How To Make A Profit Selling On Amazon
All Amazon sellers need to learn how to make a profit selling on Amazon but not all sellers know how to do that. You may be asking yourself – What is a good profit margin on amazon? How do I make a profit selling on Amazon?
Kris Gramlich and Dustin Kane welcome Neil Twa from Voltage Direct Marketing. Neil is covering part 2 of our 5 part series on how to start an Amazon FBA business effectively. Make sure you follow this series on our podcast Two Amazon Sellers and A Microphone
Since 2012 Mr. Twa has been selling on Amazon using private label branded products and FBA. He’s been building online businesses since 2007 after leaving his corporate career with IBM.
Today his team helps their clients gain $50-$100k per month (or more!) in their Amazon businesses through an 8 year proven game plan that’s generated over $100M in collective sales on FBA, with millions of units sold.
The Voltage Business Builders framework allows new startups (and experienced sellers!) to grow their private label e-commerce business start-ups under a unique ‘pay as you profit’ model of performance-driven consulting. Case studies included 6, 7, and 8 figure examples. Mr. Twa also owns a software division called Sixleaf.com that since its inception in 24014, has helped 12,000+ customers build strong brands through product research, product launches (60,000 to date!), and product relationship management.
Mr. Twa spends most of his time focused on helping his clients through brand growth strategies and business development. Through his company Voltage Digital Media they also acquire e-commerce brands with a focus on Amazon FBA.
Find Out More:
Download the Spreadsheet Mentioned in this Series: Spreadsheet
Find Us On Social Media:
➜ Facebook: https://www.facebook.com/sellozo
➜ Instagram: https://www.instagram.com/sellozoofficial
➜ LinkedIn: https://www.linkedin.com/company/sellozo
➜ Pinterest: https://www.pinterest.com/sellozooffi
➜ Twitter: https://twitter.com/sellozoofficial
➜ YouTube: https://www.youtube.com/c/Sellozo
Other Helpful Articles:
Read The Full Text Below:
How To Make A Profit Selling On Amazon
– Hello everyone and welcome to episode 111 of “Two Amazon Sellers and a Microphone.” Today is part two. Man we killed it in part one, we got Neil Twa on with us.
– He’s good. We gotta blame Dustin.
– Maybe my internet connection. Technology is crazy, but if you guys can still hear me, we are in part two.
– You said Kris was awesome. We caught that part.
– Yeah, you said I was awesome, deserve a raise.
– He’s the man, that’s right.
– Kris is awesome. He does, yes, exactly. We have a lot of fun talking to you, Neil. It’s a blast part two. We’re going to really break down the numbers. So we’re talking product research right now. We got through step one and now let’s just dive in.
– What is it? What are you doing when you’re trying to get to look at these numbers and this research?
– Yeah, absolutely dude. So we’re gonna go what I call “By the numbers” today, right? And so, as we spoke in the first, let’s just recap, let’s do a little Wayne world back in time here, thing, and we spoke about product research. What the blank am I going to sell? And today’s topic and even into the next topic is going to kind of get to the next level. We’re gonna come down off that macro and sort of get into some more micro level. We have a little bit of business so to speak. That’s just kind of how this is gonna work. If you don’t understand the lingo or some of these, I’ll try to define them as I can. Otherwise Google is your friend. I encourage you to go take a look at those. But as we get through this, understanding the numbers and running the business by the numbers is probably one of the most critical things that I want you guys to get from today because building a business and being serious about it again, is thinking with the end in mind and that really means knowing the numbers of your business and so many sellers, they jump in and it’s exciting and they’re ready to go. And maybe it’s their first business or whatever and they’re really jo-joed up, you know, but they’re not really focused on how to make it profitable or really how to make this thing run for the long-term. There may be thinking short term money, side hustle, this kind of stuff. And I hope from today’s session that you guys really understand that running a business by the numbers is probably the most important thing you will learn, and it will help define what you should sell at the micro level next of the products we’re choosing. If you remember, we talked about, I don’t know if you guys put any on your list or you even went through that exercise, hopefully you did at this point and you are now working on a a big most list of products, right? That first 500 ideas and concepts 21 days or less, it’s just a sheet, it’s a pad, it’s a notepad. It’s a thing on your app, it doesn’t matter. Just start writing all of them down. We talked about going into your last 90 days of shopping history. We talked about the white cars and what to look for. And we went over some mindset exercises, to teach you how to move product ideas into your conscious mind and out of your subconscious mind. And so as we start to look at those products, what really is important next is building that more list, right? And as we go by the numbers, the more list’s to flesh out those numbers that make the most sense. And so what I wanted