Sometimes, it’s tough to swallow being equity rich and cash poor. How our household finances became this way is a whole different topic. Let’s just say that, for multiple reasons, the year 2008 had a lot to do with it – as I’m sure millions of others can relate – and we’re still struggling with its effects. Come to think of it, that market crash happened over a decade ago. How time flies!
This blog is all about being cash poor and the difficulties that come with it, especially when running multiple businesses.
On the real-estate side of business, thanks to the recent departure of our tenants from hell from one of our properties, we are expecting that we should no longer be subjected to on-going exorbitant repair expenses, at least not in the scope and length of time that we had endured. Looking back at the records, they became our tenants just as we had embarked on our e-commerce business. Such a coincidence!
Purely from a business standpoint, the only reason this was such an unfortunate timing is because the huge repair expenses left no cash cushion in our private coffers to keep funding the e-commerce business to give it a much-needed initial push. Any e-commerce-related expenses, beyond those deemed essential, had to be cut. As of this writing, therefore, selling on Amazon is on hold.
With that, the e-commerce side of business is the focus of this blog. If you are thinking of selling products on Amazon, and if you are the type of individual that needs to know the conclusions first, here they are – based on our experience so far:
Conclusion 1 of 3:
Consider your first attempt at selling on Amazon as a learning experience. In other words, don’t expect to be making money immediately after you launch your first product – unless you have prior experience in e-commerce and/or have the necessary system already in place.
The reason I’m determined to resume selling on Amazon as soon as practicable is because, now that I have learned so much in terms of how to make it in this business, it would be a waste of time and money already expended to give it up.
Conclusion 2 of 3:
Realistically, if you do not have a minimum of $25,000 dedicated to starting up an e-commerce business, I would recommend you wait until you do. Here is why:
Let’s say you are brand new to this business and able to launch your first product for, say, $15,000 all inclusive (including training). You’ll get some money back through product sales but, at best, you’re likely to merely break even.
To keep the momentum going, you’ll want to get ready for Product #2 shortly after the launch of the first one. This means you’ll need additional funds for it. Make sense?
Here is a rough breakdown of major expense categories that you can expect. Later, below the third conclusion, each category is explained further.
Training
Procurement
Shipping
Storage
Product launch / advertising
Other
Conclusion 3 of 3:
If you’re not careful, you can easily run out of funds, over and above your original budget. You need to remain vigilant about every expense incurred. Here are some examples based on my own experience.
———–
Training
You need:
A program that, first and foremost, stays with you and gives you updated versions at no additional cost. Why? E-commerce is constantly evolving. Such updates, therefore, are especially valuable to those of us who are determined to stick with it for the long haul.
A program that comes with a group of mentors from the start – instead of this aspect being an up-sell for a much higher price later – is crucial. Mentors must be those who are successful current practitioners, who are dedicated to answering any questions you may have at any stage of implementation.
Procurement
An unexpected cost increase: Here is an example of how quickly your cost can climb if you’re not careful. Per the training received, I was planning to buy a small quantity for our first product. When the supplier presented me with the cost-saving differential between the quantity I wanted to buy and what they wanted to sell, I chose the higher quantity – as in double. Although it was a much better per-unit cost, our total cost went up, of course.
Shipping (plus duties when imported)
An unexpected cost increase: As I blogged in “The tariff conundrum” in December 2018, by the time our inventory cleared customs in the U.S.A., we were hit by the higher tariff rate. Effective March 1, 2019, we’ll find out if the tariff rate will be climbing even further.
Storage
An unexpected cost increase: Our inventory arrived at the Fulfillment by Amazon (FBA) Center mid-November 2018. Little did I know that for the months of November and December, the storage fee more than quadruples at Amazon. Because every experienced seller wants to take advantage of the high-volume-sale season during Thanksgiving and Christmas, Amazon charges more for storage – because it can.
Because I did not know about this higher storage fee, when Amazon charged my credit card for the much higher amount, I had to pay for it out of the funds originally budgeted for launching the product. This, combined with the higher procurement cost and tariffs, was enough to jolt me due to the limited funds with which I have been working.
Shortly thereafter, I made the decision to pull all inventory out of the FBA Center to be shipped to our garage – at an additional cost, of course. I did this knowing full well that it will cost me, yet again, to send them back to an FBA Center – when I’m ready to launch the product the right way.
When all was said and done, however, I felt relieved knowing that I would no longer have to worry about bleeding cash every month while not knowing when I could launch the product.
Product Launch
Product launch means advertising, which means, again, additional cost. Here, if you do not have set aside a minimum of $1,000, and preferably much more, you will not be able to do an effective campaign to boost your sales.
Other
When you go into this business with a serious intent to make it work, there are vital tools that you must have in order to run it effectively. Through training, you’ll be exposed to necessary and effective tools. In addition, as soon as you are able, you will want to delegate repetitive tasks – so that you can focus on what makes you the most money. Again, every tool and service is provided for a fee.
As you can see, each of the above major categories illustrates that someone else gets paid by you. For you to make money over and above your expenses, you need to (1) be trained well, (2) be able to effectively use the tools that make this business possible and, most importantly, (3) have continuous mentoring support to make it work.
As for me, “being on hold” does not mean there is nothing to do. In fact, quite the contrary. It means the time to not only generate funds elsewhere (real estate) but also to better understand each of the key e-commerce tools. I love learning everything about the e-commerce / Amazon business. For me, it’s a lot of fun.
Lastly, if you are wondering, I am receiving training from Amazing Selling Machine, which is the premier product of Amazing.
Although I needed to pause the process for now, I believe in ASM and its approach to training. (See “Training,” above.) As with anything worth attaining in life, this involves a lot of work. And it is not for everyone. But if you are driven (like me), with an unshakable big why, and if you’ve been thinking about selling on Amazon, then ASM is an excellent choice.
Instead of the typical “rah, rah,” I hope I provided you with a realistic picture of what you can expect if you choose e-commerce as a means to pursue your financial freedom.
If you are interested, I highly recommend that you carefully read the disclaimers, in the next three paragraphs, multiple times if necessary, BEFORE signing up with ASM.
TYPICALITY DISCLAIMER: ASM members joining between 2013-2016, who completed the program and launched a new brand, had median annual revenue of $60,750.00.
The claims presented on ASM website are not represented as predictions or forecasts that anyone who joins will experience success. Concerning future performance or results, no guarantee of any kind is implied. Individual results will vary depending on many factors outside ASM’s control, including the degree of effort made by each individual and the time, skill, and ability they can devote to the business. Although these claims are truthful statements about results obtained by our customers, they are not necessarily typical. Some customers make little or no profit.
Lastly, I am an Amazing affiliate and may be compensated for promoting its products and services.
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Happy investing!
