How Much Capital Do I Need to Start Selling Private Label on Amazon FBA?

Everyone is trying to leverage the power of the internet to create a side hustle or work from home. To get started on Amazon FBA, you are going to need some capital. There's no one answer to this question, but I can give you an idea of how much money you need to start your Private Label FBA business.

You will need a war chest of $10,000-15,000 that you can draw from to use and invest in your business, but this depends on many factors. You should not expect to withdraw any of that money in the first 12 months, perhaps even longer.

As your business grows you may need to invest additional funds to scale up your operations. This number is based on several factors including your initial product cost. And of this original sum, do not spend all of it on purchasing product. You will want to negotiate a low minimum ordered quantity or MOQ from your supplier. Even with the best data you want to validate your product on the marketplace. You will need to account for shipping and customs. You will need money for product photography, paid-advertising aka pay per click (PPC), and product giveaways.

Because you will most likely be selling a product that already exists a major part of your strategy will involve private labeling and differentiating your product on quality, price, brand, and customer service.

You can get started selling on Amazon for $2000, but this budget does not allow much for marketing nor take into consideration the cost of reordering inventory. I have mentioned this twice now because it is critical. Cash flow management is hard for any small business. A successful business will pay returns, but if your goal is to grow then you will be putting all of your profit plus additional money into buying more inventory.

A successful product will be selling multiple times per day. To avoid running out of stock and losing sales momentum, you will need to reorder well in advance. How far in advance? That depends on manufacturing lead time and shipping time which together can easily be 4-8 weeks if not more.

What if I don't have the money to get started?

If you are eager to start but fall short of cash, I do NOT recommend borrowing from credit cards or taking money out of a 401k. I understand it is important to believe in yourself and your dreams. You will realize success with hard work and a little luck, but we don't want to gamble our rent money or sabotage our credit and savings.

You are here because you want to quit the rat race, abandon the 9 to 5, discover financial freedom while reaping all the rewards of your effort. You want to spend more time with family and friends, more time to do follow your passions all while having a flexible schedule. I get it. That's why we created the Gorillaz Tribe to offer knowledge, community, and resources to those ready to get off the fence and start taking action.

If you are saving to start an Amazon Private Label business you can do the groundwork that requires minimal financial investment. This includes setting up your Seller Central account and becoming familiar with it. Reading through Amazon's Terms of Service, the FAQs and using the forums.

You can purchase a market research tool such as Jungle Scout to help you find and identify viable products. You can join Facebook groups or watch YouTube videos to learn as much of the process as possible. While the real education is in doing it yourself, becoming acquainted with the whole picture will make it easier when you choose to start by eliminating surprises and building solid marketing principles.

If saving to start this business feels like it is too far away and you need to start working on your dreams now there are other options to sell to customers on Amazon. And trust me, you do want to sell on Amazon ( Kindle Direct Publishing (KDP), Merch by Amazon (Merch), and CreateSpace (CS) are all opportunities to get in front of Amazon's customers with a unique product. These programs require very little capital to get started. You may even be able to start with no money, but a few paid tools will prove to be valuable time savers when you are ready. Read on to learn more about those platforms.

Kindle Direct Publishing (KDP)

Amazon's KDP is one tool authors can use to self-publish their books. But the opportunity is as great for non-authors if not greater. Distilled to its simplest form: You become a publisher.

You pay a one-time fee for writers to author books, you publish their works on KDP, and you collect royalties for life on the sale of the Kindle eBook. Boom!

Anyone can learn, it is legal, and most of the process can be outsourced. So why aren't more people doing it?

Because you need to invest your time upfront before it becomes passive, results don't happen overnight, and you can't just upload anything and hope it sells. You have to understand the market.

Just like Private Label on Amazon, we want to sell where there is already a strong demand, but demand alone is not enough. There are many important factors that determine whether you will make money:

  • The niche and keywords that you create your book on

  • Amazon search engine ranking

  • Amazon bestseller list ranking

  • The cover and title

  • The description of your book

  • The price

  • The number and quality of reviews

Executed correctly, you could expect to make $20 to $100 per month if your book is only modestly successful. That's only 10-50 sales per month. All with a list price of only $3! Now, remember I said most of this process can be outsourced?