you to hear today was an understanding, again, that long-term, you cannot run a business on gut feel. And so many people get started on gut feel and they make the wrong decisions. They break the piggy banks, they hit the 401 s, they run their last money on one single skew and one single product set and they fly by the seat of their pants. And at that point I’ve seen so many people crash and burn three, four or five months into this, right? You also can make one very bad product mistake and wipe out your nest egg. And we don’t want anybody to do that, right? So what we want you to understand is, multi seven figure, eight figure, nine figure sellers understand and analyze profitability first and it is the one thing we know will make a difference, a huge difference between success and total disaster. So we really want you guys to pay attention to this. You can sell profitably when your know your numbers. You can market successfully when you know your numbers, you can pay yourself and other people to help you in the business and create opportunities of automation. You can negotiate from a very strong position when you understand the numbers. And I know that people suffer a lot of times through product negotiations and stuff, mainly because they don’t simply know the numbers well enough to know the position that they should be in when they’re negotiating at the manufacturing level or even using sourcing agents and so they find themselves backing into concepts and ideas and gut feelings and that’s really not how you should work this. You really want to work this at the numerical level, right? It gives you a strong negotiating position. And of course, we want to build a business with intrinsic value. That means at the end, this is actually worth something. All this time, energy and effort and money you’re putting blood, sweat, and tears. People cry over these businesses, right? This is like serious stuff. This is your baby. And when they come to sell these babies to us, there’s always a big emotional appeal. Like they want the money. Everybody thinks it’s really great that, you know, get this big cash payout. But at the end of the day, it’s their baby and they want to really know that you’ve taken care of this it’s I spent years doing this. And so as you think about that with the end in mind, it’s very important to answer that question. You know, what are the numbers, right? So again, we talked about the urban mining hack and finding those. We talked about how to great, get great and recognize great product ideas, build that big list of never ending product ideas because while 500 is a starting point, you should be adding to your list every day and it’s gonna be an iterative continuation, a continual process, right? You obviously want to pull profitable products from your more list. And we’re gonna talk about what that means in terms of more profit, more interesting, more trend, more opportunity, more units moved. And again, we talked about things that were gonna break down, I think a little deeper here in the few minutes as we go. So one of the things that is really important for people to understand is not having a scarcity mindset regarding product ideas. Most people come in and they think there’s either one of two things, there’s too many product ideas and I can’t decide which is gonna be one of the things we solve today. And the other one is a scarcity mindset, which basically says there’s not enough good products to go around, there’s only a precious few good products, okay? And that actually isn’t the truth. Because if you consider 12 million to be a precious few, then we’re not on the same page somehow, right? Because 12 million products is a lot. It’s a lot of products. And if you move a thousand units a month, over 12 months, it’s gonna take you 83 years to move a million units. So you just got to think in terms of the scope and magnitude of those actual numbers and realize the breadth of opportunity that is setting right in front of you. So how to take that breadth of opportunity and crush it down, let’s look at that for a second. Let’s explain this. So as you’re looking for those products and you’re building your list, one of the things I want you to do is to go into Amazon and I want you to look for similar products, all right, I want you to remember this equation, as we’re thinking about this. Similarity and familiarity equal trust, okay? Similarity and familiarity, okay, equal trust. Now Amazon is your marketplace of trust, that’s why we’re talking about selling there because brands are selling there, Amazon itself is a brand that people trust and they’re moving hundreds of millions of people a month through that platform. Similarity is the products that you consider selling. But at this point we don’t know the numbers. And so we’re gonna say based on our big list, there are product ideas that are gonna be defined at the macro level by the numbers to determine whether or not the familiarity and profitability of that number are worth us actually selling it. So when we get down to some of these numbers, what we’re gonna talk about is things like gross margin, gross profit, okay, if your brain is already exploding, just hang on, we’re gonna keep going, right? What do those numbers actually mean? What is return on investment ROI, how is that important and how do you literally, most of the sellers like talk to you before they get trained correctly?
