January is just around the corner and with it brings a new list of New Years Resolutions. Mine are usually I’m going to lose weight and I’m going to declutter the house. But since this will be my first January as an Amazon Seller, I have one more to add to my list: I’m Going To Make More Money!
I’ve shared my income statements with you in prior posts and in them you’ll see that my profits aren’t that great. I attribute most of that to the low volume of inventory that I send in each month. However, I’m not viewing my low numbers as as a negative on my part because I have had to learn everything from scratch, do everything by myself (no VA’s or helpers) and do everything while working 50 hours a week at my regular job.
But regardless of my personal situation, I do want to see higher profits and I know that they are within my reach.
Higher Sales Does Not Equal Higher Profits
Notice that I want to see a higher profit and not higher sales. I’m always analyzing my numbers and know for a fact that higher sales do not automatically mean higher profits. Look at three products that I sold that give a similar profit of just over $10.00:
|Product||Cherry Pitters||Lekue Steam Case||Zoomer Dino|
|Cost of Product||-$3.38||-$11.32||-$75.99|
The Zoomer Dino wasn’t my best purchase, but selling a bunch of them would make the sales graph look good.
Overall though, from May 2014 to Nov 2014, my average selling price is 3.4X of my buying price.
Am I Insane?
According to the 3X Rule, you will double your money if you sell your product at a price that’s 3 times your cost. For example, if you were to buy a toy for $30.00 and sell it for $90.00, you will have:
- $30.00 to replace the cost of the toy
- $30.00 to pay Amazon their fees
- $30.00 profit to you
As you can see from my table above, the 3X Rule doesn’t apply to every product. But in my case, if you take the averages of everything that I sold from May 2014 to Nov 2014, it does come pretty close. So, I’m going to say that my average numbers do follow the 3X Rule. But my actual monthly profits are less than 1/3 of my selling price because the 3X Rule doesn’t factor in other costs such as monthly subscription fees and supplies. Once my profits do get higher, these extra expenses will just be a tiny drop in the bucket and become hardly noticeable.
So why am I questioning my sanity? Because my average monthly inventory purchases are just $283! If I use the 3X Rule as my guideline, there is no way that I can expect to clear $1000 a month. I keep saying that “next month will be better” but then I still send in the same amount of inventory each month.
So, my New Years Resolution of “I Want to Make More Money” needs to start with increasing my inventory purchases while maintaining my selling price of 3 times my inventory costs. But to really make this happen, I need to be a little more specific with my goal.
I used the SMART Goal system a couple of years ago when I worked on some personal goals (losing weight and decluttering). First of all, what is a SMART Goal? It’s a goal that is:
- Achievable or Attainable
- Time Based
Rather than go into the whole SMART Goal system, I’ll refer you to one of Michele Connolly’s blog posts about SMART Goals. This is where I learned about SMART Goals and found that they do work
Creating My SMART Goal
Using what I learned from Michele Connolly’s “The Complete Guide to Setting SMART Goals”, I will create my SMART Goal:
New Years Resolution: I want to make more money.
- Specific: I want to increase the monthly profit from my Amazon FBA business.
- Measurable: I want to spend $750 per month on inventory that will give me a minimum 75% return and will lead me to a monthly profit of $500. All of these figures can be measured in Quickbooks.
- Achievable: I have the finances to spend $750 per month and I’m prepared to source online 5 times a week, shop at the retail stores once a week and read Chris Green’s Online Arbitrage: Sourcing Secrets for Buying Products Online to Resell for BIG PROFITS to learn additional online sourcing methods.
- Relevant: I want to replace my income from my current job with income from selling on Amazon.
- Time-Based: I want a $500 monthly profit by February 2015.
SMART Goal: I want to increase my inventory spending to $750.00 per month on products that will give me a minimum ROI of 75% and a $500 monthly profit by February 2015.
As you can see, I went from a very vague New Years Resolution to a very specific goal.
I thought about starting with a higher goal of a $1000 profit, but I figured that would be like saying I want to lose 100 pounds in two months. Once I reach my $500 milestone then I’ll set my target goal higher. It’s all about baby steps.
p.s. Please share your goals with me in the comment form below or on my Facebook Page. I would love to hear from you!
Photo Credit for Featured Image: © Marek – Fotolia.com