You need about $250,000 or less to start an Amazon FBA business with private label (Small Scale). Here is a detailed cost analysis for starting an amazon fba business and raising finance.
Starting an Amazon FBA business with private label can be somewhat expensive; this is so because on the average, you are expected to lease large warehouse facility or yard for the storage of your products and also purchase delivery trucks and vans.
When you put a tag on your products, take this into consideration as it will affect the profits you make all along the way. Although this cost may not be significant, you should be more worried if your products stay unsold for at least 6 months. That is when it will truly hurt you.
You should make provision the amount needed to furniture and equip the office, the amount to purchase the required software applications and internet facilities, the amount needed to pay bills, promote the business and obtain the appropriate business license and certifications.
Estimated Cost Breakdown for Starting an Amazon FBA Business with Private Label
When it comes to starting a small scale Amazon FBA business with private label / e – commerce company, the following expenditure should guide you;
- The Total Fee for incorporating the Business in the united states of America: $750.
- The budget for Liability insurance, permits and license: $2,500
- Cost for payment of rent for warehouse facility for 12 month at $1.76 per square feet in the total amount of $105,600
- Cost for warehouse remodeling (construction of racks and shelves) – $20,000
- The Cost for equipping the office (computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al): $5,000
- Budget for start – up inventory – $50,000
- The Cost of Launching your official Website: $600
- Budget for paying at least 4 employees for 3 months and utility bills : $70,000
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al): $2,500
- Miscellaneous: $1,000
Going by the report from the research and feasibility studies conducted, you will need about $250,000 or less to set up a small scale Amazon FBA business with private label in the United States of America.
You will need over five hundred thousand U.S. dollars to successfully set – up a medium scale Amazon FBA business with private label / e-commerce business in the United States of America. If you are considering starting a large scale Amazon FBA business with private labels / e-commerce company, then you should look towards budgeting from seven hundred United States dollars and above.
Below are the essential factors that will affect the cost of selling on Amazon, and these different investments could result in different profits for Amazon sellers.
Factors That Determine the Cost of Opening an Amazon FBA Business
Amazon Account Type
Note that Amazon gives you two different options. They give you the individual account, which is free, you don’t pay any monthly fees, or they give you the professional account, which costs $39.99 a month. For the free option, you don’t have to pay them anything every month but you do pay them every time that you make a sale, and that’s 99 cents per sale.
But with the professional account that costs $39.99, you don’t pay them an individual fee every time you make a sale. Nonetheless, when looking to start this business, do that math and know what suits you best. If you are going to sell more than 40 products or 40 orders a month, it makes sense to go ahead and get the professional account.
Your inventory, by far and beyond, will is your biggest expense starting this business. Note there is no right or wrong or maximum or minimum that you can start with, Amazon doesn’t care. It is all depends on your preference and capabilities.
You could start with as little as $500 in inventory if you are really strapped for cash, or you just don’t want to involve yourself in so much risk, or more than likely, you might want to start with around $2500 to $3000, and that’s what most Amazon sellers do.
However, keep it in mind that if you buy a limited amount of inventory with a limited amount of funds, you will be expected to take everything that you make, all the profits off of every single sale, and put it back in to bigger and bigger inventory orders, because that’s the only way you’ll be able to continue growing your business and growing the amount of inventory you have.
The next thing that will affect the cost of starting an Amazon FBA Business in the United States will be the cost of shipping products. Normally, the cost shipping is always included in the product cost.
So if the cost for one product is $5, then it includes what the seller pays the manufacturer and that includes anything in order to import that product to the country to sell it. Note that once you know the details of your shipment, the size, the weight, how many units, it gives you not only just an estimate, but a real quote of what it will cost to get your business started.
Graphics and Logo Costs
If you have any graphic skills at all, then you can do this and brand your business yourself. There are a lot of people that start off this way, they start basic and create their own graphics. Aside that, almost every manufacturer out there that sells products to people are private labelling enterprises, and they also do basic packaging for you.
They will have templates and they might even be able to help you design your packaging and not charge you anything. Although this may not look absolutely perfect the way you want it to be or as customized you want it to be, but it is a wonderful first option as well.
But getting an expert in creative marketing to help you will cost anywhere up to $500, but that’s money well spent because these are professional designers and they specialize in packaging and logos and all kinds of professional products.
Cost of Product Photos
Have it in mind that these are absolutely critical if you want your product to make lots of sales on Amazon. But again, you have a couple options. In this modern era, smart phones take amazing photos, so there’s absolutely no reason not to have some really good photos that even you can take yourself.
So if you choose not to pay a professional photographer, you can go ahead and pick up your smartphone, set it up in a nice clear, bright area and take some pictures.
However, if you really want to make your photos and your products stand out, you can hire a professional photographer. These experts cost anywhere from $30 to $50 per photo, so you have to keep in mind how many photos you really want.
Note that on Amazon, you can have up to nine photos on your page, so you could spend nine times $50 per photo, so maybe $450 on a full photo package, but you don’t necessarily have to do that either. The main primary image of your product is the most important one, so you were starting with limited funds, you can get a professional to take a picture, the main picture of your product, just one of them to use as your primary photo.
Then you can start out taking pictures of the other photos on Amazon, numbers two, three through nine, and don’t pay anything for those, because that primary photo is the most important one that shows up in the search results and that’s what is going to get people’s attention.
To effectively generate sales on Amazon FBA, you have to advertise your products to get traffic and attract buyers. Note that just throwing it up on Amazon is not going to get people to buy right away, although it does not mean that your advertising budget has to be expensive.
If you don’t really have any funds for advertising, you can start by using friends, family and your social network. You can post on social media, whether it is Facebook or Twitter or Pinterest or Instagram, talk about your new business and your product and try to get as many people liking and sharing it as possible to get exposure and traffic.
Indeed, this process can jumpstart your product right there and get some sales going. Also another way to generate sales is to do something called Amazon Sponsored Product Ads.
As you generate sales with your promotional giveaways and get more reviews with follow – up email campaigns, you will see an increase in the organic ranking for your main keywords. Another tactic to consider for your product launch is to run sponsored ads (also known as Amazon PPC).
This strategy can quickly improve your sales. Assuming you are running ad campaigns with a lower – end budget of $10 per day. (This is the default amount Amazon suggests.) According to reports, with this budget, you can expect roughly 20 – 30 clicks on your product each day, resulting in 3 – 4 sales.
Financing Your Amazon FBA Business
Starting an Amazon FBA business with private label can be cost effective especially if you choose to run the business from your home, share office space with a friend or make use of virtual office.
Securing a standard office or warehouse facility is part of what will consume a large chunk of your start – up capital, but if you choose to start the business on a small scale, you may not have the need to go source for fund to finance the business.
No doubt when it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your Amazon FBA business with private label;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for Loan from your Bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Based on reports, new sellers spend approximately $3,836 to start selling on Amazon — including product costs, Amazon fees, and other necessary initial investments. You can reduce your startup cost significantly if you source your product on AliExpress instead of Alibaba, since AliExpress will allow you to order smaller quantities and test the waters before investing in a bulk order.
The downside to this though, is that you are paying a higher per-unit cost. It also means you are less likely to get customizations and specifications.
Also note that you won’t need to incorporate a business in order to sell on Amazon. Although many successful Amazon sellers opt to establish legal structure for their business (like an LLC), they do this further down the road in their Amazon selling journey, when it becomes necessary and financially viable.