Selling Products on Amazon FBA vs Owning an Amazon FBA Business
When speaking to folks in the entrepreneur game, there is a question common among those of us that have been in business long enough:
“Do you have a product or a business?”
Anyone can follow some of the wonderful advice of YT and FB gurus to sell a product and make a little money but being self-employed and selling a product is VERY different from OWNING a business. “Owning” a business means you have systems set in place to handle choke points and help you scale your income.
When I look at a potential product I could give a shit if it fits the magical combination lock of inputs on the same tool everyone else is using because all of the Amazon YT gurus said it would make life easier.
Instead, I take product research as an interview process. The potential product is being vetted for its quality and how it would fit my organization as an “employee” – meaning something that works as part of my system and makes me more money than it requires to “train” and employ – think launching and marketing.
You need to think of your products as your employees as well.
I want every product and process needed to sell that product to be complimentary to all of the others and extremely efficient in deployment – like a hand picked orchestra. The sum of the parts make something magical that the individual components could not.
Amazon FBA products should compliment each other
Every employee in any business is vetted this way and your Amazon business should be no different. To be beneficial to a company any employee needs tools of the trade to stay profitable – in this instance it is your marketing and adspend on each item.
Also, any organization has different levels of employees – think entry level, store manager, and regional head manager, etc. As you scale, you should sort your employees the same way. You will need all of them to make your company profitable long term and weather the ups and downs of the amazon landscape.
The way that I like to segment and plan my business is to think of my product research as which employees I will need and what function they will have in my company. I plan products around 3 tiers:
Tier 1 are products with potential to NET me more than $10k a month once scaled to capacity.
Tier 2 are products that are going to NET me between $3k and $8k a month once scaled to capacity.
Tier 3 are products that are going to net me between $1000 and $2500 a month. They are my FAVORITE.
Those numbers are profits by the way, after all expenses are paid. That is what NET means.
If we equate it to the american sport of Baseball, you all are continually trying to hit a homerun while I’m trying to make sure I get on base. If I continually have more runners in scoring position who do you think is going to win more often (make more money)?
I base everything on what my margin and expense parameters are, what the market depth is for the product on amazon, what the competition is doing for marketing and where I can improve (this is usually the biggest opportunity), what the niche looks like OFF OF AMAZON in competing markets of Ecom, and the shelf life of the product.
Yes, some products can start as Tier 3 AND IF YOU GIVE THEM THE TOOLS, they can grow to become Tier 1 products. What are the tools they need to grow? Simple, a consistent budget segmented to each product for product replenishment and shipping, and a dedicated marketing campaign and program for each item you sell. As you see opportunities you must remember that you have to account for all of these areas in order to scale. Without these tools, your “employees” will not perform well for you and will cause you issues as you try to grow.
Minimizing Risk in Your Amazon FBA Business
Most of you are looking to find homeruns all the way around. Not smart. As you grow, you need to diversify your products and expected incomes (and in turn expenses associated with each item) so that you can weather big changes because HUGE unexpected things will happen in this business – what happens if you go deep on a couple items for q4 and wipe out your cash pool and then not only do you not sell those items but your main breadwinner gets blocked…what then? You are Destination F**ked…that’s what.
Instead of 5x $10k – $20k per month products and being exposed to a big change in your income if something happens, find or grow 2x 10k(+) products once you have the capital to market and compete for them, 3x – 5x $4k – 6k products, and 30x of the $1k – $2k a month products that NOBODY is looking at because everyone is hoping to strike it big and quit their day job with their first 2 items. Those smaller items are low hanging fruit that almost nobody wants to add to their brand because they would rather find something bigger.
For a marketer like me, I LOVE those smaller “entry level” opportunities because all they need are the right tools (marketing and adspend) to grow into something much better for my brand. These entry level “employees” are given the tools they need to show me if they are a worthwhile investment to “get a raise” and grow into higher level “employees” of my company.
Your brand shouldn’t be just a stable of a few big deal products. Instead, a real business plans for and handles chokepoints before they come up and kill the company.
Give your Amazon FBA business the things it needs to grow and it will.
I make sure that each item has a dedicated and separated cash flow and budget so that I can monitor the return vs expense ratios on a micro level and decide which is the best opportunity to scale my income and protect my company from risk should something happen. When selecting an ad budget, I allow for a certain dollar amount PER UNIT out of the profitable margin and if I can’t accomplish that then I won’t allow a product to become part of my company.
Additionally, I don’t want to wake up and find out that 2 of my prized $10k a month items have gone down when I’ve only got 5 total items that I list. Instead, I would rather know that I’ve got a bunch of smaller fish (lower level “employees”) that can keep my company afloat while I sort out what happened and either exit the product because the return just isn’t there anymore or something happened to the listing.
As always, I hope that this has expanded your minds and helped you in your journey. I welcome any comments and questions you may have.