Budget For Starting Amazon FBA
How Much Startup Capital You Need to Start Your Amazon FBA Business in 2021.
October 20, 2021
What Budget Should I Have When Starting Amazon FBA?
Looking into starting your own Amazon FBA business? I have some good news for you. This business model is one of the least expensive out there in the e-commerce world. There are plenty of options for those who want to get their income online, but by far this is the most rewarding (financially and otherwise) one.
In order to understand just how much money you need, you need to understand the process of launching an Amazon FBA business from start to finish.
For Starting Your Amazon Business there are few important things that I recommend you spend money on when you decide to start selling on Amazon. Inventory costs, Supplies & Training Inventory. These are the baseline of your business and determines how much money you will make.
Why is FBA Cheaper Than Other Options?
FBA is much cheaper than other e-commerce providers because everything you need is already included. You don’t need to worry about exactly how much money you need, creating your own website, paying for a domain, handling the ins and outs of transactions, the shipping cost, or even storing and shipping your own product. With FBA, all of these details are already taken care of.
The product cost, FBA fees, sponsored ads costs and some other initial costs are the only money you will be investing to start selling on Amazon. And with the exception of the sponsored ads costs, which are optional, all other costs are pretty much fixed and depend on how many products you want to sell.
When you use a traditional dropshipping provider, not only are you paying for a membership to their site, but you also have to deal with maintaining/marketing your own website. This is a difficult process - it’s not easy to get a site from 0 to thriving overnight and requires a lot of startup capital and marketing knowledge. If you go the traditional e-commerce route (no dropshipping), you’ll need to find a space to keep your products and ship them!
Amazon FBA business posted an already established enough that if you know the science behind ranking high on their site, you’ll do just fine - and since Amazon fulfills all the orders, you won't be bogged down with shipping.
What Are the Amazon FBA Business Essentials?
To get started on Amazon, you’ll need to make sure you have all the right tools before you sell your first item. This includes a computer, printer, scanner, and internet connection. And an updated smartphone will be more helpful for checking business data anywhere. These are essential tools for an entrepreneur to be successful in their business. Besides these, you might need a global trade identification number, bank account for your new business (preferably a professional account), business models, free tools, ideas from other sellers, and more. Particularly with being an Amazon seller, you can get access to amazon warehouses, track your inventory costs and average cost with a professional account, it is important to have all of these things in order to start selling on amazon.
Obviously, before you can launch an Amazon business you need a product to sell. Remember your product doesn't need to be from a private label brand. There are different models you can use to source these products, ranging from purchasing online and storing products at an Amazon warehouse to retail arbitrage or online arbitrage, where you buy discounted items from stores and then list them online.
Product research is a very important part of these FBA models. The more time you spend on product research, the more profitable your FBA business will be. You can use some great resources like Jungle Scout to help with this process.
Start with Amazon's own product research page to see the top-selling products on the platform at any given time. Browse categories with high demand, and find potential bestsellers in order to get an idea of what people are looking for on Amazon at the moment.
On the contrary, it’s actually better at the beginning to buy a small amount of a few different products to test out the waters. We recommend picking an affordable product and purchasing in bulk from a white label distributor so you can brand and package it yourself. You really don’t need more than $500-600 to get your initial inventory ready to go (although more always helps).
More great news! If you’re starting an Amazon FBA business, you probably already have all the office supplies you need.
When you choose to go FBA instead of fulfilling all orders yourself, you avoid the hassle of paying for boxes, labels, printers, and other shipping materials.
All you really need to start your Amazon Business:
- Quality Laptop
- Consistent Internet Connection
While these can be expensive items, odds are that you already have them in your possession if you’re considering starting an online business or becoming an amazon seller. If for some reason you don’t have any of these items, you will need to set aside another $1,000-$5000 (this number can range significantly depending on what brand of computer you purchase - the phone will likely cost between $500 and $1000 but should be spread out in monthly payments while the internet connection can cost between $60-120 monthly).
If you do decide to fulfill orders yourself, here are some other costs to consider:
- Shipping and Address Labels
- Boxes or Padded Envelopes (depending on the product)
- Scale (letter, bathroom, or kitchen scale depending on the size of the product)
- Packing Tape
It can’t hurt to have these things on hand in case you decide to give arbitrage a try down the road, but it’s not necessary.
Now, I know we just said you’ll be saving money by avoiding marketing costs. This is true - but you’ll still need to invest some capital in marketing at first to ensure your product gets seen in the beginning.
The good news is that you won’t need to spend a ton. Traditional drop-shipping stores require a huge marketing investment because your base audience at the beginning is 0. If you have your own website, you are competing with everyone on Google and competing against popular e-commerce search engines like Amazon.
When you are selling on Amazon, you already have a base audience at your fingertips and can easily get your product in front of them with a basic understanding of the algorithms. Creating optimized listings, having quality photos, getting real reviews - are all ways to make sure your product gains visibility fast without spending money.
That being said, another huge part of Amazon’s ranking has to do with conversion rates and orders. So, while your product is getting established you may want to invest in some PPC advertising or sponsored products, which will cost you.
Using Sponsored Product Ads on Amazon is particularly helpful because you don’t have to pay upfront. Essentially they take a fee from your balance after you make a sale (think of it as a commission of sorts), so there isn’t much to worry about here. Still, it will affect your profit margins if you run aggressive ads.
Other marketing expenses to consider:
- Quality Product Photos
- Graphic Design/Branding
- Copywriting (If you’re not gifted in this area)
You can do all these things yourself, but depending on your skill level you may be better off hiring a professional. Prices are difficult to be certain of as they depend on how many products you are starting with and the fees that individuals charge for their services. But you could be looking at an additional $500 or so for professional branding, photos, and copy work (could be less if you’re starting small scale).
Time is money! While you won’t have to save up funds for this, you do need to consider it. If you work on an hourly basis right now and are planning to start a new Amazon business, you will need to either find more hours in a week or give up some of those hours to work on launching your store.
In the beginning, these hours will not be generating income. Take this into consideration before you decide to jump into the Amazon game. It’s not going to be an overnight success, and it is going to require work. Budget your time accordingly - and if you don’t have it, launching a new e-commerce store may not be the option for you.
You don’t need a degree to start an FBA store, but that doesn’t mean education can’t help. Letting people who have already found great success in this arena offer you quality training can be the difference between success and failure.
You want to look for a course that has a proven track record for helping people, with testimonials and teachers who have real-life experience in the field. EcomHub has been training new Amazon sellers for years and every one of our coaches has their own Amazon success story. We provide hands-on training for new sellers to help them build, launch, and scale their stores to whatever size they desire.
You can check out some of our student’s testimonials here
If you’re interested in selling on Amazon, this is the best and most important investment you can make into your future. Head on over to our website to learn more, and schedule a call with our team to take the next step toward selling on Amazon professionally.
David Zaleski is an entrepreneur, Amazon seller, and the founder of EcomHub. He's been operating in the eCommerce space since the age of 14 years old. At the age of 18, he started his own Amazon business with just $4,800 in start-up capital.See more posts from this author