We all know that “profit” depends on several things – the biggest is (of course) what you paid for the products you sell.
The profit is always really made at the time of purchase. You make “bad” buys (I’ve made several) and you won’t see profits.
You also need to take into account the expenses that you “decide” to accept into your business model.
For instance – I have expenses for:
FBAPower and FBA Scout – monthly fee.
I’ve purchased a Dymo printer and a scanner for my computer. One time charge.
I pay for several monthly memberships to gain extra insight for special deals, hot product trends and the ability to ask questions of FBA sellers who have been at this “game” a very long time.
I’m also a Pro Merchant on Amazon – which cost’s about $40 bucks a month.
I also need to buy supplies – boxes, labels, tape etc.
And you must remember to account for gas!
If you are using your credit card to make inventory purchases – you must account for finance charges.
When you see me talk about buying products – I always look for products that I can “triple” my costs (at least). This helps to make sure my Amazon fees and postage are covered and I can still make “at least” 100% ROI (Return on investment).
The New FBA Scout Can Help Calculate ROI
The new “Updated” version of FBA Scout for iPhone and Android phones… is going to help make shopping so much easier!
I just updated today!
We used to see something like this:
Now – we can see what the “NET” Payout amount will be if we sell our product at the same price (I’ve circled the Net Prices):
The Net Payout amount is the exact payout you will receive if you sold this item for the price listed in the FBA column. This is calculated using the category specific commission, weight based fees, and all FBA fees.
If I purchased the above Toy Story product – (New Condition) and offered it on Amazon for $12.88 – I know I will get $9.49 from Amazon when it sells.
I wouldn’t “Pay” to buy this product more than $4.50 (including tax and shipping) for this product . This would ensure that I would double my money after fees.
And… it gives me a tiny buffer to “play” with the price. The buffer is also a great addition to help me offset the “expenses” (monthly and one time) I listed above.
If you have ever worked in Retail – where you heard the term “keystone” in regards to pricing.
Keystone = A pricing method of marking merchandise for resell to an amount that is double the wholesale price.
When I owned my own retail store we used a Keystone “+” method. This means that you would double the price and then add an additional % to cover the cost of store expenses. This is usually used for lower volume stores… Walmart would not use this type of pricing method.
Want to know when you “know” you are profitable?
When you have to pay income taxes! 🙂
Make sure you keep track of all the things you can “write off”. Plus – Remember you still have to take an accurate inventory count on December 31’st of each year. This inventory count is based on the “cost” of the product – so keep track of what you paid for your products.
Past experience shows that inventory is a pain in the neck… at least it only happens once a year.
I’m here for ya,
p.s. I started selling on Amazon in May of 2011 with just a test of a few products and was blown away by my success right off the bat. – Of course – I’ve now had some failures to match up with the successful parts and I’ll be sharing all of that with you.
You can read about my journey so far in this 54 page report:
Click Here ==>>Amazon Arbitrage