– I think we lost Neil a little bit. Did you lose him?
– Did you guys, oh, sorry. Are we back?
– We’re good. We just lost you for last like five seconds.
– Okay, last five seconds. I’ve covered like a million things in five seconds right now. Well, we’ll step back. So what I was saying was, in the terms of the profitability, it’s very important to understand the metrics that stack up in this in becoming a way to analyze those products to the point where you know that if I were to create a product similar to the one that’s in the market, and I have familiarity in a brand that I’m going to create to compete against them and I’m gonna use Amazon as my trust process for people who have never heard of my brand before, right, and then be to run a profitable business around this product and reach a certain market, a point of market share in which I start to dominate the other three to five competitors in my marketplace, okay. And it’s important to understand that when you start to realize that that’s a very numerical driven decision-making model and not an emotional or gut feeling, then you will start to see yourself as a business person who is actually running a business, not a side hustle. And I get a lot of people who come to me and you think this is not right when I say it this way, but they’re running, a quarter million, half a million, even a million dollar a year businesses. And when we take them through this exercise of just understanding the numbers in their business, you gotta be surprised at how many of these sellers can not ramble off in about 30 seconds exactly what their business is doing financially. It always blows my mind. It’s one of the first things we do when we talk to them, you know, what are your numbers? What’s your profit margins on your products? How are you identifying your cost of goods versus your competitors? What’s your market strategy for pricing? How is your campaign’s running? And, they can tell me all the bad things, but they can’t tell me the good things about how the business is actually running. It’s very surprising to me that this is management in E-comm, is not really being taught, it’s a very important thing. So as you understand those numbers, it’s very important that you dig in to what do those numbers look like? So we have something called cost of goods. That’s the physical product cost to have one of those things manufactured for you, okay? That number is a number given to you, you typically buy the manufacturer who says, well, if you want one unit of this widget, it’s going to cost you $5 and 18 cents or $6 and 18 or whatever, right? You have Amazons fees that have to be calculated on top of that. Now Amazon has something like 60 or 70 different fee structures and the way, it gets a little complicated, right? One of the things that we identified in our discussion previously was how to kind of avoid the three different areas we talked about in the last podcast that had to do with certain areas you don’t want to dig into. If you hadn’t caught that, and maybe you’re just catching this one, I encourage you to go back and catch those as to why you shouldn’t get them. When you go towards Amazon, you’re looking at finding a product segment that we consider to be blue sky or evergreen. And those are usually Amazon fees around 15% average, right? You don’t want them necessarily to be lower because if they’re lower, you’re typically paying or selling in retail on a lower price point. If they’re higher then you may be running into hyper competitive or saturated niches, and you don’t want to be in those either. What you want to do is find those products that kind of average out about 15% average cost of sales plus, or minus a little bit. When you do that, you actually know you can plug that number in to your spreadsheet or your or calculations, right? You have to have a fulfillment cost. What does it cost to actually fulfill a unit of that, all right? Amazon has a seller calculator that will tell you these fees. So you want to make sure you understand that too. And then you obviously understand your net from Amazon, which of course is the retail price minus all the fees. And that’s kind of what your net would be from Amazon for a unit of those sold. Now, one of the two other columns we talk about, gross profit, margin and percentage are important to understand how to actually correctly calculate the gross and profit so that you actually really understand your return on investment. So a lot of people make mistakes. They will say something silly like, oh, I got a product for $50 and I sold it for $100 so I had 200% ROI. And I’m like, no, that’s not exactly how that works. You actually, got 100% ROI. Oh, I did? Oh, I didn’t actually understand that. When you get into really understanding where the margins are, you will understand your unit gross percentage or your ROI. That