How much money do you really NEED to start an AMAZON FBA online business?
I’ve taken some time put together a comprehensive list covering the costs involved when starting an Amazon FBA private label business. I’ve made a video on this topic and you can watch that here. However you can find a breakdown of the entire video below if you’d prefer to read it instead.
Often I’ve found a bunch of Amazon “gurus” underestimate the costs involved in starting an FBA business in order for you to leave enough room in your budget to buy their courses. That way you haven’t really factored in all the costs if you intend on buying a course as well. I’m not selling my course on this post, I’m not even linking to it so you know I’m not screwing you around.
I am working on making more legitimately useful posts/videos like this so please let me know what helped you or what you would like to see more of in the comments or ask questions in the Entrepreneur Wolfpack Facebook group.
Happy selling!
Sheldon Evans — Entrepreneur Wolfpack
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Watch the video here or continue reading for the full article:
Product Cost
The first cost involved which is also one of the biggest costs is the product manufacturing. You’re going to having to drop a load of cash here as this is the base of your entire business, without a product you have nothing to sell. I often talk about the types of products you should be selling in order to maximise you profit and guarantee sales.
- Has to be lightweight (Under 2lbs)
- Physically small — to minimise shipping costs
- Sells for between $20 and $50 on Amazon
- Decide on want VS need products
- Low number of ratings (less than 75) and high sales velocity on Amazon (at least 7–10 units per day)
- Easy to replicate and differentiate from competitors
Assuming we’re sticking to the criteria outlined above, your cost of product could be anywhere from $0.10 to $10 per unit. I prefer to stay in the lower range to maximise ROI. So let’s say $2 per unit for this example.
I recommend at the very least 400–500 units initially. That gives you enough inventory to do giveaways to launch your product and rank on Amazon as well make sales without running out of stock before you can get a second shipment in.
That leaves us with $2 x 400 units
= $800
Shipping
Shipping costs can vary greatly depending on how you decide to send your inventory (Air vs Sea) as well as the size and weight of your shipment. However from my experience, if I stick to the product criteria above my shipping costs are always about 60–80% of my initial product manufacturing cost which includes the declared value of our shipment as well as the courier/shipping fees. So for the sake of this example we’ll leave it in the middle at 70%.
If so if our initial product cost was $800.
70% x $800
= $560
Product Research Tools
This should actually be the first place you start but as I said I want you to know where the bulk of your investment will come from first. Reason being that without this you’re really going to struggle with even finding a good product to sell let alone manufacture. There are a ton of research tools out there and in the past I would’ve said use whichever one you prefer but over time there have been a few that have emerged which clearly beat the competition.
I currently use Viral Launch’s Product Discovery tool because it has proven to be the most accurate when it comes to estimating revenue, profit and sales velocity from tests on my own products. They are also becoming a one-stop sort of location for pretty much every tool you’ll need for a successful Amazon business from selecting a product, doing keyword research on it, calculating returns and even launching your product with the help of their huge network of deal seekers by doing product giveaways.
They have a few different packages at the time of writing this ranging from $29 for their beginner package all the way to $99 for the pro version. I’d recommend getting the “Intermediate” package as that has everything you’d need to start off with, both their product discovery tool and Market Intelligence which is their chrome extension for validating and researching product ideas on Amazon by showing you sales velocity, reviews etc.
The Intermediate Viral Launch package is $59 however you can get it for 50% off here using a discount code
That leaves us with $29.50
Amazon Seller Account
Now this is a no brainer because without this you can’t sell anything on Amazon. There are two types of accounts you can have on Amazon, and Individual Seller’s account and a Professional Account. We’re going to need a Pro account in order to create listings and hold more inventory.
The Pro account is $39.99 monthly but don’t stress too much about this just yet. Go ahead and register your account and link up your bank account. It doesn’t matter how long you have your account for as long as you don’t use it, Amazon will be happy to refund you this fee. When I first registered my account it took me two months before I started using it, I contacted their support through their online chat system and asked for a refund as I haven’t been using the account. They obliged and refunded me 2 months worth of fees and you can do the same. If they refuse, disconnect and open a new ticket, maybe you just got someone from support in a bad mood.
