The True Cost of Starting an Amazon FBA Business

There are a number of gurus online saying you can start an Amazon FBA business with as little as $100, $500 or even $1,000 dollars. There is a ton of variance on how much it actually costs to start an Amazon FBA business. These gurus are all trying to keep their numbers low so in turn you can buy their course. All trying to justify the need for their course and how you can benefits form it for a low-price blah blah blah. Through this article I want to highlight the true cost of starting an online business so there is no surprise down the line when you try to start marking your first sales.

This article is going to be broken down into 3 sections Business, Product and Marketing, Each one of these cost are either need or recommend when starting out.

Business

Registering a Trademark (Cost $0-$350)

While getting a registered trademark isn’t something you have to do in order to start selling on Amazon. It is highly recommended that eventually, you do get one. I have outlined the importance of a trademark on Amazon in that article. The main reasons you should get a trademark is Enhanced brand content, brand registry, better marketing, and generally better branding opportunites. With a trademark taking up to 6 months to 1 year to complete its best to get this started as soon as possible.

Business Structure (Cost $30 – $300)

Legally you will have to have some sort of business structure when selling on Amazon.  You will have to submit your tax information when you begin to register your account. This can either be a sole proprietorship or setting up an LLC. If you choose to do a sole proprietorship you will need to set up a DBA (Doing Business As) with your local government. Or you can use any other business structure of your choosing.

Domain Name (Cost $0-$12)

This is not a must for selling on Amazon but if you are going to be selling private labeling products it is recommended to buy your domain name. You might not be planning on setting up a website right away but it is a good idea to at least buy the domain name for your brand ahead of time before someone else steals it. That way you will be able to open your own eCommerce site and not have to worry about securing a domain name.

Domains are cheap to register you can get one from Namecheap. They are the cheapest place to register a domain name.

Amazon Professional Account ($39.99)

If you plan on selling FBA then you are going to need an Amazon Professional Account. Which is $39.99 a month, there is a basic account that only charges a extra 0.99 per sale but with limited access to marketing, buy box and a few extra things you are going to need to invest in the professional account.

Product

Product Samples ($50-$200)

Never buy a product for resell that you have never seen before. Amazon is hard and a large percent of your success relies on the quality of your product. So order samples test them out while you are planning your business strategy and getting some of the other things needed to be done. Take your time with testing there is alot to get done but this is one of your first steps in starting a online business.

Barcodes ( $0-$300 Per Code)

Getting barcodes can be expensive, with Amazon requiring GS1 barcodes for products listed on their site. Luckily there are a few ways around it either by applying for GTIN exemption or finding cheap GS1 barcodes online. Please note that when you register with GS1 your barcodes are branded to you. Using cheap GS1 barcodes found online belong to a different brand that no longer exists. Depending on where you obtain your bardcodes might or might not get accepted by Amazon and potentially put your account at risk. Getting GTIN exemption or GS1 Barcodes is the safe option.

Inventory ($500-$2000)

This is going to be one of your biggest expenses when starting out which is getting your initial product. It is recommended to start out with 300 to 500 units depending on the type of product. If it is a large and expensive item that won’t sell regularly then this can be a much lower number.

For example, if you are selling phone cases that you sourced for a $1 each and only have 300 inventory which starts selling at a rate of 10 per day you will only have 30 days of coverage. Your manufacturer might have a 2 week turn around time than 2 weeks to get to your location then you have to send in inventory to Amazon which is an additional 2 weeks. Which means by the time you realize your sales velocity you won’t have inventory for close to a month. Which will kill your listing before you even get started.

Prep work is very important to try to guess to the best of your ability how much sales you will be getting. At the start, it will be slow but things can change on Amazon very quickly and depending on your knowledge of marketing and the niche you are in will dictate how quickly your items will sell.

If you are wondering how to figure out the sales velocity of your product the best tool is going to be jungle scout. Just type in some of your competitors to see how they are going.

Shipping ( $300 – $1000)

Don’t forget the shipping, first you will have to import the product then ship to FBA. Depending on the size source and weight of your product pricing can vary. If ording large quanities try to have everything case packed and palletized to save on shipping expenses.

Branding & Packaging ($100-$1000)

Hopefully you will have the packaging included with your brand’s logo already printed on it. But sometimes this is not an included resulting in an added expense. You will also have to source shipping boxes if you are case pack your product while sending into Amazon FBA.

Marketing

Advertising ($300-$500)

This is going to be your second biggest expense because products don’t simply sell themselves. You will need to start to build momentum to your product listings. Now, this cost is going to be higher but for your first month, you should be spending at least $10.00 per day. Hopefully if done correctly you will start making sales and try to recoup some of the expense

Product Photography/ Copy ($0 – $250)

If you aren’t a professional photographer then I suggest investing in one. Your products need images and the higher the quality the better. Most Amazon listings will have between 5 to 8 product shots that showcase the product. This is also what your customers will be judging your product on other than reviews.

Also writing for your product listing is important if you aren’t savy you will need to fill out product titles, bullet points and descriptions. Which can be bootstrapped out outsourced to a freelancer.

Marketing Materials ($0-$1000)

Logo, inserts and other media such as video will need to go along with your product. Cost on this vary greatly so my estimates are based on doing the bare minimum or bootstrapping it yourself.

Logo – Cost from $5- to $100 depending on the site you use. Upwork, Fiverr, and Freelancer are all great in finding a freelance graphic designer to work with.

Inserts – Once you have a logo a little thank you letter is always a nice touch. Which can be sources

Other media– For your product images, there should be images that go over key selling points and details about your product if you aren’t a graphic designer then you will need to hire one. Video is also important which can be added to other channels such as youtube to better sell your product. If you have brand registry Amazon now allows videos on your listings.

Tools & Supplies ($50-$100)

From shipping labels to getting software like feedback five or jungle scout to help with your product reviews / sourcing. There are a few things you will be needing or wanting before you get started. This is something to keep in mind that there are little added expenses along the way. So adjust your budget accordingly.

Total Cost To Start Amazon FBA Business

With bootstrapping most of your product marketing materials, shooting your photos and keep your initial inventory cost low you are still looking at around $1,320 to $1,500 to get started selling on Amazon. Prices can rise upwards of $7,000 to $10,000 once you start outsourcing, building listing getting a trademark and adding a much larger marketing budget.

All in all, I think it is safe to say that spending somewhere between $2,000 and $5,000 depending on your expertise is a good budget to go for when starting out on Amazon FBA. I don’t think everyone will be able to bootstrap everything plus the amount of time it takes to get started might be easier to outsource some of the easier things to do. Also, most of my pricing was on the modest side. Shipping, Inventory and marketing are where you will be spending 99% of your budget once you have everything else sorted. So it is best to

Final Thoughts

This article wasn’t made to scare you away but just to give you insight on what you should be expecting to pay when starting off on Amazon. Yes I am sure there are ways to do this a little cheaper to bootstrap it all together and start off with limited inventory or create a product on your own. But realistically what i hightlisted in this article is simple to cost of doing business.

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Drew Kalinski

Founder of Amztut

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