should be relatively strong. And what we consider relatively strong is 80 to 150%. It should be your unit gross ROI. Now, again, I’m throwing out a lot of numbers at you guys today and we’re gonna try to break some of this down in the next 10 or 15 minutes without making this go for 45. But at the end of the day, you really understand that gross profit ROI, that leads you into things like how much should I spend on my ad budget, right? How should I actually take accountability for ad budget? When you understand that in terms of the cost of running the business down to a per unit level, that means I know it, one unit of sell, all the costs and fees structure, then I actually know how to budget an ad correctly while still making it profitable. What I see as everybody does the inverse, and they will try to run an ad budget against a $9 profit margin and then scream when they’re making a dollar or 50 cents and their aid costs won’t get below 20 cents their 20%. It’s never going to, it probably never would, but you never properly calculated it and now you’re screaming about ad budgets so you got yourself backwards. So you gotta be thinking about the products first. What are the numbers of the current product fees? They’re just storage fees, you can have storage fees in Amazon, storage fees can add up if you’re not moving enough units. For longterm storage fees those can add up correctly. You got to make sure you accommodate those numbers. You have returns in shrinkage. It’s typically our net where we currently play balls, excuse me, I’m trying to say this the right way. We see about 2% in returns in shrinkage. It could be up as high 4% but typically you want to see it around 2% or so. That is the products that might be returned or shrinkage in your inventory levels based on manufacturing defects, and other things. So with all of those loaded, we should get to three types of columns that are the most important for you to look at in terms of your brain, your profitability, your spreadsheet, you want to work out, or however you’re tracking the products you’re looking at currently. As again, we’re trying to answer that question what the blank do I sell? That is net profit at the dollar amount, that is your net profit percentage and your unit ROI percentage. Those are three columns that we like to track as red, yellow, or green. It’s pretty simple, right? Red means what? Don’t go, stay away. Yellow means caution. If you can’t get your retail price directly, or you can’t get your manufacturing costs where you know if it’s A cost, 100 or other things under control, it could be in the red. If you can get those in control and have good control of your profitability, your brand, and of course, raising your prices against your competition, that yellow could go green, making that a great product. What you want to be careful is launching a product with yellow, expecting it to go green. You can certainly not launch a red product and move it into the yellow or green if the market simply won’t support that, okay? And I see people making those mistakes. I’ve seen quite a few of those sellers come to us again, doing half a million to a million a year, wondering why they can’t pay themselves more than about three grand a month, that sounds really ridiculous, right? But then you put all their products into the spreadsheet and we work all the numbers, and all of a sudden they’re seeing yellows and reds and maybe one green, and the one green is holding the business up. And if that one green skew goes down, guess what happens guys? Like these guys are in two to three months, they’re out of business, right? It’s the same sad story over and over again. So the other things we pay attention to then give us estimated daily units sold. That’s a projection of units, which has to do with of course, profitability, revenue generation, how much inventory we’re moving and an important Jim in that is how do I overtake my competition in ranking? It’s a good thing to know the estimated daily sales units of those products so I know how to properly position my marketing to overcome or break down the barriers that might cause me to not enter or enter that market with my product launch correctly under the right understanding of what effort it will take to rank that product and beat my competition. And that leads us to the estimated annual units sold, which we break down quarter by quarter, what we call our 90 day cash flow plan, which is kind of breaking all of these numbers into what is the total sales velocity, total number of units I would move in a 90 day period as it’s relative to a 12 month annual run rate? Everybody keeping up with me so far?
– I’m throwing a lot of stuff out there.
– No, this is fantastic. I’m sure people listening to this right now are rapidly taking notes.
– I am.
– Yeah, I’m writing this stuff down, I mean, this is good.