So a Professional Amazon Account
= $39.99
Logo And Branding
This cost could be optional if you feel you can design a professional logo and packaging yourself however I’d save myself the trouble/effort and just get it done on Fiverr. Fiverr is a site where you can find someone to do a specific job for 5 bucks. In recent years they’ve changed the service slightly and now freelancers can charge more although you can still find tons of great deals for a “fiverr”.
Most gurus will say that you don’t need custom packaging design but I will argue against that and say that it’s a must. It gives you another way to differentiate your product and you can position yourself as the premium option amongst your competitors so you don’t come across as just another generic knock-off.
Let’s assume you’re getting a custom logo and packaging designed.
= $40
UPC Barcode
Every product needs a UPC code or Universal Product Code in order for it to be identified once it gets to Amazon. You only need one UPC per LISTING, not for each individual item which a lot of people have asked in Facebook groups and on my videos.
There are rumours that you need GS-1 registered barcodes and that cheap barcodes no longer work on Amazon. This can significantly raise your cost investment as GS-1 barcodes can be anywhere from $250 upwards per barcode. At the time of writing these rumours are false! I still use barcodes from a list of 10,000 that I bought on eBay years ago for $5.
So we’re gonna go with $5 for this. However I have seen some people say that this is not the true cost as you’ll also need to pay for your supplier to print and stick a barcode on each of your products and that can be up to $0.20 per item so here’s a little tip, above I mentioned having custom packaging designed, so what you’ll so is send your barcode to your packaging designer and ask them to include the barcode in the design. Now when you have the package printed at the supplier the barcode is already on the product. Kaboom!
That brings us to a total of $1474.49 or $1500.
This is essentially your final cost unless you decide to factor in the following optional costs into it as well.
Optional Costs
- Product Photography
Some people will say that these costs are not optional at all and there’s no other way around it however that’s not the case in my experiences. In 2 years of selling on Amazon I have not once paid for photography of my products, I just do it myself. Some of you know I also have a successful photography based Youtube channel so if you’d like to learn how to take better photos for your Amazon listings, check out some of my tutorials.
If you’d prefer to do it yourself and couldn’t be bothered with taking the time to do it, then again I’d suggest heading on over to Fiverr and having someone on there take professional photos for you.
This can be anywhere from around $15 to $100 per product depending on who you decide to go with. It’s relatively simple, either you can manually create a fulfilment order from within your Amazon account and have it sent to your photographer, have them buy it from Amazon and then refund them through PayPal 😉 (this is against Amazon’s T’s and C’s if you ask them to leave a positive review so be careful), or you can have your supplier send one sample directly to your photographer.
Let’s assume we’re getting 5 photos taken and edited for our listing here.
= $100
- Inspection Service
Again, this could be considered an optional not-so-optional cost and the reason being is that it really depends on who your supplier is and what product it is that you’re going to be selling. If you have a supplier that is well-vetted and has a solid track record, this won’t be so much of an issue as you know what you’re getting from the start. Also, if the product that you’re selling is relatively simple to manufacture and there’s not much that can go wrong then you’re fine skipping this. If you’re selling electronics or fragile goods, you’re probably better off having them inspected before you have the shipment sent out to Amazon’s warehouses.
Inspection services range anywhere from $100 to $300 (I wouldn’t recommend paying more than this unless you’re ordering a massive quantity because then you’re just getting ripped off).
So let’s add another $100 onto our initial cost and we’re left with a grand total of $1674.49 or $1700.
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Now as I said in the beginning of this post, this cost can vary depending on what your initial product cost is and how much you’re willing to invest. The more you invest the more you can expect to make back in terms of profit.
I really hope this info help you decide on whether or not the FBA model is for you. If it did or if you have any questions, drop them down below or in the Facebook group and I’ll see you soon!
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