We started looking for products that could generate a significant amount each month. This is the process that we will carry out to achieve this.
It was time to stop fooling around. My way of doing business is emotional. I like to do things but not always necessarily those that can bring us money. This is the “problem” I have. I don’t like the money itself, but rather the process of entrepreneurship.
These holidays, in addition to being able to disconnect, also helped me organize my thoughts and thoughts. We can still have a good time and also earn some money. That’s why I challenged the team to find a product that can charge 10k with a profit of 2.5k in 6 months. Whoever gets it will have an incentive.
Use tools like Helium10
The basics of research are tools like Helium10 where you can get sales and billing data. It’s a process where you can start with something random and then from there you move on to different products that have nothing to do with the initial idea you had.
Objective: to create a brand
The product can be part of an existing brand or a new brand can also be created. The idea is that it has the potential to add more products later. In this way, the asset that is created is not only the products that generate revenue, but also the brand that may have the potential to be resold along the way.
Find a product with an average level of competition
It’s easy to find a product that sells a lot but not so much with an average level of competition. The tools we have, other vendors have them too. That’s why the most obvious is where everyone is going. Finding products with a good level of sales and with the potential for more is key. It’s not easy at all.
A product that can outperform the competition
Then it has to be a product that can become a niche leader. This requires the competition not to be too advanced by already having thousands of ratings above four in their rosters. The optimum are competing products with less than 300 ratings and if, in addition to the average, they do not reach a four, even better.
An off-season product that sells more at Christmas
The ideal would be to find a product that is not only sold in summer or winter. Something that sells throughout the year and can bring us great and small joys as the best time of the year approaches.
A product that is purchased in units greater than one and is recurring
If we already want to find the Ferrari among the products, it would be to launch a new one which is typically bought in units of 1-0 and which is also recurring. In other words, the initial customer who had a good experience comes back 1-3 months later to buy more units. It’s typical in food but we don’t want to sell food.
You see. Finding the perfect product is not easy. In the end, you have to settle for something imperfect. We’ll see…
Knowing what you are going to sell is not an easy task. Making use of Amazon’s recommendations sometimes leads you on the best path.
Not selling on Amazon is a problem but falling short many times almost tastes worse. Realizing that you could have sold more but you have not planned well and consequently you are not reducing what you could be reducing limits your growth possibilities.
Amazon makes recommendations to replenish inventory. The algorithm used today is not smart enough and does not take into account what I am going to tell you next.
Historical sales dates
The historical sales data is taken into account by Amazon but it falls short. It only looks at the short term, so the huge rise we see at Christmas does not take them sufficiently into account. My recommendation therefore is basic. You have to analyze the data of an entire year. It is exactly what we are doing right now. We want to know everything we have to have in Amazon warehouses so as not to fall short at the product level. This also allows us to buy product now that it is available from our suppliers but will not be available when we are really going to need it: around Christmas. We buy much more than we are going to need in the short term to be prepared.
Holidays and special days beyond Christmas
Last year at this time we had spectacular sales. The country that stood out was Germany. My explanation at the time was Easter together with the Covid effect that blew up billing. This year we have prepared packs of Pokémon to the beast. With more than 600 units in stock, it is possible to decide that we are well prepared and more so considering that with our sale price we are not being competitive. My intuition told me that the other vendors were going to run out of stock and that was going to be our moment of glory. Nor is it still happening as I expected. After selling almost nothing yesterday there were 44 sales. These days, 100-200 more packs could still come out. I’d rather be overstocked than understocked.
This part is the most complicated and it is the one where you will possibly catch your fingers. I do not dare much to bet on trends. Arriving early allows you to win the biggest prize but as always if there is much to win there is also much to lose. That is why my growth strategy is not so aggressive. We follow trends when they have already become obvious and there is room for manoeuvre. It was the case of Pokémon. In this case we are also talking less about detailed inventory planning but rather about expanding the catalogue.
In summary: Calculating demand correctly is a complex and almost impossible task. You will never be completely right because taking into account past data will never allow you to predict the future well. We make the attempt. It is nonetheless the best you can do.
Making a good month on Amazon is possible. When you create a business what you are looking for is recurring income. This is our plan.
