How I Built and Sold My Amazon FBA Business For 7 Figures
[Morning y’all! Recently found out that a former personal finance blogger sold his Amazon FBA business for roughly $5,000,000 (!) after starting it only 5 years ago (!!), so if you’ve ever been interested in running an FBA, this post is for you! From Jon Elder who now helps others manage their Amazon businesses over at BlackLabelAdvisor.com.]
*******
It is such an honor to write my story for J. Money! He helped me out immensely when I ran a blog back in the day, and graciously advised me on how to gain more readers. Happy to share my tips and story to his audience now!
In 2014, I was working at my corporate job and wanted more out of life. I wanted something of my own. In a sense, I wanted financial freedom.
This is where my Amazon FBA business was born. I remember it like it was yesterday. I was on my computer researching business ideas and everyone kept talking about this new opportunity called FBA (“Fulfillment By Amazon”).
At the time, I had always assumed that everything on Amazon.com was sold by, well, Amazon. WRONG! As it turned out, the vast majority of items sold on Amazon are sold by small businesses run by everyone from young entrepreneurs to families!
In comes the golf brush. Yes, that’s right, a golf brush. My idea was that this could be a test run at the business and see where it went. After some digging, I realized that there were very few golf brush sellers on Amazon so I immediately went to work finding a supplier overseas. After some negotiating, product testing, and landing my preferred factory, I placed my first order and had it shipped by airplane to an Amazon warehouse where it would be sold to my first customer!
In my head, I assumed it would take weeks, maybe months for my product to be found I was dead wrong! Within hours, I made my first sale and I was floored. I drove home way too fast, and excitedly shared the news with my wife. “Someone just bought a golf brush from me, can you believe it?!”
[Not the brush I sold, gut a good example of one]
This ignited a passion in my gut like you wouldn’t believe. I knew I was onto something with this business. As the sales grew, I expanded the color offerings and soon became the #1 seller of golf brushes on Amazon! It was surreal to see the “#1 seller” badge on our golf brush listing.
As time went on (while also working at my corporate job), I moonlighted at this and started expanding into new products and categories on Amazon. Since I wasn’t paying myself any money yet, all the profits continued to be funneled back into the business so I could buy larger and larger purchase orders to keep up with my ever expanding sales.
Two years go by and I was swamped. Between a baby in the house, moving to a new state, starting a new job, and running a booming Amazon business, there never seemed to be enough time in the day. This is when I was at a crossroads. Continue this hectic lifestyle or go ALL IN? For me, the choice was easy. I gave my employer my two week notice and focused all my energy on the Amazon business.
Boy, what a good decision that was! With my newfound time, I was able to dedicate sections of my time to R&D, launch new products quicker, and ensure each product listing was optimized for maximum exposure. Soon, I was doing millions in revenue each year. I still look back on these numbers and am shocked. The business was booming and sales grew at 100% year over year.
So, what were some keys to this success?
Unlike many fake Amazon gurus out there, my strategy was very different than what you see online these days. When I thought about a product, I asked myself, “am I turning this category on its head and delivering excellence to the customer?”
This was the driving force that lead to product innovation and setting my products apart from the competition. Nothing average. Be the best. It seems simple but it takes a lot of hard work and is worth it. Once you see raving reviews come in, you realize you made a difference in someone’s life!
The second element that truly set my business apart from millions of others is customer service. From the very beginning, I modeled my customer service after Zappos. If you’re not aware, their customer service staff go above and beyond to make your day, even if it means a cost to them financially. They get it. They know that if they take a hit with one order but hook you for life, they will make a killing on you over the years.
So, this is how I ran my business. Even down to questionable customers who I knew were most likely scamming me. I went out of my way to make them happy. Maybe I made them feel guilty? Who knows. But as time went on, I’d like to believe some of my customers shared my products with their friends and family or on social media because of the A+ experience they had with me.
My Amazon FBA journey took a good turn in 2019 when I started to think about selling my business. I think every business owner thinks about the end goal. For me, it was to build up a strong business, create an attractive asset, and sell to someone for a pretty penny. I did just that and sold for $5 Million to a private buyer.
So, there you have it. I started with zero sales in 2014. Grew it to over $10 million in sales within 5 years, and sold the business for 7 figures. It’s a beautiful story and one that can be repeated if you put the customer first and are willing to spend the time to make your product truly the best.
Questions? Happy to answer them below!
*******
I took him up on that last line there and peppered him with a half a dozen questions after being enthralled by his story here ;) I’ve known John for almost a decade now and had no idea he was building stuff outside the personal finance blogging world!
Here’s our Q&A:
This was great, man! I’m sure it wasn’t ALL rainbows and sunshine though – what were some of the challenges of running the biz?
Forecasting inventory needs each month was ALWAYS a challenge. The biggest challenge of all was knowing what to order, and how much, over the Spring to ensure stock levels for Prime Day over summer, and then what to purchase over summer for Black Friday and Christmas sales. Tracking daily sales and looking at historical trends, and then adding a % for all future orders was key to my success.
Challenge #2: There is always a hungry competitor trying to take away your sales, so staying on top of innovation is huge. The goal is to make your product the VERY best in your category so you maintain your sales when other competitors enter your space. This takes consistent time to refine a product and add elements to truly make it shine.
Challenge #3: Expanding product lines is a real challenge because sometimes a launch can be a flop so great care is needed before spending money on a new idea. Thanks to various software programs and the ability to buy smaller test orders, anyone can overcome this.
What does Amazon charge as far as fees?
This is going to depend on your product category. Amazon has something called a referral fee that is charged just for using their platform. This could be as low as 8% or as high as 20%. The vast majority of product categories are in the 8-15% range.
Amazon also charges FBA and storage fees for using their warehouse and packing/shipping services. These fees will depend on the size and weight of your product. Someone has to pay for those little robots at the Amazon warehouses!
Can you give an idea of your profit vs revenue #’s in general? I know with online products you obviously keep a majority, if not all of it, but obviously $10 Million in revenue is different than $10 Million in profit! (Though still just as sexy sounding!)
Yes, the profit number for any business is a much less sexy number, unfortunately, because that is the revenue number minus product costs, shipping, Amazon fees, software expenses, taxes, and advertising.
For example, in 2018 with a little over $6 million in revenue, the net profit after ALL expenses for my biz was $1.2 million, roughly 20% net profit. Not many businesses exists with this high of a net profit these days! It’s quite extraordinary :)
Is there anything that *can’t* be sold on Amazon? Drugs for example? Haha…
LOL, you can’t sell booze, sculptures, cars, and drugs!
Check out this post for more: What Can’t You Sell on Amazon?
Lastly, how can others get started with FBA if they’re interested? Any books, courses, articles, podcasts, etc you’d recommend?
I love seeing others experience the same success as I did, so I do one-on-one consulting options for people just getting started. I hold your hand and walk you through sourcing, shipping, listing optimization, all the way to your first sale! You can find me over at www.blacklabeladvisor.com or email me at jonelder [at] blacklabeladvisor [dot] com.
If you’re not ready to launch quite yet and want to get more familiar with the Amazon FBA universe, I’d recommend The Rock Your Brand Podcast. You can also learn more about the FBA program directly on Amazon here: https://sell.amazon.com/fulfillment-by-amazon.html
Thanks for taking the time, Jon!
*******
For 70+ more business ideas, check out our Side Hustle Series.
********
[Prefer to get these blog posts *weekly* instead of daily? Sign up to my new weekly digest here, and get other thoughts on life/business/money as well: jmoney.biz/newsletter]
No comments:
Post a Comment