How To Start A Business on Amazon With Less Budget: The Ultimate Guide

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You want to start a business on Amazon, but you lack the necessary starting capital? You don't have enough money to place your first order or to advertise your products?

But you want to start a business on Amazon?

If you're willing to work hard for it, then your starting capital won't matter.

In this article, you will learn how to start a business on Amazon with less budget and earn thousands of dollars.

Of course, you can't start selling products on Amazon with $0. After all, you have to buy goods and for that you naturally need capital.

But you don't need an investor or a huge fortune to start. In this article, I'll explain how you can start a business on Amazon with about $1,800.

Most people out there don't have tens of thousands of dollars available to start a business.

However, some people have done it in the past and started their own business. You can do that too (and start a business on Amazon).

These are the contents of this guide:

  • Why you should start a business on Amazon
  • How much starting capital do you need?
  • How to lower starting capital
  • A detailed calculation of costs
  • How to sell your products faster

Let's dive right in to it.

Why You Should Start A Business On Amazon

There are many reasons why you should start a business on Amazon. However, the most important reason is quite simple: you can make money on Amazon. Even lots of money.

Let's take a look at the four largest technology companies in the world:

Apple, Microsoft, Google and Amazon

Amazon has the most potential among these four large technology companies. And that's the second reason why you should start a business on Amazon.

You should invest in Amazon. 

Here you can see the approximate development of Amazon (2004-today)

Here you can see a great infographic I have created about some amazing Amazon facts:

Amazon Business

Share this Image On Your Site

How much does Amazon FBA cost?

Of course, if you have more starting capital, it is always better. That's because you have the opportunity to invest in high-priced categories.

Not all sellers on Amazon have a lot of money at their disposal. Not even those who have been there for several years.

So not every seller can purchase expensive products. For this reason, most sellers buy low-price products aka. the garlic press.

Let's have a look at the price of a usual garlic press on Alibaba.

You can buy a garlic press for $0.5.

Bildschirmfoto 2019 11 23 um 00.47.25


By negotiating, you can probably get a lower price. You may end up paying $0.3 for a garlic press with no delivery costs.

This is the strategy most sellers are doing when they start a business on Amazon.

And that's also the reason why so many fail or don't make any profit. Most sellers want to sell in niches where purchase prices are less than $2.

But you will automatically have less competition when you enter a niche where the purchase price of a product starts at $10.

Of course, it's even better to get into a niche where the purchase price starts at $20.

The higher the purchase price, the better.

I've written an article explaining this strategy in detail (How To Find Products To Sell On Amazon).

However, you don't have enough starting capital, otherwise you wouldn't read this article.

So you have to find a strategy with which you can enter a less competitive niche with a limited budget. Because only then can you be successful.

However, I recommend a starting capital of $2000 dollars. You can save this amount over a certain period of time.

Lower your Amazon FBA Costs

One of the biggest mistakes start-ups make again and again is to offer their products on a small market.

Instead, they should offer their products on many different markets.

If entrepreneurs would offer their products on several markets, probably more start-ups would be successfull.

But what does this mean?

What I'm trying to tell you is that you should do it just like most start-ups that focus only on one market.

You're probably thinking that all this doesn't make any sense.

But that's not the case.

Selling on Amazon is another task than running a start-up-business, because you are very likely to sell products that are already want to buy.

So why should you focus on a specific market?

Because it is much cheaper.

I want to apply this theory not only to the sale of your products, but also to the purchase.

Most Amazon sellers buy their goods from overseas, from China, to be exact. If you buy your products from China, there are a lot of additional administrative costs.

So if you don't have a lot of starting capital, you should buy your products in the country you live in.

In the beginning, you should also limit your business to one Amazon marketplace, if you sell your products on many different marketplaces, then you will have to pay for this.

Keep in mind that you should concentrate on one country when buying and selling your products.

Amazon FBA Requirements: What You Really Need

There is a lot of discussion on the Internet about what it takes to start a business on Amazon.

Most of the time I think not necessary, not necessary, not necessary.

In this section, I will explain to you what you really need to sell on Amazon. You don't need a graphic designer or an agent to test your samples for you.

That's all unnecessary.

To start a business on Amazon, you only need:

  • $1500-$2000 Budget
  • A bank account
  • Internet
  • Company
  • Credit Card

Find Amazon FBA Products To Start A Business On Amazon

First, you need to find a product that you can sell on Amazon. Your product is the backbone of your business and should be chosen with care.

For this task, you need an Amazon Seller Tool. In my opinion, such a tool is indispensable for your success.

I recommend you to use Helium 10 or Jungle Scout.

While Helium 10 is an incredibly powerful Amazon tool that you should definitely use as soon as you have more money available, Jungle Scout is a cheaper alternative.

I've written an article here about the best Amazon Seller tools.

Once you have a tool (in this case Jungle Scout, because your budget is limited) you can start looking for products.

Below I'll explain what features products should have.

Sell Products That Are Light And Small

You should focus on products that are light and small. This is because you have to pay less for such products than for products that are big and heavy.

In addition, if you buy items that are small and light, your shipping costs will be greatly reduced.