– All right, I don’t want to leave everybody behind cause that’s a lot of acronyms. What we’re down to what looks to be a 90 day cash flow plan in your brain, you may want to write this down, get a forecast, write in a spreadsheet, get a software. It really doesn’t matter what mechanical thing you do at this point. It’s more important that you understand the business that we’re talking about, right? What it’s gonna lead us to is an understanding over three months, what’s our velocity of units moved during launch or growth, or even when we reach market penetration or our percentage of market penetration, we have a good understanding based on our competition, what our expected results should be in that 90 day period for a single skew that we’re launching of a product within a brand, okay, that’s going from macro to our micro. It also very much helps us understand inventory units that will be moved, which is again very important to your cost structure of inventory calculations for your long-term storage fees and of course the amount of inventory you need to order or pre-order as part of your logistics. And then of course, the management you need to do within FBA fulfilled by Amazon for your IPI rules, your inventory rules, whether or not you have to balance some between a third party logistics company, logistics company, let’s say that right, and how many you can actually stick in Amazon that you’re gonna turn over in that timeframe. If you understand those numbers in the thresholds and you very much understand what a single unit life cycle looks like from the time that it goes from, is it profitable, to selling a unit, to delivering a unit and of course, returning that product and investment back to the business while paying ourselves something out of all of that at that bottom line, what should we get paid for every one of those units moved? I challenge you to get paid more than $12 in profit per unit. So how does that float back up stream, right? It floats back upstream in terms of me moving one of those units to a customer through Amazon Marketplace and ensuring that it was done profitably. Like that’s the whole, that’s the whole Wizard of Oz thing here, right? So as you move those products into your more lists, you will use tools like Helium 10, Jungle Scout, or even SixLeaf Phoenix tool to go out and data mine that into your database, your spreadsheet, your task list, your white paper, wherever you’re gonna put this thing. And you’re going to ensure that you’ve got all those costs together, all right? This is taking 80% of the time to basically get down to the question, what’s your number? Your number might be, I’m okay having $9 in profit, I’ve got to have a minimum in $12. I want to have $20 in profit. Well, as you work that back up stream, that’s going to then tell you what your cost of goods should be for that product. As you’re looking at your manufacturing, it’s gonna give you a good estimation of I need 15% of that unit retail costs sold to equate to my advertising budget. I need to have 15% Amazon. I need to have 2% to storage and fees. I need to have 2% to market trends and inflation and by the time all those numbers work out, my three columns of profit are green, okay? If one of them is yellow, but it’s acceptable to me and that’s my number, that’s okay to me. What I want you to base that on is a very clear understanding of those numbers and one of them in particular, I forgot a second ago, but let’s make sure I say it out loud, is your cost of goods. I don’t want a cost of good for my product above 35%. We touched on that just a little bit in the last podcast, but let’s make sure we have that plugged in there as well. So that’s gonna end up with, I think like 35 different columns if you were to put it in a spreadsheet, which is tracking columns and data columns, et cetera like that. And there are some software that do that, but actually at this point, there’s not a software that does everything that I just told you although I’m going to give you one as a gift today for free, literally, I’m gonna link it to you, it’s gonna have a little instruction at the top, it’s a Google spreadsheet, okay, so it can be shared, go in and make a copy. Don’t go in and edit the one that you’re gonna get. Go into file, make a copy, save it to your drive. It’s yours, use it for free, okay? At the very bottom of this sheet is gonna be some cool graphics that we plugged in and let’s break those down real quick as to the proceeds from a sale of an average product, okay, we talked about the cost of goods. We talked about Amazon fees. We talked about your profit, very important. Your ad budget, other ancillary fees. Well, we talked about the three of those and your fulfillment costs. What does it take to get that unit sold? It’s gonna show you in a graph based on all the products you’ve currently put in the sheet, it’s going to give you a gross margin breakdown. Please understand the difference between profitability and gross margin. People get very confused on that. When you see it and to hear this, it should make sense to you, okay? It is gonna be what my gross margin is for every unit sold currently listed on my spreadsheet. You have a profitability breakdown. Where do all of those six or seven different columns actually play out in a single unit sold, and then I’m gonna have my ROI calculation, all right? This one’s gonna actually tell me in a graphical format with the letters, how it all breaks down correctly so that I ensure I understand the return on investment of one unit sold that is returned to the business’s profit. Y’all follow me with that so far? Because that’s a very important thing. So we’re gonna go and we’re gonna take our products from our big list that we’re building our iterative continuation lists that you’re going to be working every day to add products to and you’re going to keep filtering them into this free spreadsheet that I’m gonna give you. And as the numbers go red, you’ll put them on the red column. If they go yellow, you put them in a yellow column. If they’re green, you keep them on the green light spreadsheet. In that green light spreadsheet, as you are