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You Want to Start a Business and Sell On Amazon?

Updated on November 7, 2017

An Idea Pops Into Your Head

You think to yourself, "I want to be an entrepreneur! I'll sell these widgets here on Amazon and make gazillions of dollars!"

But then your little voice whispers in your ear, "slow down and think about it first."

Now, keep reading.


Before You Do Anything

Before anything, such as coming up with the name for your business, you should be able to answer the following questions first. Be realistic with yourself.

Here are some questions that you should answer first:

  1. Should I make something and sell it? Should I buy from a manufacturer and be a reseller? Should I look into Private Label Rights?

  2. Do I have the space, money, time, patience, and market sense to deal with buying and keeping inventory on hand, resolving customer issues, and fickleness of the market?

  3. Would I be better off selling non-tangible items, such as an e-book, graphics, or software? This can be a tough question to answer, especially if the person feels like they are lacking sufficient "talent".

  4. How would I handle any kind of “failure”?

  5. Will this business be scale-able? Meaning it can grow or shrink as needed, without negatively effecting the business. This can be very important, as times can change and the person may need to resize their business demand, or lack there of.

  6. Would I be able to cover the costs of overhead when things aren't selling? Meaning the cost of renting space, paying off debt, or buying new inventory.

  7. Should I find a mentor first? Someone who will guide me and share their wisdom.

  8. Would Amazon be the main or only place that I could be doing business? Should I try selling locally first?

  9. Would I need a backup plan just in case I am physically unable to keep running my business?

  10. What would my costs be? This is critical. It is one of the main reasons for failure of small businesses, runaway costs, or simply bad book keeping.

The tenth one above is especially important because you may well find that the margins (difference between costs and profit) are so low or the competition is so high that selling certain things is just not worth it. Trust me, you don’t want to have a bunch of inventory that you paid for on credit but it is not selling.

You must figure out your costs before stepping into a business. Keep your costs as low as possible.

"Keep Your Costs As Low As Possible"

Selling On Amazon

The important thing about Amazon is that they can make or break a business that operates on their site. They have far better information than any one seller, and could decide to cut you out of a niche, if they see a enough profit potential.

They can even suspend your account for the smallest of mistakes. You must make sure your customers are content.

If you think that you want to sell something in which other sellers are, or will be, selling the same widget, you very likely would be having to deal with competitors undercutting your prices by a penny every few hours, just so they stay higher on the list of sellers. That is one of the most annoying and difficult (book keeping-wise) things to deal with as a seller.

The very best thing you could do, particularly when selling on Amazon, is to sell something in which you have little or no real competition. It should be small enough of a niche that your competitors would not consider entering, but big enough that there is room for growth. Find the right niche!

This leads me to the next important detail.

Sell Something Unique

By creating your own product; be it software, a book, or your own patented doohicky, you would be able to have more control over your product. You would also be protecting your business and have the potential for more profit. Additionally, you would have more control over the quality of your products if you make it, or have it made, yourself. If you sell a product made by someone else then you are subjecting yourself to a lot more risk without much reward.

The manufacturer could go out of business or change the product into something you do not like. They could even reduce the quality of the product in order to make more money themselves.

However, there are times when it make sense to sell other manufacturer-made products as an add-on or up-sell of your unique product. Don't count manufacturers out, that sell their products to other sellers. They have their place, certainly.

But whenever possible, you should create your own product.

"Create Your Own Product"

More Things to Do

Create a business plan - Try your best to stick to your plan. Don’t keep growing in different directions without carefully weighing the costs and benefits.

Business license - In the USA, you most likely would need a state business license (at least in most states). There may be some county or city licenses, but you will need to check with your local office. Some people choose to get a federal license, whether they need one or not. All licenses should be very easy to get. Usually it is as simple as filling out a form and then paying a small fee.

Taxes - Make sure to speak with a business accountant and also check with your local government websites for information on the best business type to set up (ie S-Corp, Limited Liability, etc). Determine the taxes which you would have to deal (you may be quite surprised). In some cases you may need to pay taxes at the city, county, and state levels, including taxes for the shipping and receiving states. I knew of some sellers that would not sell to certain states.

E-commerce - If you are considering selling via your own ecommerce site, carefully consider what you would use for an ecommerce platform. The more popular platforms ones are not necessarily the best. They should be well supported with an active community, less problematic, fairly easy to use, have good customization, and provide sufficient reporting features.

Sourcing - Look at many avenues of finding products in which to sell. Alibaba is not the only, or best, place for sourcing manufacturers. JD and Doba are two such sites. Consider other regions as well, even sourcing from within the US. Drop shipping is another alternative to buying and maintaining inventory. One thing to consider when choosing between manufacturers is how small of an order would you be allowed to buy. Some manufacturers’ minimum orders are actually quite large, often costing into the thousands of dollars.

Test your market - Before committing to a large inventory or range of products you should order and sell one or two products, and then monitor the sales. One thing I had found was that smaller products are a considerably easier to inventory and ship. Bigger is not always better. Even if you buy a very small “test” quantity it can be costly for you. Remember that it is worth paying more on a handful of products that do not sell, than it is to buy thousands of heavily discounted, wholesale products that end up sitting on the shelves, not selling. I advise that you always test the water before you jump in!

Keep great records - Ideally, you should maintain an accurate inventory of all your products. You may be able to outsource this to a business that specializes in inventorying products and book keeping. It is critical that you know all your costs.

Keeping good records and monitoring your business are THE most important things for you to do.

Have you sold anything on Amazon?

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If so, would you do it again?

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© 2017 And Drewson


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