I’ve been at this for over 5 years- 3 of which have been a full time income for me. If I had to start again from scratch, I would take the lessons I’ve learned and do a few things differently. Here are my Top 10 (in no particular order). I hope they help you in your journey!
1. Fulfill EVERYTHING through Amazon.
When I was starting out, I fulfilled EVERYTHING myself. This was ok when I only had a few products, but there are SO many advantages of Fulfillment by Amazon. This topic deserves a post of it’s own (and I’ll get to that in the future…) The long and short of it though is that it saves time (and in the long run, money as well) and prevents me from having to even touch the inventory- creating a hands-free and more passive income. This has been one of the most helpful decisions I’ve made for this business! If I had to start over, I would have done this from the beginning. Since this was an “afterthought”, I’ve spent a great deal of time transporting inventory from my house to Amazon’s warehouses. I am still working at recovering my space. If you’re on the fence about this and would like to start with less risk, go ahead and fulfill a few items out of your own space, but do yourself a favor and switch to FBA ASAP! You’ll be glad you did
2. Don’t Pay Tax (sales tax that is!)
Oh how I wish I would have known that I was not responsible for the tax on items I bought locally early on! I paid SO much sales tax my first year because I just didn’t know! It is quite easy to get tax exempt status (and if you’re a legitimate business, you already have this status- you just need a simple form from your state). The form you need varies from state to state and sometimes city to city, but if you call your county clerks office, they will direct you to what you need (tell them you are a retailer and need a use tax form for tax exempt status)
3. Save on Income Tax/Hire an Accountant
When your business gets to the point that you’re making a sizable income, you’ll want to hire a professional to help with taxes. My first year in business, I was set up as a DBA which was fine before I started making a decent income. However, when I hit 6 figures, I realized this really hurt me from a tax standpoint since the IRS sees all of that money as personal income (when set up as a DBA). My accountant helped me set up an LLC (with help from an attorney- which now can be done fairly easily and inexpensively yourself with a service like legalzoom.com). This helped show the IRS that the business and personal income were separate. I essentially “pay myself a check” each month out of “the business.” Of course I still get taxed on personal AND business, but it saves some money. It’s worth setting up an LLC when you get to this point. Talk to an accountant for advice on your situation.
4. Know What to Sell
Again, this could be an entire post (and we’ll get to that in the future also!) Let’s just say though this is one of the most single important decisions you’ll make about your business. Now, selling arbitrage (buy low sell high) and media has the advantages of being low risk (not buying in large quantities) so it is not AS important as when you move into wholesale and private labeling (for more on these topics, see my free guide- available for download below). I started off selling a LOT of electronics (and still do sell some). The problem with highly technical items is that you can expect a LOT of returns- people simply don’t want to take the time to understand how to use them. They are also usually expensive and the price deteriorates quickly (also expect heavy competition). As I branch out into new products, I use the following criteria to guide my decision:
b. Specialized niche (can’t be easily purchased at a store like Walmart)
c. Easy to use/enjoy to reduce returns and eliminate the need for heavy customer support (DVDs are a prime example)
d. Not too expensive, not to cheap ($15-$70 retail is a good range)
e. Lightweight/relatively small- ships easily
5. Build a Brand Early
A brand can take a LONG time to build (and gain a loyal following). There were so many products I sold early on that were “brand friendly” but I never branded them. I didn’t even consider it since the generic or “no name brand” versions were selling so well. As soon as you hit a product that you can buy wholesale that is doing WELL, consider building a brand around the product!
As I mentioned in my free guide (available for download below) my business almost failed due to focusing on one or two products! Diversifying is one of the most important things in business. This is a key reason I suggest selling DVDs, as well as other merchandise that you can get a lot of variety in small quantities while you build your brand (where you’ll ultimately order larger quantities of the same product.) Remember that it’s not just about diversifying products, but also price! You may have an item that will make you hundreds of dollars, but you’ll only sell them once every couple months while other products will sell day after day, but only make a couple dollars. Variety is the key!
7. Test the Market
If I had to do it all over again, I would not buy thousands of a single product just because I thought it was “cool.” What you think about a product DOES NOT MATTER. What matters is that it sells! Do yourself a favor next time you have an opportunity like this and buy 5! List them, see if they sell and how quickly. THEN make a determination of whether or not you should buy more (and how many!)
8. Don’t touch Inventory
Passive Income… I remember being introduced to this principle at one of the many multi-level marketing schemes I fell for. The idea was so cool: “money while you sleep.” Although the concept of “passive income” is a bit of a fantasy (at least the way it’s presented by some- “set it and forget it”), I do make money every single night while I’m sleeping. Of course, I put work into making that money, but these days I put much less of my own energy into making the money than I used to! One MAJOR change I’ve made is to have suppliers ship directly to Amazon. I used to get everything shipped to my house. I would re-pack it, sticker it and then send it out to Amazon. I now wonder WHY I spent so much time and energy (and money!) doing this when a direct route to Amazon is far more effective. It saves time, money AND stress.
9. Outsource Earlier
Please understand this: Nothing should be outsourced until you have a working system that you are doing yourself! Early on in my quests for “easy passive income” I would hire people to design “money making websites.” The only person who made any money off those sites were the people I paid to make them and the people I paid to “promote” them! The truth is, I had not MADE a website myself, so I did not have a system to teach anyone. Don’t fall for anyone who tells you that all you need to do is pay them and they will make you money! If this were true, why wouldn’t they just make the money for themselves? Outsourcing is great, however, when you have a working system in place that can be taught to another person. This will free up your time to start working on other aspects of your business. If I had to do it all again, I would NOT have outsourced anything at the beginning- I needed to learn it first, but I would have definitely outsourced some tasks at least a year before I finally did. The amazing income was great, but when I was doing nothing but working, the income came at a cost- to me and to my family. Outsource as soon as you’re overworking yourself and you have a system in place that can be taught to someone else!
10. Utilize Multichannel Fulfillment
I started by talking about Amazon FBA and I will end with it because it is SO powerful. For a while, I was fulfilling most Amazon orders through FBA, but still fulfilling my website, and Ebay orders myself all in the name of “saving money.” In reality, this makes little sense from a productivity or financial standpoint. Multichannel fulfillment does not cost much more, in most cases, than fulfilling orders myself- in many cases, it is the same or even less. Go ahead and go on the road with your laptop and let Amazon handle the “dirty work” for you!
In another 5 years, I will no doubt have a whole new list of 10 items I would have done differently “5 years ago”. This is the nature of the business. Nothing is static. Everything changes. As long as you learn from mistakes, grow and adapt, you’re bound to succeed. I hope this was helpful for you!
For more details on the steps that work for me, please fill in your name and email address below and download my free guide to get started!