Here is a guiding idea that will help you out when building a new business (including an Amazon business)…
Everything costs twice as much, takes three times as long and you will never know everything that can go wrong until it does (and it will). That's the truth no matter what business you choose to do.
If there is a hidden secret about Amazon it's this...if you are successful you make no money.
Yes - you read that right….
As your business grows, you will most likely need more inventory. For this reason, many sellers reinvest their profit back into buying more products and starting new lines. This is what they teach at business school but most people don't understand the concept of cash flow versus profit you can spend.
For example, Adam Hudson didn't take a CENT out of his Amazon business for three years - he just kept buying more inventory. Now he owns a large amount of inventory that was all funded from previous profits.
In our experience, those that take a much longer view and see the journey as an experience are the ones that are more likely to succeed.
We also believe in a positive view that if you have come across failure in the past, it makes you better and even stronger. If you choose to view your mistakes and failures this way you are now wiser, able to see ‘the truth’ and in a position to make better decisions.
The advice we are about to give below is predicated on two things:
- You have limited or no business experience.
- You have limited capital and will most likely start with less than $20,000 in inventory.
If you have a lot of business experience and more money to invest then things may grow much more quickly for you.
For those with limited funds and experience, we would say that your first year goals on Amazon are to:
- Learn how to do it.
- Find a single product and get it on the platform (which takes significant time and effort.)
- Make your first sale.
All going well, you will then spend the next few months turning that inventory over and getting your money back - hopefully with a profit (but obviously there's risk in any commercial venture and therefore no guarantees that will be the case). If you do that cycle once, you will now have a REAL education based on your own experience and you will have recovered your inventory investment, course investment and your one-off costs like logo development, photography etc. That is when 90% of your learning is done, not when you finish the last lesson in our course.
Then in that second year you establish perhaps 2-3 other products (now with confidence because you have REAL experience). By the end of that year you are re-investing more into inventory.
Then in the third year your little Amazon business may start building some momentum.
In your 4th year (all going well) you may now be in a position to draw a small, reliable income from your Amazon business.
So in short, for business beginners with limited capital, we advocate not taking profits out of your business for at least your first 3-4 years.
Please also understand that like any business there are not just financial risks, you also have a multitude of others risks you should speak to your professional advisors about for example product liability.
If any of what is described above seems scary, risky or doesn't suit your needs then this is not the business for you.