Most entrepreneurs are very apprehensive about starting an Amazon business mainly because of the fact that they think it’s an endeavor that requires a big budget. We’re here to tell you that if you play your cards right and do the proper research, you can get your Amazon business off the ground with a very modest budget.

In today’s post, we’ll discuss some tips to minimize costs as well as help you identify some instances where you can cut corners without them affecting the performance of your Amazon business.

When You’re Working on a Budget, Research and Learning is Important.

Has it ever occurred to you why rich people are able to grow their wealth much more easily than the average person? It’s because they have room for error. If they start an entrepreneurial endeavor and it ends up not working out, they still have a lot of money to put into other endeavors. Some of which will, no doubt, end up working and increasing their wealth.

The case with us is much different. We don’t have pools of money to put into different endeavors, we have a limited budget which we need to utilize smartly so that the single venture we’re banking on does indeed end up bearing fruit. This will include doing your research into what goes into setting up an Amazon business. It’s also important that you start out small so that things don’t get overwhelming when you’re just starting out.

Minimizing Startup Costs

There are a number of approaches through which you can jumpstart your Amazon business. All of it depends on your mindset, the way you want your business to operate and whatever approach you’re most comfortable with.

For example, during the first few months of running your Amazon business, you might want to only ship your product to customers within the country; Once your business starts gaining traction, you can expand and start shipping overseas. Another interesting thing that can occur is if your supplier is based in another country. What you can do in this circumstance is to tell your supplier to ship your product to an Amazon fulfillment center in that country. This will cut down massively on shipping costs. It may result in much more complex dealings but the amount you’ll save in shipping costs will most definitely be worth it.

Also, if you feel that your product will resonate in a certain region of the world, you might want to contact a supplier in said region and ask them to ship your product to an Amazon fulfillment center there. This might result in much higher sales and revenue than you could ever get in the region where you are based.

Be Very Particular About your Inventory

Although the possibilities are limitless when it comes to what you can sell on Amazon, when it comes to starting an Amazon business on a budget, these possibilities do get a bit restricted. When deciding on what you want to sell as a product, you have to be quite selective when you don’t have a ton of money to fall back on.

Here are some key factors that you should think about when deciding on the product that you want to sell:

• Size: The size of your product should not be too large. It should be able to fit in a shoebox at the maximum. Not only will this cut down on manufacturing costs but it will also save you a ton in shipping costs.
• Weight: The same idea as to when we were thinking about size; Your product should be fairly lightweight because if it is heavy, it will drive up shipping costs.
• Usability: Try to go for a product or products that are fairly regularly used. Try and avoid specific niches of items or items that are one-and-done.
• Seasonality: We highly recommend that you stay away from products that are seasonal in nature. Always try and go for products that can be sold to the public all-year-round.
• Durability: We recommend that you don’t go for products that are fragile in nature. These products have a high risk of getting damaged during shipping which can cause huge losses and can be catastrophic for your business. Always go for products that are fairly sturdy and can take being tossed around during shipping without being damaged.
• Category: Some categories such as electronics are much more competitive than others. You’re going to need a lot of money to stand out as a seller in categories like these so we recommend that you avoid them.

Cross-Referencing Selling and Cost Prices

Once you’ve decided upon what you want your product to be, you’re going to want to go on Alibaba and cross-reference selling prices with the average cost prices.

Performing cross-reference checks like these are very important during your product research phase as they will allow you to paint an accurate picture in regards to what your profit margins may look like. When you’re launching an Amazon business on a budget, your initial batch tends to be a total of anywhere between 250 – 500 items and performing these checks will help you calculate approximately how much the cost of that will be.

Utilizing the Amazon FBA Calculator

The Amazon FBA Calculator is a free tool that you should absolutely utilize for every product idea that you have before you invest in it. It enables you to get a decently accurate idea of the amount of revenue you can expect to make from whatever your product idea is. It works by allowing you to input certain data about a product that you are looking to sell and it also allows you to input the cost price of the product. All of this data is then collected and processed and as a result, you are able to see the costs that come into every single sale that you will make.

An important thing to note is that when the Amazon FBA calculator asks you to input the ‘Cost of Product’, it’s a good idea to head over to Alibaba and look at different listings of the product to see much it’s selling for. In order to be safe, you should always input the highest cost price you can find on Alibaba into the Amazon FBA calculator.

Avoid Competing with Big Brands

This is fairly obvious but we feel it’s still important to state that you should avoid trying to sell any products that are already being dominated by certain big brands that you can’t realistically compete with. Some examples of these are Adidas in clothing or Converse or Vans in shoes. No consumer is going to want to try out a product from a new and small business when they can reliably get a high-grade product from a company that has been an established name in the industry for years.

Hence, it’s a good idea to have a product in a category where there’s no such giant that you have to compete with.

