Looking at a few of my more recent income reports (late 2014 and early 2015), it’s hard to miss that my total online income numbers have skyrocketed. This is due mostly to the recent business venture that my lovely wife and I are doing together – selling on Amazon via FBA. If you haven’t seen it already, be sure to check out my original post about how we got started – Side Hustling with My Lady. Income is up. No doubt about that. But expenses have skyrocketed too. Due to the nature of this type of business – we have to spend money to make money.
In this post, I’m going to dig through my numbers from my first 4 or 5 months in this business and answer the following questions:
- Is selling on Amazon via FBA a profitable online business model?
- Is selling on Amazon via FBA considered passive income?
- How much money have I spent?
- How much money have I earned?
- How much inventory do I have at Amazon?
Amazon FBA – Profitable Online Business?
To be clear – I should mention that there are two different methods of selling on Amazon via FBA. 1. You can sell your own products or goods. Things that you produce or have produced and sell with your own private label on them. Or, 2. You can sell products that somebody else has already produced and marketed. My wife and I have started out doing the latter. We find and buy stuff for cheap that we can send to Amazon and sell for a profit. One way to estimate how much you could possibly earn is to use an Amazon revenue calculator.
Selling on Amazon the way that we are isn’t exactly a totally online business. There is plenty of offline stuff that we need to do to make it work. But the sales that happen on Amazon rely completely upon the online marketplace. And the sales just keep rolling in. So, is it a profitable business? After nearly 5 months into this experiment – I can say with confidence that…Selling on Amazon via FBA absolutely is a viable and profitable online business.Click To Tweet
How profitable is this type of business? Well… keep reading. But one thing is for certain. Profits are completely dependent upon how much money you are willing to spend. Spend more – make more. Spend less – make less. We’ve experienced both sides of this equation within the 4 or 5 months we’ve been selling on Amazon. When we stay consistent with buying stuff and sending it in, our sales keep flowing. When we take some time off, our sales numbers begin to suffer as a result.
Amazon FBA – Passive Income?
Do I consider this passive income? Yeah – mostly (I guess). I like to define passive income as money earned by not directly trading time for a specified amount of money (like with an hourly or salary paid job). In our case, we are spending as much or as little time as we want and the amount of money we earn does not correlate with how much time we spend.
In our case, we are doing the retail arbitrage version of this business. We spend time upfront searching for deals. We buy as much as we can during each shopping trip. We then prepare the items and ship them to Amazon. On average, we spend just a few hours each week doing these activities. Maybe 2 or 3 hours shopping and another 2 hours to get the stuff prepped and shipped. Some weeks we shop a little more and some weeks we don’t shop at all.
After doing those things, all we do is sit back and wait for the sales to happen and wait for the money to roll in. Sounds like passive income to me! This isn’t 100% true though. There are some things that I like to monitor in our Amazon Seller account on an almost daily basis. But I spend just a few minutes each day – and even that isn’t even necessary. If I wanted, I could log in maybe only once a week or so and do what I need to do.
How much money have we spent?
$10,486.76 – This is the exact dollar amount we’ve spent on everything related to selling on Amazon from the day we started until the day I published this post. That’s from September 2014 until February 2015. The following screenshot is taken from Quicken, where I track all of our income and expenses.
As you can see, the bulk of our spending is on inventory purchases, as it should be. In order to sell stuff, we need to buy stuff. A couple of other business expenses to note, including dining. Yes, we sometimes go out to eat while we are out shopping for inventory. And yes, this is a business expense! What a cool thing to do on a date night – go out shopping “on business” with My Lady and go out to eat as a business write-off.
Lastly, we’ve spent just over $300 on supplies. These include things like printer ink, labels, boxes, packing tape and a few other tools that have made life easier for us. GO HERE to see my full list of FBA Seller Tools and Supplies.
How much money have we earned?
$10,584.00 – This is the exact dollar amount that Amazon has actually sent to us. This is money in the bank! Amazon sends out payments every 2 weeks. We’ve opted for the direct deposit option. So, every 2 weeks we get a deposit into our business checking account. The screenshot below shows all of the payments we’ve received to date. Note: we have not received the top row payment yet, as it is a running total for the current pay period and this screenshot was taken only 5 days into that pay period.
It’s pretty clear to see how we benefited by jumping into this business right before the holiday buying season. For just getting started, I think we kind of made a killing during November and December! Our first January payment sucked. And this was due in part to the fact that we stopped shopping for 3 weeks and also because the holiday buying season ended. But as you can see, our earnings picked back up in late January and February as we got back into the swing of things and started shopping again and sending stuff to Amazon to sell.
How much inventory do we have left?
$7,798.45 – This is the current total value (at the time this post was written) of all of the items we have left in Amazon warehouses that has not yet sold. Just like if we were running a traditional brick-and-mortar retail store, we have to carry inventory. Not everything we buy and send to Amazon sells immediately. Some stuff does. But other stuff could potentially sit in the warehouse for weeks or months before it sells.
To me, this inventory represents future passive income. Even if we do nothing for a few weeks, we still have inventory at Amazon and potential to make sales. In fact, we are currently in a bit of a lull right now. We are in the middle of our 3rd straight week of doing absolutely nothing towards the Amazon business – yet sales continue to drip in day after day.
Is it profitable? Is it worth it?
If you look at only the income and expense figures, it doesn’t appear that this has been very profitable at all. Those two figures are almost identical. But it’s all a matter of perspective. The way I see it, the income we’ve brought in has offset our expenses almost exactly and has completely paid for our inventory assets that are valued at over $7,000! Is this a profitable online business? Hell yes it is!
Considering the time we spend on this business is very minimal, I would absolutely say that it has been worth it. The weeks that we bring home a couple of shopping cart loads of inventory and get it all processed and shipped to Amazon, we spend less than 10 hours “working.” There have been many weeks that we’ve worked zero on the business. And money keeps rolling in. Worth it!
Lesson #1 – spending more equals earning more. Twice now since we’ve started this business, we’ve taken a 3-week hiatus (meaning we stopped buying stuff to send in). And during both of those time periods, our earnings started to dwindle. If we want to keep earning big, we have to keep spending big.
Lesson #2 – not everything we buy is going to sell right away. We just have to get comfortable with the fact that we have to carry inventory and mentally write that off as a temporary expense.
Lesson #3 – prices on Amazon change constantly, and they usually go down. Before buying items now, we never assume that the current low price on Amazon is going to be the low price by the time our item is listed for sale. Other FBAers just like us are constantly competing to sell items for the lowest price. Now we make sure there is plenty of wiggle room and plenty of profit to be had even if prices go down significantly.
Lesson #4 – testing, experimenting and constantly making adjustments are essential. For us, most of this is referring to our buying decisions and the credentials we use to make them. During our first 4 or 5 months, we’ve definitely learned a little bit about what sells well, what might not and which items to buy or avoid buying based on potential profits.
Lastly – A Free Gift for You
I created a simple guide, in the form of a PDF download, which shows you exactly how we find items to buy and send in to Amazon to sell. This guide includes all of our updated criteria and walks you through the process, step-by-step, by showing screenshots from my phone with a real-life example.
My hope is that this post helps shed some light for you on the profitability possibilities of selling stuff via Amazon FBA. I’ll be happy to try and answer any questions, to the best of my ability, in the comments section below.
The Private Label FBA Model – Brief Overview
FBA Infographic courtesy of Jungle Scout