How To Start an Amazon FBA Business With Little Money in 2019
Trent: Hi there, and welcome to episode number 110 of the Bright Ideas Daily Nugget. I am your host Trent Dyrsmid. And in today’s video, I’m going to help get an answer to this question right here. How do you start an Amazon business in 2019 when you don’t have a whole lot of money? Well, the answer to that question lies in thinking your way through a couple of different things. First of all, you have to decide on what type of Amazon business that you’re going to start. There’s a lot of different ways that you can sell products on Amazon. And I’m not even going to cover them all. I’m just going to cover the ones that I’m familiar with.
There is the private label approach, which probably takes the most money, involves the most risk, and takes the longest to be successful at if you can be successful at it. It’s fairly tricky. I wasn’t particularly successful with that. There is the wholesale approach, which is the approach that I use and have been wildly successful at, and it’s much less risk, but it still takes a — it depends on what your definition of reasonable chunk of money is. I started off with $50,000, and that enabled me to buy enough inventory to scale my business from zero to $100,000 a month in just five months. But I was full time from day one. Maybe your goals are different.
A lot of people start off either in wholesale with a smaller amount of working capital because they’re doing it part time. Or maybe they’re doing what’s called retail arbitrage, or online arbitrage. And they both basically work the same way. You’re looking to buy discounted merchandise in a retail outlet or on some website, and then resell those products for a profit on Amazon. And odd — I mean, who knew that was a thing, but it is, it’s actually a very big business and there’s a lot of people doing it. I’m probably not the best guy to learn retail arbitrage from because it’s not something that I ever chose to do. However, it is a thing; I do know people that are quite successful doing it. And if you’re working with a limited amount of working capital, that might be a good way for you to build your business.
In addition to that, you could also take the route of not buying any inventory and simply offer to manage other Amazon sellers’ third party accounts. Typically, this would be a brand who’s selling their own products on Amazon, or thinking about selling their own products on Amazon, but don’t really understand the platform, don’t know how to get the best out of it. That is an area where if that was your exclusive focus obviously you would acquire the knowledge fairly quickly, and they would be able to pay you simply a percentage of their sales to manage their account for them. That requires no money. It just requires time, obviously some experience which you would have to acquire which will then lead to your having a level of expertise.
Now, there’s a couple of other things to factor in when you’re looking at starting your Amazon business regardless of which model you’re going to use. You have to decide whether you’re going to sell via FBA, which is Fulfillment by Amazon or you’re going to sell via FBM, which is Fulfillment by Merchant, which is something that I covered in episode – oh an episode or two ago number, I think it was number 108, where we talked about some myths of selling on Amazon. I spoke with a woman who built a very successful business by acquiring a small amount of a large number of products to give herself a rather wide but shallow product portfolio. But she had really great gross profit margins on each product.
So again, that takes a little bit of money, probably more than managing other people’s accounts because obviously you don’t need any of your own money, and maybe the same as starting off of with wholesale. Again, the beauty of our age, you can literally go in and just buy products off the shelf, you don’t need a whole lot of money to be able to do that. But understand this; the rate of your growth will be a function of the number of profitable products that you can buy. So, no matter which model you choose, if your working capital is so constrained that you simply can’t buy much in the way of inventory that will be a throttle on your growth. So keep that in mind.
And finally, I would strongly encourage you to delegate anything and everything that you can especially early on and well, all the time really to overseas virtual assistants. We hire all of our VA in the Philippines to pay between about three and $5 per hour, and they’re doing a whole lot of the grunt work that I could never afford to pay a US citizen to be able to do it just simply the economics wouldn’t work out. However, that was the key reason why we were able to grow our business from zero in month number one using the wholesale model to over 100,000 a month by month five and over a million dollars in our first year.
All right, so hopefully we have dug into that deep enough. If you have questions that you would like me to answer in a future video, go to Brightideas.co/askTrent. If you don’t want to wait very long to get an answer, you could also join our Facebook community which is very active, and I participate in every single day. You can get to that at Brightideas.co/Facebook. If you’d like to check out our podcast, we produce one episode per week where we interview other highly successful ecommerce entrepreneurs. You can find that at Brightideas.co/iTunes.
If you’re watching this video on YouTube, would love for you to become a subscriber by clicking the subscribe button. If you have questions, you can leave them in the comments in the description field. I will post links to four other pieces of my content. One of them; Which is More Profitable? Managing a Brand’s Amazon Account Versus Selling Your Own Products. Another one, Myths About Selling on Amazon, another one, Can You Start a Wholesale Business While Working Full Time, and then an episode of Ask Me Anything, which was just the last episode I did where I talked a little bit more about the model of buying low and selling high. So that’s it for today. Thank you very much for tuning in. I look forward to seeing you in the next video soon. Take care. Bye-bye.