that increases the output of each system.
Travel hacking isn’t something new and I’ve talked about it for some time now. Using points and miles is an incredible way to begin traveling for a vastly decreased cost. Travel hacking is one of the easiest systems to put into place to increase your lifestyle and quality of life. So the first system I’ve put into place is a growing travel hacking hobby that I greatly benefit from.
The next and more important system in my opinion is the cash flow (Muse) business that provides me with increased and consistent income every month. This business, once set up optimally will allow me to move massive amounts of products without ever handling inventory, making sales or doing any sort of marketing. Using my business model I’m able to travel the world (using my points) and still have a growing income from anywhere in the world.
The last system that completes the trifecta of this stacked system is outsourcing. Again, nothing new, but think about how better your life and business becomes simply by outsourcing business and life tasks that you shouldn’t or don’t want to be doing. The key for me in using outsourcing is to automate the majority of this business so that I’m not creating a new job for myself, but creating an automated system that has one sole purpose – to provide me cash every single month.
On their own, each of the three systems provides an incredible benefit – Decreased travel costs, a monthly income and a VA to ensure that the income created from your cash flow business is never tied to your input time, but something amazing happens when you place these three specific systems together.
Travel hacking is all about building points and using sign up bonuses to create a massive amount of those points very quickly. This is typically done through various MS (manufactured spending) strategies so you aren’t actually required to spend the $4,000 within four months on three different cards at the same time. Pairing the travel hacking system with a cash flow system, especially one that has a large inventory cost each month means you can create a massive amount of points without paying any fees that are typically created from MS methods. On top of getting the sign up bonuses for a larger amount of cards, because of your spending, you are typically getting 2x points on ALL spending even after you reach the sign up bonus. By putting every cost on your credit cards you dramatically increase the amount of points and miles to can use each year.
A cash flow business should never be tied to your time. It should provide income regardless of how many hours you put in each week and your current location around the world. In order to effectively make this happen is by using subsystems and an affordable labor force. For me this is all solved through proper outsourcing with a virtual assistant. My VA is able to do everything I don’t want to do. My VA handles just about every system within my business and directly contributes to growing it. Not only does this mean less work for me, but means more income month over month.
You can see how each systems contributes to the other, creating a trifecta that dramatically increases their individual benefits to me. More travel without the cost, freedom of location thanks to a consistent income from my cash flow business and less work load thanks to my VA. This directly sums up an idea I’ve been considering for quite some time. There are three major things that can grant ultimate freedom when used together, similar to system stacking.
Freedom of location, Freedom of resources and Freedom of Time.
When you have all three you have true freedom. Many people have one or two, but those who truly live a great life have all three. The three freedoms are just the idea, whereas system stacking is the application and practice of achieving such an idea.
I want you to really think deeply about the above idea and system stacking, and how it can dramatically affect your life for the better. Start by putting one of the above systems in place and add-on from there. The hardest system to implement is the cash flow business, but you can start reaping the benefits from travel hacking and a VA immediately. You can even use your VA to assist you in building your cash flow business. There is no right way to do this, just find the way that works best for you and grow from there.
I’ll be delcing deeper on the idea of systems and how they play a major part in creating your ideal lifestyle. I’m building a small private group of people with the sole purpose of developing and publishing white papers on the subject matter of 10xing your quality of life. If you’re interested in becoming a part of this private group, leave a comment below and we can talk about the idea more specifically.
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.