continuing to add products, there’s one last, very important thing that you’re gonna want to pay attention to and it’s called project launch cost. That’s a big one, right? It’s the question of how much money do I need to sell this product? Or how much money do I need to invest if I’m gonna take your program and the best products, or if I’m just gonna invest in the market and I want to move this out. How much does it cost to take it? And everybody wants to know what exact number. Well, guess what? You’re going to get a number within 3% variation. We have run millions of units through sheets like this, millions of dollars sold. It’ll be within 3%. If it says 17,619 bucks to launch that product and have inventory for 90 days and make it profitable and return a predicted cashflow over 90 days and 12 months run rate, that’s what it’s gonna take. Do you have to sell it if it’s green light? Well, no. What you need to do, unless that is going to be something that you could do, maybe you can do that, no big deal. Maybe you can’t, maybe you’re looking at 7,000, maybe you’re looking at 700, go through the continue iteration of the product list, go through the research and find it product launch cost that does meet your goals and does answer the question, how much should I spend? And it will also answer the question, what the hell do I sell? Because when those products come out there and they’re green, that’s a product in your brand, you can go to market with confidence selling. Now it does take some additional final word, some additional market research and understanding of the market of those products to determine whether or not you should sell them. Now, the numbers will work out, but the market research competition and saturation, we’re gonna talk about those in the next topics, because those are the defining questions between getting married to the product and being able to rank the product to ensure that you reach your platinum principle and the ability to sell this and have a legacy play in the end. So defining what your number is, is up to you. It may be that you can launch a $7,000 product that’s gonna return you $21,000 a year or $21,000 a month in profit. That is gonna be something you can determine once you plug those numbers in. So again, this is a numerical driven business model. It really is at the end of the day, you can take all your emotions aside. Once you determine what to do, if the products do not work out in the numbers, you shouldn’t launch them because in three or six months, you’re gonna wish you hadn’t. And it’s very important to know those numbers before you go to market.
– I’ll tell you what, I’m super excited to see this spreadsheet and we are going to, we’ll make sure it’s in the show notes which are on the podcast, we’ll put it in the description on YouTube, wherever you’re listening to this, guys will have the link to this spreadsheet, but I can’t tell you how important this is. I mean, Kris and I, we talk to sellers all the time, either they’re coming on to Sellozo because they’re struggling with their advertising and they’re looking for ways to find the right aid costs. And the problem is none of that. The problem is like you said, they’ve picked a product where either they connect to Sellozo for the first time and they find out that they’re unprofitable and they thought they were profitable. Like, well, when you look at all your costs together, you’re unprofitable here. No idea of that launch budget, like they picked a product that’s gonna take 10 grand to launch, you know, and they weren’t prepared for it, or they didn’t have that. So everything that you just laid out is so important to the success going on. I’d love to dig into a few more of these things really quick. Just a question on return on investment and how important that is, I can give a little story. I mean, one of my first products ended up being a great mover, sold a ton of units but it was at a low price point and so it had a low ROI so I ended up having a lot of capital invested in a product that brought me money, but I kind of maybe had it in a product that was bringing me more money with that same capital investment. So explain ROI and what that number like your ideal number is, and how important that should be for people’s tactics.
– Well, I mean, defining ROI is gonna be a little different. I mean, it’s by standard definition of the Webster definition, it is a return on investment. It just means what is the timeframe and capital required to return an invested, a percentage expected return, whether I say it’s 20% and I’m okay with that, or 40%, there is some number that I define as an ROI that is acceptable to me, right? So if I’m gonna invest a thousand dollars, then I would like that return on investment to be $4,000, right? Therefore my ROI is 3000. How long that takes for me to do that is gonna be defined by the market. It’s gonna be defined by my niche. And in some ways it’s gonna be defined by me, whether or not that’s acceptable, if that’s acceptable in my numbers, maybe it takes four months to do that, okay, I’m cool with that. I’d rather have it happen in three days or a week or even a day, that’s where I’m at now. So at this point, you have to define ROI by your number standard. Now you can go in and look at say, outdoor gear or kitchen supplies and stuff, and they’re all going to have different ROIs, but you literally is gonna get down to, I have to launch this product, all right, I want to see a predictable return in 90 days. I want to see the inventory that I’ve purchased turned over in 90 days or less. I want to see my profit margins per unit maintained and I want to see a percentage of growth that is maintained over those 90 days, it shows me a quarter by quarter growth that will add up to an annual growth rate. We typically want to see organic annual growth rate around 40 to 60% and that’s what we see because we’re picking the products right here at the very beginning, knowing they have a good market upsell, a good opportunity, whatever my current ROI is, in defined as my project launch costs and the timeframe of 90 days that’s going to turn over is going to be the cost it