[Morning y’all! Recently found out that a former personal finance blogger sold his Amazon FBA business for roughly $5,000,000 (!) after starting it only 5 years ago (!!), so if you’ve ever been interested in running an FBA, this post is for you! From Jon Elder who now helps others manage their Amazon businesses over at BlackLabelAdvisor.com.]
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It is such an honor to write my story for J. Money! He helped me out immensely when I ran a blog back in the day, and graciously advised me on how to gain more readers. Happy to share my tips and story to his audience now!
In 2014, I was working at my corporate job and wanted more out of life. I wanted something of my own. In a sense, I wanted financial freedom.
This is where my Amazon FBA business was born. I remember it like it was yesterday. I was on my computer researching business ideas and everyone kept talking about this new opportunity called FBA (“Fulfillment By Amazon”).
At the time, I had always assumed that everything on Amazon.com was sold by, well, Amazon. WRONG! As it turned out, the vast majority of items sold on Amazon are sold by small businesses run by everyone from young entrepreneurs to families!
In comes the golf tool. Yes, that’s right, a golf tool. My idea was that this could be a test run at the business and see where it went. After some digging, I realized that there were very few golf tool sellers on Amazon so I immediately went to work finding a supplier overseas. After some negotiating, product testing, and landing my preferred factory, I placed my first order and had it shipped by airplane to an Amazon warehouse where it would be sold to my first customer!
In my head, I assumed it would take weeks, maybe months for my product to be found. I was dead wrong! Within hours, I made my first sale and I was floored. I drove home way too fast, and excitedly shared the news with my wife. “Someone just bought a golf tool from me, can you believe it?!”
This ignited a passion in my gut like you wouldn’t believe. I knew I was onto something with this business. As the sales grew, I expanded the color offerings and soon became the #1 seller of golf tools on Amazon! It was surreal to see the “#1 seller” badge on our golf tool listing.
As time went on (while also working at my corporate job), I moonlighted at this and started expanding into new products and categories on Amazon. Since I wasn’t paying myself any money yet, all the profits continued to be funneled back into the business so I could buy larger and larger purchase orders to keep up with my ever expanding sales.
Two years go by and I was swamped. Between a baby in the house, moving to a new state, starting a new job, and running a booming Amazon business, there never seemed to be enough time in the day. This is when I was at a crossroads. Continue this hectic lifestyle or go ALL IN? For me, the choice was easy. I gave my employer my two week notice and focused all my energy on the Amazon business.
Boy, what a good decision that was! With my newfound time, I was able to dedicate sections of my time to R&D, launch new products quicker, and ensure each product listing was optimized for maximum exposure. Soon, I was doing millions in revenue each year. I still look back on these numbers and am shocked. The business was booming and sales grew at 100% year over year.
So, what were some keys to this success?
Unlike many fake Amazon gurus out there, my strategy was very different than what you see online these days. When I thought about a product, I asked myself, “am I turning this category on its head and delivering excellence to the customer?”
This was the driving force that lead to product innovation and setting my products apart from the competition. Nothing average. Be the best. It seems simple but it takes a lot of hard work and is worth it. Once you see raving reviews come in, you realize you made a difference in someone’s life!
The second element that truly set my business apart from millions of others is customer service. From the very beginning, I modeled my customer service after Zappos. If you’re not aware, their customer service staff go above and beyond to make your day, even if it means a cost to them financially. They get it. They know that if they take a hit with one order but hook you for life, they will make a killing on you over the years.
So, this is how I ran my business. Even down to questionable customers who I knew were most likely scamming me. I went out of my way to make them happy. Maybe I made them feel guilty? Who knows. But as time went on, I’d like to believe some of my customers shared my products with their friends and family or on social media because of the A+ experience they had with me.
My Amazon FBA journey took a good turn in 2019 when I started to think about selling my business. I think every business owner thinks about the end goal. For me, it was to build up a strong business, create an attractive asset, and sell to someone for a pretty penny. I did just that and sold for $5 Million to a private buyer.
So, there you have it. I started with zero sales in 2014. Grew it to over $10 million in sales within 5 years, and sold the business for 7 figures. It’s a beautiful story and one that can be repeated if you put the customer first and are willing to spend the time to make your product truly the best.
Questions? Happy to answer them below!
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I took him up on that last line there and peppered him with a half a dozen questions after being enthralled by his story here ;) I’ve known John for almost a decade now and had no idea he was building stuff outside the personal finance blogging world!
Here’s our Q&A:
This was great, man! I’m sure it wasn’t ALL rainbows and sunshine though – what were some of the challenges of running the biz?
Forecasting inventory needs each month was ALWAYS a challenge. The biggest challenge of all was knowing what to order, and how much, over the Spring to ensure stock levels for Prime Day over summer, and then what to purchase over summer for Black Friday and Christmas sales. Tracking daily sales and looking at historical trends, and then adding a % for all future orders was key to my success.
