They always say you need to have money to make money. While it certainly helps, there are always ways for the opportunistic and patient entrepreneur to make something out of nothing. Amazon FBA already opens up a world of possibilities by taking care of warehousing and shipping.
In this article, we will show you how to start an Amazon FBA business with as little startup money as possible. We have included both very practical as well as more abstract tips that are meant to help you from all angles.
Create a budget
Whenever we talk about saving money, a detailed and organized budget is non-negotiable. Unless you are an extremely disciplined and frugal person, there is simply no way you will stop funds leaking here and there without one. Even if you are, it will be almost impossible to figure out how much you actually made without records of your expenditure.
Even $10,000 in sales on Amazon doesn’t mean a thing if your startup costs were $9,999. Getting good at bookkeeping can only help you further down the line, so we highly recommend you get into the habit now while it’s manageable.
Set a number for yourself that you simply are not allowed to break. Then, get creative with ways that you can stay inside that number. You would be surprised what a strong motivator need can be.
A bonus tip
A pro tip would be to split the bill up further. Set a certain amount apart as “emergency funds.” These funds are only to be used when completely unforeseen circumstances force you to go over your initial budget. Think of this money as “money I don’t really want to use but will sacrifice if I must.”
It also helps to have the confidence when making decisions that the money you are spending has been planned for. It can become very demotivating very quickly watching your money being spent without immediate returns and this can lessen that effect on you.
Find a low-cost/high-profit product
The core benefit and purpose of selling on Amazon and leveraging Amazon FBA is to cut expenses and lower your overhead. That leaves the actual sourcing and stocking up of your product as your by far your main expense. In fact, everything else added up will most likely not even cost half of this depending on how big you start.
There are three main ways to source a product for Amazon:
- Create your own
- Private label
- Retail arbitrage
In this section, we will help you find a low-cost product using private labeling. Creating your own product is simply too subjective and retail arbitrage isn’t a sustainable option for a long-term business.
A quick recap: Private labeling is when you buy a generic product at very low cost, brand it, and sell it at a marked up price.
Choose a product on Amazon
The first step is to find a product on Amazon you want to sell. We have various articles on our blog that cover finding a good product, like this. Once you have a product, you can determine its average price and estimate a profit based on the supply costs. Look at the following factors:
- Light and easy to ship – The lighter, smaller, and easier to ship a product is, the lower your Amazon FBA fees will be.
- As large an audience as possible – Ideally, you want a product that appeals to as many people as possible. Take into account factors like age appropriateness, gender, niche, and use. For example, a laptop sleeve is useful to just about anyone.
- Seasonality – Seasonal products can be an awesome way to turn a quick buck, but if you want to start a solid business, you should look for items with a year-long appeal.
Find a supplier
Alibaba is the go-to site to find cheap bulk suppliers of generic items. The prices are simply unbeatable, even with importation and shipping costs added. If you can find a local manufacturer with competitive rates, good for you.
Try to negotiate with the supplier to send you as small a sample for as cheap as possible. You could use this sample to test out your branding, selling the product, and just determine the quality. Look for a supplier that can brand your product with your designs themselves to save even more.
Come up with possible profit margins
Once you have your product and supplier, you should start coming up with possible profit margins. Amazon provides a handy tool that will automatically add their fees and calculate your profit for you. You can also factor in the supply cost. This should start to give you a decent idea. If you are picky, you can factor in a return %, shipping to Amazon warehouse fees, branding, etc.
Branding & photography
You might be surprised to know just how cheap this can be. You don’t need to hire a big agency to do this for you. Go on freelancing sites and find a designer to create some logos and whatever else you need. The total cost should be $100-$200 at most.
Amazon Seller Account
This isn’t a big cost but is worth considering. The professional account costs $39.99 per month but comes with plenty of benefits. The individual seller account is free, but you pay a $0.99 fee per product sold. Obviously, if you plan on selling more than 40 products per month, the individual account is cheaper. However, you will need to swallow the $40 upfront payment.
Start selling locally
You can sell internationally with Amazon. However, there are extra freight charges involved that can crush any profit of a small business running on thin profit margins. This option should be left for much later, once you have established yourself. If there is one theme that’s common among almost all Amazon FBA startup stories, it’s that they started only shipping inside their own country.
Use an Amazon Partnered Carrier
Many sellers don’t know about this program, to their detriment. Amazon has partnered with various couriers who will ship your products to the Amazon warehouses at very low rates. Then again,f you can do it yourself, all the power to you.
Learn from others
Thanks to the wonders of the internet, there is no shortage of other people willing to share their experiences in just about any field. That includes Amazon FBA. In fact, the internet is basically overflowing with blogs and other sharing platforms where you can find a wealth of information.
Amazon FBA sellers love sharing their ventures in this dynamic field. You could call them “experiments” as the desired product is not always guaranteed, and there is plenty of room to play with the variables.
While our tips will definitely help you start a lean business, nothing beats getting real-life examples of it being done. A quick Google search will unearth a number of these stories freely shared by their undertakers. This story submitted to Jungle Scout by Chris Jones from Zonlife is an excellent example.
Don’t underestimate the helpful sources
YouTube is another possible source of information, although you should take some “sellers” with a pinch of salt and try and verify if their success is real independently.
Finding some good reading material can also open your eyes to worlds of new possibilities. Although they might not seem relevant to Amazon FBA at first glance, these books usually provide invaluable insights for any small business that wants to scale. Fantastic examples that immediately jump to mind are The Lean Startup by Eric Ries and Zero to One by Peter Thiel.
These books cover almost everything from landing a big idea to marketing to scaling your business. They provide fantastic advice no matter in what sphere you operate in.
Go to Amazon FBA training events, seminars or workshops
This follows on the theme of the previous section. Amazon FBA workshops are often meant to help those new to Amazon FBA get up and running with minimum friction and at low cost. These seminars or training events expose you to must-know Amazon FBA information, help you with pretty much all the tips we have just listed, and can even put you in touch with reliable and cost-effective suppliers.
As a bonus, you will be introduced to industry experts and a number of like-minded peers. Who knows in what way these invaluable connections can help you in the future? At the very least, you will be heartened by the knowledge that you are not alone in your pursuit of the Amazon FBA dream of financial freedom.
There you have it, how to start an FBA business with little capital
By diligently following these steps, you can follow in the footsteps of fellow Amazon FBA-ers who started their business with between $500-$2,000. It might seem too simple or too good to be true.
However, we want to stress that a significant factor in how cheaply you can start up your Amazon business is how much time and effort you put into sourcing products. Be patient and don’t jump at the first opportunity, unless it’s too good to pass up.
We hope this article helps make your journey to financial freedom through Amazon FBA a smooth one. Good luck and happy selling!