If you less budget, try turning every screw to reduce your costs. The size and weight of your items are options you need to take care of first.

Avoid Niches Where Big Brands Sell

One things for sure. If you enter a niche where only big brands offer their products, you will definitely have no chance.

That's not necessarily because, unlike you, big brands have an infinite budget and can advertise their products much better on Amazon than you can.

It's because people usually prefer brands, so you don't stand a chance. Avoid niches where many brands offer their products.

Avoid Seasonal Products

Avoid seasonal products. A typical example of a seasonal product is the Fidget Spinner.

It had a big boom in 2017.

Then there was a big breakdown.

Seasonal products are too risky.

For your first product that you want to sell on Amazon, you should focus on a safe product that sells constantly!

Sell Products Your Customers Need To Buy Several Times A Year

By selling products that your customers have to buy several times a year, you generate a huge advantage.

In my experience, these products make 10 times as much sales as normal products. If it works, then sell products that are needed several times a year by your customers.

Use the Amazon FBA Calculator

If you want to sell on Amazon, you have to pay fees to Amazon. If you use Amazon's FBA service, you will have to pay even more for the logistics services.

Learn more about Amazon FBA fees here.

These fees reduce your profit. If you sell products that don't have a high selling price, you may even not be able to make any profit.

Therefore, you should use this Amazon FBA calculator to calculate your margin. I recommend that you only sell items that have an average margin of 20%.

Focus On Niches With Low Competition

Like I said, you have to stay away from a lot of competition.

But you can't go into niches where the products have a very high price, because you don't have a big budget.

How should you proceed?

Pay attention to the number of reviews

Make sure that the articles in your niche have a few amount of reviews. People prefer to buy products that have many reviews because they like to rely on the decisions of others.

In a niche where many articles have hundreds of reviews, it is very difficult to establish a new product.

Watch out for the rating

Next, you should take a look at the rating. Do the products of your competition have a good or a bad rating?

If most products have a five-star rating or almost a five-star rating, I strongly advise against entering this niche.

It is better if the articles have a bad rating. This shows that the customers are dissatisfied, so it will be easier for you to convince the customers of your product.

To develop a better product, proceed as follows:

  1. You read through the bad reviews of your competitors
  2. You make up a list of the most common problems
  3. Try to discuss and solve these problems with your supplier.
  4. Bring a better product to market

With this strategy, you will be able to beat your competitors over a longer period of time.

Search for products with few pictures

On Amazon, you can upload up to nine pictures of your article. But most products have only seven images, and that's also a lot.

If a retailer has uploaded nine images to Amazon, you can be sure that that retailer has optimized its entire Amazon listing.

This, in turn, says something about the activity of a retailer. A merchant who has optimized his listing will be very likely to be active on Amazon.

Search for niches with less active sellers. There are a few tricks you can use to find such niches.

For example with Helium 10:

Helium 10 Black Box Dashboard 

Pay attention to the number of sellers in a niche

The number of sellers in a niche is an indicator of competition.

If an item is already being offered by hundreds of merchants, then search further.

Helium 10 Magnet gives you a good overview of the number of dealers for a product, or the number of dealers for a specific keyword.

Helium 10 Magnet 3


However, you can also manually determine the number of merchants or the number of competing products.

Proceed as follows:

  1. Search for relevant keywords
  2. Enter these relevant keywords into Amazon
  3. Check the number of search results

With Helium 10 Cerebro you can check which products are indexed for which keywords and what ranking these products have.

You can even narrow down the ranking.

Helium 10 Cerebro Organic Rank

Conclusion

Now you know what to look for during your product research. In fact, you are looking for products that have the following characteristics:

  • Light and small products
  • Private Label Products
  • Niches with low competition
  • Avoid seasonal products
  • Products that are required several times a year

So far, you've costs of $50 for Jungle Scout. In the next section, you'll learn how you can continue to reduce your costs.

Source Products For Amazon FBA

Have you found a suitable Amazon FBA product? Now, it is time to order this product and ship it to an Amazon department store.

In the last section of this article, I told you that you should order your products from a local supplier.

In fact, this has three advantages:

  • Less delivery costs
  • Lower administrative costs
  • More flexibility

To illustrate the strategies in this article, we will work with Alibaba. But you can also apply the learned strategies to your local supplier.

Purchase Products On Alibaba

First, go to Alibaba and search for your desired product. For example, let's say you want to sell drinking bottles.

You enter "Drinking Bottles" in the Alibaba search bar.

A variety of available products and merchants will appear. Below you can see the average selling price and the average delivery quantity.

You can narrow down your results by using filters.

Pick out a few items and message the manufacturers. Always be professional, serious and show the supplier that you know what you want.

Here is a template you can use.

Negotiate Minimum Order Quantity

A good way to negotiate the MQO is to tell the supplier that you want to test the quality of the product for the first order, and to let them know how much you are going to order next year.

I wouldn't pose as a private label salesman either, but would present myself as a representative of a large E-Commerce company that has to comply with its regulations.

There are countless ways you can negotiate with your manufacturer on Alibaba. Here you can find a good article about it.