Challenge #2: There is always a hungry competitor trying to take away your sales, so staying on top of innovation is huge. The goal is to make your product the VERY best in your category so you maintain your sales when other competitors enter your space. This takes consistent time to refine a product and add elements to truly make it shine.
Challenge #3: Expanding product lines is a real challenge because sometimes a launch can be a flop so great care is needed before spending money on a new idea. Thanks to various software programs and the ability to buy smaller test orders, anyone can overcome this.
What does Amazon charge as far as fees?
This is going to depend on your product category. Amazon has something called a referral fee that is charged just for using their platform. This could be as low as 8% or as high as 20%. The vast majority of product categories are in the 8-15% range.
Amazon also charges FBA and storage fees for using their warehouse and packing/shipping services. These fees will depend on the size and weight of your product. Someone has to pay for those little robots at the Amazon warehouses!
Can you give an idea of your profit vs revenue #’s in general? I know with online products you obviously keep a majority, if not all of it, but obviously $10 Million in revenue is different than $10 Million in profit! (Though still just as sexy sounding!)
Yes, the profit number for any business is a much less sexy number, unfortunately, because that is the revenue number minus product costs, shipping, Amazon fees, software expenses, taxes, and advertising.
For example, in 2018 with a little over $6 million in revenue, the net profit after ALL expenses for my biz was $1.2 million, roughly 20% net profit. Not many businesses exists with this high of a net profit these days! It’s quite extraordinary :)
Is there anything that *can’t* be sold on Amazon? Drugs for example? Haha…
LOL, you can’t sell booze, sculptures, cars, and drugs!
Check out this post for more: What Can’t You Sell on Amazon?
Lastly, how can others get started with FBA if they’re interested? Any books, courses, articles, podcasts, etc you’d recommend?
I love seeing others experience the same success as I did, so I do one-on-one consulting options for people just getting started. I hold your hand and walk you through sourcing, shipping, listing optimization, all the way to your first sale! You can find me over at www.blacklabeladvisor.com or email me at jonelder [at] blacklabeladvisor [dot] com.
If you’re not ready to launch quite yet and want to get more familiar with the Amazon FBA universe, I’d recommend The Rock Your Brand Podcast. You can also learn more about the FBA program directly on Amazon here: https://sell.amazon.com/fulfillment-by-amazon.html
Thanks for taking the time, Jon!
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Fascinating, couple questions:
Were you inspired by the 4 Hour work week? (this seems like a newer take on the model described in that book)
How did you land on golf brushes? Was this a need you had or a product that you found had a weak presence on amazon?
Hi Matt! Those are all great questions. Yes, 4 Hour Workweek was a huge inspiration! It changed my thinking about time and what type of life I wanted. It was a life changer.
Golf brushes was just a product I stumbled upon during my research. I also wanted something really cheap to source (90 cents per brush) since I was brand new at the Amazon business model. I had limited funds at the time so it was a perfect fit. And yes, I noticed that there were just one or two sellers on Amazon and I wasn’t impressed with their listings. I just knew that I could improve upon what I saw and exploit this niche :) It worked as I quickly became the #1 seller of golf brushes on Amazon!
Probably the secret ingredients: little competition, low quality of the current offering and a a very good strategy: to keep the customer excited, since they are the ones who grow our businesses.
Super story. Thanks for sharing it ;)
Anytime Ramona! Yes, I expanded on those things down below in response to another comment from a reader. There is a variety of things to look for when launching a product that’s for sure! Keeping the customer excited and coming back for more is actually the hard part.
I’m glad you enjoyed reading about my story!
Amazing! What platform did he sell his FBA site on?
I think Jon used to run a personal finance site. Can you remind us what it was?
Thanks
Hi Jack! I used the broker firm Website Closers based out of New York. They are the #1 firm to go with for these large e-commerce business deals. It actually took 8 months to sell, a very stressful experience! I had one bank suddenly pull out of the deal on the buyer’s side so we had to start over with a new bank. It was a challenge but the broker got us through it and closed the deal for me :)
And I used to run Free Money Wisdom. I ended up selling this blog to a private equity firm many years ago.
Amazing story! I have a craft business where I sell my products on Etsy. I have been looking at selling on Homemade Amazon but my items are personalized and I am not sure about the return policy on Amazon. I don’t want a bunch of returned personalized tumblers! lol
Hello Lonelle! You’d be surprised at how low return rates are for Amazon customers. They are typically highly educated and value-centric. Expanding onto the Homemade marketplace would be a no brainer for you. Sounds like a fun product!
Wow, what a great success story. A couple of questions floating in my head:
Did most of your successes came from finding niches? How would you go about finding those niches?
Did you design your own products and how would you find a company that would make that product to your specifications?
Thanks for your questions Jerry.