In April of last year we billed over 80k on Amazon. To this day I am not sure exactly what it is due to. I suspect that it had to do with Easter in Germany where there is a certain tendency to give bigger and bigger gifts to the little ones. This year saw an increase compared to February and March but we are a long way from last year.
The problem we are having is that there is a lack of stability when it comes to planning income on Amazon. At the moment it is rather “let’s see how things go this month”. Obviously that is not what you are looking for in a business like ours. The problem has been identified for a long time and has to do with the lack of possibility of buying the right products at the right price. We are solving this at the moment.
Launch of own products
This point should not surprise you too much either. There are already two brands created. One of them is already having more and more products in the catalog of our Amazon account. Right now we are not having any super-sales but in the short term that is not the goal either. The objective is to create a wide catalog of products that does not depend on 1-2 items that stand out from the rest. The goal is to add new products every month here.
Yesterday that strategy was broken a bit. This week is vacation and he received one for a project that was supposed to be finished a week after I got back. Now because you have to go on for five more months for what is windfall income. You already know my strategy: reinvest in own projects. So, I challenged my team to find two products that generated 2.5k profit each month. Let’s see if we really are as good with Amazon as we like to think… 😉
We have the possibility to compare products directly from Lego. Both through our Spanish SL and through the German one. That is why we are going to take a part of the available capital and invest it in Lego with the objective of reselling it in 18-36 months. It is true that here we will always have a limited number of products available for sale because they will be EOL items that will be sent to Amazon, but it is a cycle that is continually renewed. The more they sell, the more you can buy and store to make the snowball bigger and bigger. Direct access to Lego means that we do not have to be on the lookout for super-offers because we can always buy at attractive prices. What we do have to take into account are the EOL cycles and not wait until the last moment to be able to certain products that are going to come out of the Lego sales catalog.
Invoicing 1 million euros this year on Amazon remains a challenge. We have fallen in sales this year compared to the previous one. It will not be an easy challenge but it is still feasible. Let’s see how the rest of the year goes and the search for our products.
When you’ve spent time with a blog like me, you repeat themes. It is inevitable and sometimes logical. Interestingly in this case not so long ago. Six months ago, I answered the question by doing a first calculation with what our Amazon business could be worth.
Important Nuances About Selling an Amazon Business
Six months ago, based on the numbers we had at the time, I came up with an estimated value of 140,000. Here are some nuances and additional information to the first post.
- A business is worth as much as the buyer is willing to pay. It’s always a different situation if they want to buy from you or if you want to sell. The first scenario obviously puts you in a better situation.
- A private label business with its own products is worth more than a resale business. Our own products are already charging more now than six months ago, but we are still at a very low level.
Adapted calculation of the sale value of our Amazon account at the end of 2022
Today we are going to look ahead assuming that we are going to be able to achieve the goal of reaching 1 million euros in sales on Amazon. This could be achieved with more aggressive pricing reaching a lower margin of say 20%. The profit we could get, also subtracting the increased business costs, would be 100k. Six months ago I applied a 2-3 multiplier. Knowing what I know today, I would lower it to 1.5-2.5.
Company value (pessimistic scenario)
In a pessimistic scenario, I would apply the lower multiplier. The Amazon business could be worth 150k. In this case, the buyer would only value what the account generates in a year. We would also be in an active search scenario for a buyer. If you think about it, this sale price would be a bargain because in less than 2 years a buyer could have recovered the investment. For that price, finding an Amazon account with those measurements, I would be interested in buying, but I think that’s a realistic number for a business based on reselling and selling third-party products like ours.
Business value (optimistic scenario)
In a scenario as the name suggests, the multiplier could possibly be higher. In this case, we would have a buyer contacting us with an interest in buying the business. Here the multiplier could be 2.5 and in an optimal case even 3. If we apply 2.5 we would be talking about 250k. If you ask me, that doesn’t drive me crazy either. This is too low a figure for a company that generates 100,000 profits per year. In our case, the profits will increase since we continue to invest and our own products will have an increasingly important weight.
In summary: an Amazon account must have a very high turnover to reach relevant figures. It can also be seen as an opportunity to act as a buyer. Today, I am not adding the potential sale value to the equity. I will add it at some point. We’ll see.