If you order your products locally, MOQ won't be a big problem.

A good alternative is Alieexpress. On Aliexpress you can order smaller quantities. But be aware that the cost of the product per unit is often much higher. Try to find a good balance to avoid wasting money.

Order A Sample

Once you have found a supplier on Alibaba, you have to order a sample. The sample is usually sent by air freight and costs money.

Many retailers order two or three samples of their product to make sure the product is of the right quality and design.

Ordering a sample is very important.

Suppose you place your order of 500 units. If in the end the quality, colour and print of your logo doesn't fit, it can quickly become expensive.

Try to reduce your costs by ordering only one sample.

Before you do that, take a look at the quality and clarify any open questions with your manufacturer.

Above all, you should make sure that your branding (i.e. the imprint of your logo) is already present on the first sample.

If not, then you have to order a second sample and that will cost you money again.

Amazon FBA Costs: A Detailed Cost Calculation

Okay, in the article so far, we've looked at what tricks you can use to reduce your costs and what features you need to look out for in your products.

In this article, we will break down the individual costs and analyze how much seed capital you really need.

You'll also get some helpful tips on how to lower your costs even further.

Company foundation:

You have to register your company, otherwise you can't sell on Amazon. Depending on which country you come from and where you live, it will cost you $30-$50.

Amazon Seller Tool:

For beginners, I would recommend Jungle Scout because it's cheaper.

You can choose between the Jungle Scout, Jungle Scout & Extension or Extension package.

For beginners, the Jungle Scout package is the best choice for $49 per month.

Sample:

As already mentioned you have to order a sample of your product. Try to order only a sample that already has your design and logo on it.

The price including air freight is about $50.

Graphic design:

You should give your product an individual design. If you are fit to do it yourself, you can do it yourself.

In this case, the cost is $0.

Otherwise you need a graphic designer. The cost is about $50.

Product photos:

Do you or one of your friends have a good camera? Do any of you enjoy taking photos?

Then you can do it yourself. But always make sure that the quality of your product photos is right.

That's really important.

Otherwise, you can hire a professional photographer. The costs are about $150.

Logo:

Of course, you need a logo for your brand. I recommend that you simply use Fiverr here.

The costs are about $15.

Products (incl. tax excl. delivery):

The production costs should be about $2 per unit.

Minimum order:

Try to reduce the minimum order quantity to 250 units. This is probably the minimum quantity you can negotiate with a supplier.

Some manufacturers on Alibaba require a minimum order of 500 units.

Delivery:

Your sample will be shipped by air freight. However, you should have your goods delivered by sea freight.

The average cost is $2 per unit.

Amazon fees:

The fees depend on your Amazon Seller account and your merchant form (FBM/FBA).

There are two types of Amazon Seller accounts.

Basic account

  • No monthly basic fee
  • $1 per item + Percentage Sales Fees (Amazon FBA Fees)

Professional seller account

  • Monthly subscription fee of $39.99
  • Percentage sales fees (Amazon FBA fees)

I would strongly recommend that you opt directly for the professional seller account.

Amazon PPC:

To sell your products quickly after launch, you need to place ads.

That's basically the most important thing, because if nobody sees your products, then you won't sell anything.

If your product is better than your competitors', then you will get better organic rankings on Amazon over a longer period of time.

For this you have to a) sell more than your competitors and b) have better ratings.

In the beginning, you have to invest in advertisements so that customers will be aware of your product at all.

For advertisements you should definitely budget enough.

Summary

Company Setup $50
Jungle Scout $49
Sample $50
Graphic Design $50
Photos $150
Logo $15
Products $2 x 250 = $500
Shipping $2 x 250 = $500
Amazon Fees $39.99
Storage $0.55 x 250 = $137.5
Amazon PPC $200
Total $1.741,49


Total is $1,741.49. With a starting capital of $2000, you have a buffer of $258.51.

Optimize Your Amazon Listing

To increase your organic traffic and sales, you should optimize your Amazon listing.

Especially if your competitors have products with an inferior listing, then you can achieve good rankings and make more sales through optimization.

When optimizing, you should first ask yourself what information your customers are looking for.

Think about exactly what your customers are looking for and what they want.

In addition, you should pay attention to the following points:

  • content
  • pictures
  • keywords
  • Questions & Answers
  • reviews

I wrote a detailed article about how you can optimize your Amazon listing.

Good tools to optimize your listing are Helium 10 Magent and Helium 10 Cerebro.

Sell Your FBA Products To Friends

If you have a small amount of strong capital at your disposal, you have to sell your products to your friends.

Of course, you don't want to force products on your friends that they don't need. But for those who are interested, you can simply offer them a voucher code with which they can get your product at the purchase price, for example.

So you don't make a profit by selling your items to your friends, but you make an important difference.

Your organic search results improve enormously.

Amazon's search algorithm is designed to put the products that sell best at the top.

So if your products sell better than your competitors over a period of time, you'll sooner or later be ranked first in search results.

Until then, you need to invest money in Amazon PPC ads. Even if you sell products via your ads, your organic ranking increases.

This is how Amazon works.

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