takes for this sales and the profit and the manufacturing and it is what it is, is the basic simple way to say that. You have to determine if it’s for you. If it’s not, go find another product. Your ROI is gonna be dependent on the number of products you put into your more list and are willing to work through this process. But I will tell you the difference between where we are right now and maybe where you’re at listening to this podcast today is the difference in the time and energy and effort you’re willing to put into product research 80% upfront before you ever take one of those products to market. You want to know how the other people get successful is they’ve gotten very good at being patient in the product research and market research to find that right product profitability, and then get it in the market. It really is the biggest difference. I see so many people just shotgun blasting products. I see a lot of make this much money in 30 days crap. You know, it’s a lottery mindset mentality, right? We’ve gotta be very careful. If you want to build a serious business that runs three to five years out with predictable gains growth and an ability to sell it for something, then six to 12 months is not a long time to get these businesses ramped up and running. And that’s the kind of expectations I set with my people is in six to 12 months, that if you can reach a six or a seven figure run rate in your business in that timeframe, then you’re set up for success that will lead you for years to come. And the thing about these products, Dustin, is that the type of products and the ROI we’re looking for as you’ll see it in this spreadsheet are not the ones where everybody goes into the software and it’s like, this one makes $48,000 a month. Well, that’s the one I want to sell. They are going into a place where they shouldn’t be. If you could get a product, right, where I’ve invested, say five grand, they can turn around and make me a couple grand every month for the next two or three years, that is a great ROI for that product. Now I gotta be thinking about how many more of those can I find and pencil in? Can I find 5, 10, 20, 50 of those? Now I have a business, now I have a brand. And now you have something to actually work with.
– Go ahead, Kris. I know you’re getting ready to say something, this is fantastic. I mean, I know Kris is listening right now he’s frozen. We’ll get Kris answer it back, okay, ask your question Kris.
– Yeah. Do you know, does there ever come a time when you’ve build in a brand and you just have to be in that particular niche because you just have to be there like supplement brands, they all sell similar supplements. So does a brand ever have to be in the same niche because they just want to be in there for bringing awareness. Does there ever come a time where you just throw the numbers out and you just launch a product because you want to be in the same category as all your competitors?
– No, this is a passion question, if I’m hearing it correctly, because people come in and say, well, I’m very passionate about this niche and I want to sell them this product niche. Well, that’s great. Find products in there that are profitable. Find products in there that meet the criteria. If you don’t find anything in there, then go find something else to sell because I will sell fuzzy bunny slippers to grandma, because she’s passionate about the pink ones with the fuzzy things, it’s got the little logo on the side, right? Because she’s happy, it’s the non-slip. She doesn’t feel like she’s gonna fall. She absolutely loves them and she wants to tell everybody at her nursing home or wherever she lives, that this is something you should buy, that’s passion, right? And I’m passionate about my customers being passionate. So the simple answer to your question is, no, I will go where the dollars are. I will go where the business is, right? Now, am I gonna pull back in certain areas like selling Triple X, you know, mommy, daddy stuff? No, all right, just because I’m not gonna sell that stuff, right, but you might want to, and that’s cool, whatever, but you know, there’s niches I won’t go into for that reason, but there’s predominantly, I’m gonna follow the number. And if it works out, that I’m expanding a brand in a particular area of say outdoor or kitchen or home, or one of these other places, there are thousands upon thousands of product opportunities in there, and they will go green light and you just need to find them and keep working. There’s plenty of holes in that.
– Cool, thanks.
– I made this exact mistake. I feel like this is the biggest mistake people make is you start building a brand, especially if you have success with your first product, like if it comes out of the gates rocking and whether it was luck or whatever, you picked the right product, and then you start going all the rest of the popular products in that niche, you start and then you get burned, that just sucks.
– Yup. Keep digging that well hole, right? If you find water, don’t pick up your drill and go try to find water 20 feet off to the right. And so many people make that mistake. Just keep drilling, right? If you found water at 100 feet, well guess what, there may be water at 200 feet. So just keep going. And when you see that opportunity, what you’re not recognizing maybe at this point is all that upfront work you just did to get in to say the outdoor gear niche that is selling, I don’t know, bicycle seats. There’s thousands of different variation types and bundles of bicycle seats, where you can just keep digging deep. And once you know the market, you understand the customers, you’ve done the keyword research, you’ve take the time and effort to get into it, it just gets to be faster and faster for the products that you can dig into and your launches get easier and more predictable and you just keep expanding that brand. People think it’s kind of boring, why would I have 59 pike seat skews? Well, because it does seven figures a year, that’s why, right? I mean, at the end of the day, a passion in business at this type and level is probably more important than passion in the product you’re selling.