Ordering a Sample from Your Supplier

Once you’ve chosen a supplier on Alibaba or anywhere else, you’re going to want to ask them for a sample of the product. It’s highly important that you don’t skip this step. It’s vital that you inspect the product yourself before it is shipped out to consumers. Just imagine if you skip this step because you think that the product looks satisfactory in the pictures provided by the supplier but once your customers get it, the product is, in fact, of very low quality. This will drive the ratings of your Amazon business to the ground and will most likely result in you having to shut it down.

A great tip when ordering a sample from your supplier is to first settle on the product branding and logo and then have the sample shipped out to you with all of the complete branding and graphics on it. That way you won’t have to ship out a second sample with the branding because you’d received a plain sample of the product before. It will save you a lot of time and money.

Some things to keep an eye out for once you receive your sample is its size, weight, design and overall quality. Make sure that your branding is properly pasted onto the product and that it won’t come off easily. Look, test and inspect every aspect of your product as this is absolutely vital in ensuring that your customers receive a product that they are pleased with.

Negotiate Smaller MOQs with Your Supplier

It’s important to know about a supplier’s MOQ before you order a sample from them. MOQ stands for the Minimum Order Quantity of a supplier. For example, a certain supplier may have a MOQ of 1500 units in place for his items. This means that you’ll have to order a minimum of 1500 items if you want to place an order with that supplier at all.

We realize that this sounds quite steep and ridiculous and we agree. That’s why we recommend that you reach out and contact your supplier so that you can negotiate with them to bring their MOQ down. Always approach them with a professional attitude and let them know what your strategic business needs and wants are. Don’t be afraid to stand your ground as that’s the crux of how financial dealings operate.

While trying to get a supplier to lower their MOQ on your first shipment, you have to give them some guarantee that you are serious about your order and that they’re not just wasting their time. One way to do this is to tell them that you want to inspect the quality of the product as it is your first order and also, give them an estimate of how many units you will expect to order from them over the course of the year. This estimate will be based on all the prior product research you’ve performed up to that point.

Make an Effort to Minimize Your Cost-Per-Click (CPC)

Your Cost-Per-Click refers to your total expenditure on ads divided by the total number of clicks on that ad. As you can probably tell, minimizing your CPC can have a huge impact in not only keeping your Amazon business afloat but to help it rise exponentially.

One of the most common ways in which you can minimize your CPC is through making use of negative keywords. Negative keywords allow you to control what specific search terms your ads should NOT be shown for. This helps improve your profitability tenfold as you are able to fine-tune and control your ads so they don’t get displayed to irrelevant people with whom they will not resonate. It’s a good idea to add negative keywords to your advertising campaigns from the very start as this will help you filter out irrelevant searches so your money is not wasted on them.

The second way of minimizing your CPC is by isolating your search terms. Here’s an example: as a seller, if you’re bidding on “cute shoes” as a broad/phrase match keyword, there is a chance that Amazon may show your product to a customer who was searching for “cute shoes for dogs”. This would obviously not result in a sale as your product is completely different from what the customer was looking for. You can stop this from happening by converting search terms into Exact Match keywords. However, you should be wary of what search terms you convert into Exact Match keywords because, in some cases, you may actually benefit from certain search terms not being Exact Match keywords.

One more way of minimizing your CPC is by focusing on your bids and managing them effectively. Though this may seem fairly obvious but a lot of advertisers and sellers on Amazon tend to underestimate how complex bidding can be.

Additional Costs to Keep in Mind

It’s highly important that you leave some room in your budget for miscellaneous costs such as your Amazon account, storage and shipping costs, branding and logo design costs and advertising costs.

With a tight budget, it’s important that you do your research thoroughly before you attempt to set up and get your business off the ground. It’s vital that you don’t spend too much time or money on things like a brand logo, identity or special packaging. All of this can come later once you’ve gotten your feet off the ground and once your business is starting to gain some traction. Initially, you should focus on your product and your brand’s discoverability and prominence online.

You can boost your brand’s prominence in a number of ways such as by building a social media presence, setting up an email campaign, identifying effective keywords and optimizing your product listings.

Once your business starts attracting customers and making sales, you can take all the money you get from your sales and re-invest it into your business such as by placing bigger orders to your supplier. This can help cut down the cost-per-product and thus, help increase your profit margin.

Conclusion

With so many tools at your disposal, it’s now easier than ever for entrepreneurs to get their Amazon businesses started on a tight budget. Though it may seem difficult but with the proper research and the correct approach, it is most certainly possible and also, incredibly rewarding.

Amazon’s FBA business model makes it incredibly easy for you to set up your business and leverage the power of Amazon’s warehousing and fulfillment features so that you can focus on maintaining your brand image and increasing your online prominence and reach. Which is why Amazon will always be the platform of choice instead of say Ebay. But if you still need more convincing on this part, head on over to this article we found extremely informative.