Not sure if you have the capital to start an FBA business? Here's a guide to help you decide if you have what you need.
How much capital should I have to start with FBA?
September 26, 2021
Starting an Amazon FBA business is an affordable way to have a second income, but you need to understand these four critical areas to cover in your opening investment so that your shop has a solid foundation. By investing in your office, product, the marketplace, and the amazon sellers, you’ll set yourself up for success.
Before even considering how much money you need to invest, the biggest investment that you will make into your business of selling on Amazon is time.
Starting a business is hard. You may already have a full-time job, but you’ll be taking on the roles of:
- Marketing Director
- Office Manager
- Customer Service Representative
- Product Manager
And many more roles you may not even consider. If you want to lean on this as your primary source of income, it will require work. Your store will take some time to gain momentum and begin to profit. In addition to all these roles, you will likely need to allocate time to develop your skills.
If this still seems like a good fit for you, and you have time to invest, let’s jump into your budget items.
At first, you need to spend money setup. This is where you will be spending your time, so make it clean and effective. You want equipment that you are familiar with and that will serve you well. If you purchase a new laptop, look for one with a familiar operating system.
The same thing goes for a smartphone, and the two should be compatible so that you can easily share information between them. Add a printer for labels, and that is all the technology you’ll need.
You likely already have these things in your home. If you do not have them, it may cost upwards of $2,000-$4,000 to purchase a smartphone, laptop, and printer (depending on the variety you choose).
The upside of this is that these are all multi-use items, and can be helpful to you in a myriad of ways outside of the store. Additionally, many tech companies offer pay-as-you-go options, so you won’t need to front this expense entirely at the beginning.
In addition, you may need:
- Packing Materials (bubble wrap, newspaper, etc.)
You may wonder why some of these items are necessary, given that Amazon is fulfilling your shipments for you. Check out our article on how to prepare your items for FBA - in order to send your shipments to Amazon for fulfillment, they will need to be prepackaged (assuming you’re not paying a third party to do this for you, but in the beginning, you may not be able to afford that).
These additional items should cost no more than $100 to start. Even better - you may be able to find some of them for free! Check out this article on how to find boxes at little to no cost.
Total Office Costs: Between $100-$4,100*
*Depending on what tech you already own.
An exciting part of launching your business is deciding what products you will sell. This will determine everything from the direction of your marketing, to your customer base, to your shipping supplies and costs. As you decide what you are going to sell, check out the FBA fees calculator to see what it will cost to ship each item.
We recommend buying a few types of similar items to start out with, to help you determine what to sell. In order to do this, you will need to invest about $500 into product. Make sure that you set the sales price high enough that you will make a profit (keeping FBA fees, adin fees, and product price in mind) but low enough that you can compete with other listings.
You can find products both on the web, from warehouse-like sites GlobalSources or AliExpress, or in stores. When you find products in stores on sale or clearance, and then resell them online for a profit, this is called “Retail Arbitrage.” This practice takes advantage of the need that physical retail stores have to move and change stock to stay in business - a need that you will not have as an online retailer. We generally prefer using online sourcing than praciting Retail Arbitrage, but some have made a hefty profit from that model.
Initial Inventory Cost: Around $500*
*May vary depending on product choice.
Marketplace costs are two-fold: fees and advertising. Fees are calculated through FBA, and we mentioned them in the previous section regarding products. If you are savvy about the products you choose to sell, you can keep fees low.
The cost of advertising on Amazon is up to you. Remember, you are your own marketing executive. In that role, you should try to see things through the eyes of your buyers. Things to consider include:
- Are your product photos high resolution?
- Are you using Search Engine Optimization?
- Is your product title accurate?
- Is your description engaging and does it utilize keywords?
- Does your store have a cohesive brand? Should you add a logo?
The exciting part about advertising your product on Amazon is the sheer volume of consumers already running through the site consistently. An easy way to take advantage of this is to use sponsored ads via Amazon.
Sponsored ads run from a percentage of each sale you make, so it is difficult to nail down a precise dollar amount you will invest in them. Amazon allows you to have a lot of power over this, describing it as a ‘bid’ per click. Check out their explanation here of how this works.
Let’s be generous with our budget here and assume you’ll want a starting budget of $500 for advertising - assuming you may pay for some professional photos, copywriting assistance, and ads. This isn’t a concrete number by any means, however, and could be drastically more or less depending on how aggressive you want to be with your campaigns.
Initial Marketing Cost: Around $500*
*Will vary depending on what you can do for yourself and how aggressive you plan to market your product.
This is one of the most important pieces - what are you doing to invest in yourself? Do you have the tools that you will need to succeed in this fast-paced online world? It is exciting to jump into something new, but you will quickly find yourself in over your head if you don’t take time to become educated on what is trending in your market.
There are many articles and blogs on the internet full of unvetted, non-certified information regarding this topic. Everyone seems to have their own opinion on your store - and it hasn’t even launched yet! EcomHub has been studying the Amazon marketplace for almost a decade, and training new sellers to succeed on Amazon for years. Set up a call with our expert coaches today and let them cut down your research time.
You can check out some of our student’s testimonials here
Initial Education Investment: $0-$5,000*
*Optional expense, but the return on this investment will change the outcome of your store in the long-run.
How much capital you will need may vary based on what you are selling, how often you advertise, and how much preparation you have already done. Your financial needs to begin could be as low as $1,100, or as high as $10,000. It all truly depends on your situation. A consultation with our seasoned coaches can help you narrow this down specifically for you and your store. Let us help you reach your goals!
Julia Grant is a copywriter specializing in e-commerce and small business, helping businesses expand their reach with copy that clearly communicates their message and converts. She is a certified translator and interpreter and prides herself on providing culturally relevant content in both English and Spanish.See more posts from this author