You will use freelance writers (and eventually a small team) to produce new books constantly. You can ramp up to publishing 5 or more books per week. Use the power of numbers to multiply your earnings.

Even though some books only sell 10 times per month, others could sell 50 or more times every month as you get better at niche selection and keywords. In a few month's time (or sooner) depending on your ambition and the amount of time you devote to learning, outsourcing, and scaling you could have 100 books earning you between $2,000-10,000 every single month.

Merch by Amazon (Merch)

Amazon's newest program is Print on Demand (POD) Merchandise includes t-shirts, long sleeve shirts, sweatshirts, hooded sweatshirts (hoodies) and pop sockets. To earn money on Merch you will need to upload original designs to Amazon's platform. Merch by Amazon is currently invitation only. After applying you can currently expect to wait 1-4 weeks to be accepted to the program.

Amazon does not have exclusivity rights to your design and you can upload them to other POD platforms while waiting for Amazon to accept you and you may find it worth it to continue doing so after acceptance.

POD shirts are not new to the internet. What is new is being able to leverage Amazon's massive marketplace. They do all the work except the design and you get a royalty every time your product sells.

You can design in free programs. If you are not a designer you can make simple text-based designs while learning how to design. If you want to throw money at it, you can have freelancers create designs for you. Just like everything, not any and every design will work. The important factors include:

  • The niche and keywords

  • The Brand Name

  • The Product Title

  • The Bullet Points

  • The Price

These all come back to keywords except price. Price is the smallest determining factor if someone will buy your design as long as it is in an acceptable range. Each t-shirt sale will provide a royalty of as little as $0.01 to about $5. Merch operates on a tiered system, so unlike KDP you need to have sales and be granted a number of design spaces to grow. This small barrier to entry helps curb a flood of cheap and terrible designs allowing your designs to be found and sold.

What Merch does have in common with KDP is it is a numbers game. In a few months time, with 100 to 500 designs live, you could be making several thousand dollars per month in royalties.

Why only one penny on some designs? How does this tier system work? To answer these questions and more I will create another blog post. For now, you'll find content with the Facebook groups and YouTube already out there. Trust me, there's plenty to read, watch, and digest.

KDP Print on Demand Low-Content and No-Content Books

Your books will be available to sell in Amazon's US, UK, and European marketplaces with the click of a button. This is a POD platform for paperback (softcover) books as well as other media. We are only focused on paperback books: namely low-content or no-content books which is another way of saying journals, diaries, and notebooks.

Your interior pages will NOT be filled with a tale of fiction or a biographical account. They will be "empty" lined pages, dot matrix, tables for activities, grids for a daily planner or whatever you determine there is a demand for you and you can supply the design.

You will then create an attractive cover which is arguably the most important design component. We ARE selling a book based on its cover.

You can design your interior pages and covers freely and quickly with a couple of tools. If you are not a designer, you could hire a freelancer to do your covers, but there are ways of designing without being a "designer".

This would include using graphics and photos in the public domain as your cover image including using the popular and free Canva.

The important factors to your success will be tied to:

  • The niches you choose to sell in

  • The keywords you use and where you use them in your description

  • The attractiveness of the cover

  • The function of the interior pages

  • The price

Finding niches without too much competition and sufficient buyer demand is critical. The keywords carry more weight in some parts of your listing than in others. You need to maximize their strength where you can.

Beauty is in the eye of the beholder so whether it is cartoon ice cream cones or a smiling donkey picture is entirely up to the buyer as long as you executed the design well.

There is a narrow window of acceptable prices earning royalties from less than a dollar to two or more. To be successful here you must also use the power of numbers. This is about creating hundreds (even thousands) of products in profitable niches with the right keywords.

So there's more than one way to sell on Amazon. How much money you need to get started selling on Amazon is entirely dependent on the platform you choose to use.

What skills you bring to the table, the skills you are willing to learn, the tools you use, and the professional help you pay for services are all factors affecting start-up costs. There is no cookie-cutter answer.