Finding niches is the name of the game but it’s not as hard as people think! Product categories are HUGE and there are ample opportunities everywhere. The key is to go into a category, say like kids toys. Instead of selling junk, truly spend the time to work with a factory and design the best kids toy you’ve ever seen. Research online and go to Target and compare notes. The goal is to always be the best for the customer. Really WOW them. Going about finding them is all about passion. Focus on things you are interested in. Then, utilize software that analyses seller data to see if their revenues are worth pursuing.
Yes, I designed my own products but the product idea was not a brand new item in the market. For example, take the magnetic fridge dry erase board market. You could design a totally unique dry erase magnet with a truly unique design and cool features and that would set you apart but you didn’t reinvent the wheel.
Finding a factory is a BIG challenge and one that I learned to overcome quickly. Your best bet is to utilize a site called Alibaba and research factories that specialize in the product category you are interested in. You would then find three that really stand out and order samples from each factory. Once those sample comes in, you then compare quality and the level of customer service you experienced with each factory. I use my own personal checklist when going through this process. The worst thing you could do is send money to a factory to make 500 units of a product, ship it to Amazon, and then start seeing 1 and 2 star reviews come in. THAT would truly be a nightmare but can be easily avoided if you follow a process.
Hope this answers your questions!
I know I could google it, but what the heck is a golf brush and why is there such a high demans for them?
Hi Angela! Here’s a quick link to a search for “golf brush” on Amazon.com: https://www.amazon.com/s?k=golf+brush&ref=nb_sb_noss_2
Golfers absolutely love these things! I used to golf so I already had an interest in this product. As you can see, there are many customers looking for different kinds of golf brushes! The golf brush is basically a two sided bristle brush with a pick at the end to dig dirt out of clubs and golfing shoes. My factory overseas was actually the supplier for golf accessory products for the PGA tour!
Any thoughts on how to select a product to sell? Seem like there is a vast world out there and difficult to narrow on a product to sell.
THAT is one the most common questions I get believe it or not. There is so much bad information out there from fake “gurus” who dish out nonsense. Really, it comes down to three things. The first is passion. Find a product category you are truly interested in. For example, I have zero interest in women’s makeup, so I wouldn’t even consider entering this space. However, I’ve always been interested in sports so I ended up selling quite a few sports products. This is critical.
Secondly, you need to find an untapped niche. This is the hardest part and requires quite a few hours of research and note taking. The goal is to find a product that has very few competitors allowing you the opportunity to enter the space with an AMAZING product and establish yourself as the authority/leader.
Thirdly, the price point needs to be a minimum of $20 but I’d recommend something more in the $50-$100 range. This type of product price will drastically increase your margins! There is far less competition in higher priced product categories as well.
If you have more questions or would like come consulting, please reach out! I hope this was helpful :)
I’ve seen many posts such as this one, but unfortunately most, if not all of them, lack actual substance and are more-or-less of a ‘I did this, so can you, now enroll in my course.’
I understand you cannot divulge all of your strategies, but was wondering if you could provide at least two concrete examples (it can be anything – sourcing, finding niches, etc) , given that the FBA market has been around for a long time and tons of gurus have educated thousands of other now-gurus.
Hi Jim! Yeah, most gurus are totally fake! They have no idea what they are talking about and scam people all the time. It actually drives me a bit nuts all the nonsense I see online nowadays.
The first example is finding a product. The key is to find something with a nice even spread of sales revenue among a few competitors. This is a green light because it tells you that the sales aren’t going to just one seller. Next would be to examine the competitors and reviews to see if you can solve common problems with their products. Basically, your goal is to launch the best, most innovative product in that category. Sounds simple but this takes hours and hours if research. Very effective though!
Second example is sourcing. Always and I repeat, always connect with three factories for each new product and send some odd ball questions to test their customer service skills. Then always order a final ample of your product and compare quality between them. Whoever gave you the best performance will end up being your factory of choice.
I hope these two examples are helpful! If you’d like to connect more, feel free to reach out.
Yeah, most gurus are totally fake! They have no idea what they are talking about and scam people all the time. It actually drives me a bit nuts all tye nonsense I see online nowadays.
The first example is finding a product. The key is to find something with a nice even spread of sales revenue among a few competitors. This is a green light because it tells you that the sales aren’t going to just one seller. Next would be to examine the competitors and reviews to see if you can solve common problems with their products. Basically, your goal is to launch the best, most innovative product in that category. Sounds simple but this takes hours and hours if research. Very effective though!
Second example is sourcing. Always and I repeat, always connect with three factories for each new product and send some odd ball questions to test their customer service skills. Then always order a final ample of your product and compare quality between them. Whoever gave you tye best performance will end up being your factory of choice.
I hope these two examples are helpful! If you’d like to connect more, feel free to reach out.
That was super useful Jon, thanks
You’re very welcome Joel!