Find out how much it costs to start an Amazon business. Learn about the costs and expenses of starting an Amazon business.
How Much Does it Cost to Start an Amazon Business: There are many entrepreneurs that want to start an Amazon business but don’t know how much it cost to start an Amazon business, this article will help you answer this question.
How Much Does it Cost to Start an Amazon Business?
If you want to know the costs of starting an Amazon business, keep reading this article and find out how much it costs to start an Amazon business.
Overview of costs
Selling on Amazon is a great way to enter e-commerce without a lot of risks. However, it still requires an upfront investment, and you can’t become profitable until those investments pay off. There are three main types of costs associated with selling on Amazon: listing fees, order fulfillment costs, and shipping. Listing fees vary based on category but average around $1 per item sold. That means if you sell 100 items in a month, your monthly fee will be $100.
Order fulfillment costs include storage space for inventory and packaging materials such as boxes or bubble wrap; these expenses depend largely on how much inventory you keep in stock at any given time. Shipping charges also vary depending on how quickly customers receive their orders; rates increase if orders need to be shipped overnight or two-day delivery instead of standard ground shipping.
To determine your total cost of starting an Amazon business, add up all your projected expenses over six months and divide by six to get your monthly cost per item sold—the number that determines whether or not your business will be profitable. For example, if you estimate that it will cost $500 to start an Amazon business and you plan to sell 1,000 items in six months.
Your estimated monthly cost per item sold would be $0.50. If you could sell each item for more than $0.50 (for example, $3), then your business would likely be profitable. If not, consider reducing your initial investment or finding ways to reduce shipping costs so you can charge more for each product sold.
Amazon Seller Account
$40/month – $100/month: You can start out on Amazon by creating a free seller account and connecting it with your credit card or checking account. The fees vary depending on which type of seller account you choose. The basic plan will run you $40 per month plus a referral fee of 6 percent, but if you process more than 40 orders a month you’ll get billed at least $100 per month (or more).
For help deciding which option is best for you, consult our table comparing them here. Note that certain businesses are prohibited from selling on Amazon, so check out their policy if you’re trying to sell products that might fall into those categories. Also note that in some states, like California, you may need to register as a business entity with tax requirements before beginning.
Inventory and Supplies
There’s no magic formula for estimating how much inventory you’ll need, but here are some guidelines that might help: Aim for approximately two months of inventory at all times. Why? Because if you know what sells, and you know how quickly it sells, then that tells you approximately how long your product sits in a warehouse before selling.
So if your business is just starting out and will be selling without advertising or marketing (so-called organic sales), then you might want four months of inventory (two in production and two months’ worth on hand). Then again, those periods might not match up well with when products will sell best so don’t worry about being exact—simply think of having between two and four months of inventory as a good rule of thumb.
Fulfillment By Amazon
What is FBA? Fulfillment by Amazon (FBA) is a fulfillment service provided by Amazon that allows sellers to store their products in Amazon’s warehouses, and Amazon directly does the picking, packing, shipping, and customer service on these items. What makes FBA so appealing is that you pay a flat $0.99-per-item fee, plus 15% of each sale price. There are no additional fees beyond that and your products are eligible for FREE Super Saver Shipping as well!
Unlike sellers who use Merchant fulfilled Prime (MFP), there are NO additional fees or charges for you or your customers when using FBA. Also unlike MFP, you don’t have to worry about whether your product will arrive at its destination within two days. If it doesn’t arrive within those two days, Amazon will refund your customer for any shipping costs they incurred.
You also don’t have to worry about how much inventory you need to keep on hand because all orders placed through FBA get shipped out from one of Amazon’s many fulfillment centers across North America. The downside: You do not get to choose which warehouse your product gets sent out from; however, if a particular warehouse has been giving bad reviews or has been sending out damaged products, then Amazon will usually route around that warehouse until things improve.
Pricing Strategy
Now that you know how much money you will need, start researching your pricing strategy. For most people, their pricing strategy comes from their own experiences as a consumer. How do you feel about paying $50 for a book versus $5 for an e-book? If you don’t care about physical things, you may think $10 is a great price for anything else—and that’s all fine.
But there are other factors to consider before setting your prices. Your biggest competitor is likely going to be big online retailers like Amazon. You can either compete with them by selling at lower prices or higher quality. It’s up to you, but make sure whatever you choose fits into your overall business plan and allows room for growth.
You also want to make sure you have enough money left over after production costs so that you can pay yourself (if needed) and still turn a profit on each sale. Consider what kind of margin works best for your business model and then set your prices accordingly.
Taxes, Legal, Software
Taxes can be complicated for independent contractors, especially if you’re selling items in multiple states. Consider hiring a tax professional to help you set up your business and file taxes. You might also have other state-specific legal obligations, like registering as an LLC or keeping records on hand, so make sure to check with your state’s regulations and rules before starting a business online. Finally, you might need specialized software that helps you track sales and handle inventory management (like accounting).
With these expenses in mind, take a look at what one small business owner says about how much she spent setting up her business. In total, she invested $2,000—and earned $5,000 in revenue during her first month of operation. That’s a solid return on investment! What does that mean for you? If you want to start a profitable business from home, think about investing money into some equipment and/or programs that will save time and boost your productivity.
You may even see results within your first month of operations! But remember: Be realistic when thinking about costs; not every successful business is created equal. As one entrepreneur said, Successful businesses are often built around niche products [that] sell well over time. Take time to understand your market before making big investments—and do some research into pricing options. It’s important to price things competitively while still earning enough profit per item to stay afloat.
Marketing & Advertising
Marketing and advertising can take up a big chunk of your budget, but they’re necessary. You want to start building brand awareness and creating demand as early as possible. It costs around $0.50 to $5 per click for search ads on Google, so you’ll have to set aside some money for PPC. The more you invest in advertising, however, the more you’ll be able to build your brand and spread awareness about your product or service. If you don’t have much of a marketing budget, consider investing in social media instead.
For example, Facebook has recently been showing ads at the top of users’ News Feeds—this is a great way to reach potential customers at no cost to you. However, if you plan to run paid ads (and why wouldn’t you?), keep in mind that many free ad networks use click farms, which are essentially people who will click on your ad every day without buying anything.
While these clicks won’t hurt your conversion rate too much, they’ll eat into your profits. So it’s a good idea to partner with a paid network like AdEspresso that uses software to filter out spam clicks from real people before any money changes hands. That said, here are two key things you should always do: firstly, find ways to get coverage from online publications or blogs; secondly, get reviews from real customers.
Also Read: How Do I Start Selling on Amazon Without Money?
Conclusion
To start your own business on Amazon, you’ll need a few essential items. If you already have them, great! It will be easier for you to get started right away. If not, consider borrowing or buying these items before diving in. Once you have all of your supplies, search through Amazon FBA Seller Central (the official portal) and identify potential products.
Make sure they meet all of your needs—including price point and profitability—before putting them up for sale. Just make sure that they are safe and legal in terms of their ingredients and marketing claims.
Once you’ve found something worth selling on Amazon, proceed with setting up your account by uploading relevant information about yourself and your products.
