Fulfillment by Amazon businesses (FBA) are becoming increasingly popular as our business world moves more and more toward e-commerce models or adapts their existing business to add e-commerce solutions for the ever-growing community of online shoppers. If you are running an FBA business, you have probably realized that it is a competitive marketplace and figuring out how to grow and carve out your piece of the marketplace is a challenge. Here are a few things to consider.
Capital is Key
If you are thinking of starting an FBA business, or already have a fledgling one, you’ll want to ensure you have a healthy amount of capital in the bank. Costs for everything are increasing. You may have to deal with rising costs due to inflation, or increased costs, for shipping/transportation. The base costs for most things rose in 2021, so if you are a manufacturer of a good, the chances are your overhead went up or you’ve faced some difficulties sourcing materials due to shipping challenges and delays thank to the pandemic. Plan to have double the amount of capital for your business than what you would have needed in 2019. You also must factor in upfront costs, such as advertising, marketing swag, packaging costs, base inventory, etc. These are all things you need to plan out in advance in order to figure out your base costs.
The easiest way to find capital is to ask for it from people you know, however, this is something you should do as a professional. Prepare a business plan and have statistics and financial data to offer. Do a market analysis and explain to potential investors how you plan to make your business unique and therefore successful. Make them feel confident that they are investing their money into something that will pay them back in the long run. It’s difficult to mix business and family, or business and friends, so if you go this route you need to make people feel secure and like they aren’t making a risky investment.
You can also look at the options your bank may offer. A small business loan may be a viable option, or depending on the amount of capital you require and the timeline you expect to break even on and begin making a profit, you may be able to carry that temporary debt on a credit card. Remember, however, that credit cards come with steep interest rates, so if you are anticipating carrying your debt for more than a couple of months, this may not be the most fiscally responsible choice.
Leveraging Amazon for Capital
Amazon has a program that lends capital to FBA businesses, but it isn’t available to everyone. If your business qualifies for this lending, it is usually at a lower interest rate than a credit card, and the money is dedicated to your FBA business to grow inventory, etc. A percentage of your sales is syphoned off to pay back the loan directly from your Amazon seller account. This is a fantastic option if you can get it because the loan and payments essentially take care of themselves, so long as you are making sales!
If you are new to business or the world of FBA business, it’s important to be focused and highly organized when it comes to your costs and budget. Map out everything you need to pay for, from inventory to shipping and banking fees. Once you do that you can determine your retail prices and figure out the amount of capital required to begin and get growing.
Contact Wizards of Ecom to learn more about growing your online business.