– Do you have any negotiation tips or like, this is more of a personal question actually, but you know, there’s a product that I wanna go after. It’s not meeting the 80 to 150% ROI, but it’s pretty close. What kind of negotiation tactics or tricks do you have where I can get closer to that, 80 to 150 ROI area?
– If it’s currently lower in terms of your negotiations but you have a good understanding what your cost of goods needs to be and you’re taking that into the negotiation with your manufacturer and if they can make that come, or come into alignment with it, then the next thing you would actually be looking at is where else in the supply chain or business can I make money off of this or make it more profitable, right? So then he would look and say, well, brand affiliation, maybe some influencers to expand it or raise it, by price increases on the front end to gain more competition. And of course that gives me more room in my A cost and my campaigns to broaden the reach of that product and become somebody who literally could sell it for 10 or $15 more a unit than all the competition currently in the marketplace. I may inch that up and inch that up, but eventually you’re gonna look back and find I’m the only one sitting here with a product still selling 500 units a month for $15 more than the rest of my competition. So you can look at a time where predictability of brand growth and affinity will overcome current price points or negotiation objections. And of course, as you order more units from that manufacturer, terms can be negotiated and contractual terms of units purchase can be negotiated, or you find another manufacturer who can produce it or create it in a lower price point for you, right? You now have power and control in the negotiation when you do that. So again, make sure it’s profitable. Find a little negotiation base on front. If you know you can take it to market with better retail pricing and profitability later on the front end and go to market with it, out-brand it, move it up, then come back to manufacturing with a power negotiation position, right? You want the next 10,000 unit order? Great. I need 90 day terms and I need you to drop the price to 518 from 618.
– Cool. Yeah, that’s good stuff. That’s good.
– We’ve covered so much information here. I’m sure if everyone’s like Kris and myself taking notes here, they wrote down a lot of terms. And I think the main thing, and you’ve kind of opened my eyes to even more metrics too, on this product research term. It’s how important it is. You’re, passionate about spending your money here to make sure that you’re validating the product before you launch it. And I can assure you that I didn’t do it enough on a lot of my products and I know a lot of people that they just met, they gloss it. And I like the way you’re okay just being passionate about the product, which kind of makes you just sort of not pay attention to the fact that it might not work if you really broke it down.
– Yeah, then you go down the roads of things like, well, I might need a patent or something on this, right? Then you start to get over way too far in the innovation brain and not enough in the business opportunity brain. So you’ve got to balance the two out somewhere in the middle. But I will also give you a caveat that when the numbers work and the product seems to fit really well, but you don’t currently see certain trends in the market or you see opportunities to trend, we’re gonna talk about that in the next session cause it kind of leads your conversation sort of segues into the component of don’t marry your product, which is find someone else’s girlfriend instead, that’s gonna be our next topic. So what that leads into is things, something I coined years ago called trend jacking, which I’ve taught a number of people how to do. And I’ll give you some examples, even a product example when you guys show up to the next podcast of one we did, because everyone wants to know, what kind of products do you sell? Well, I’m gonna give you one on the next podcast that’ll tell you how it went down, what the brand did, how we aligned it with the numbers and then how we met the market and answer that question, what the hell do I sell? And it should bring together the next, the third topic, these two components that we just discussed today and kind of round up the whole understanding of how to answer that question.
– One thing that I, this is such a good important topic because one thing, you can get stuck on like a product and you do like fall in love with it, right?
– You do.
– You’re like, I gotta do this, I gotta do this but when you start looking at it just as a widget, and this is something not as personally do, when I do product research, I’ll make a copy and then I’ll just change the names and like just delete the names and so all I look at is the numbers and not the names of the products, so I don’t know what I’m, I don’t know what product is what until at the very end, that has the most profitability, the most ROI so that it doesn’t skew my decision on what I launch cause if you see the name, you’re immediately emotionally attached to it or the product name, you’re attached to it and now you can start to justify all the numbers.
– So you start to make compromises and we know how that works. Little compromises, like maybe she’ll stop picking her teeth later on, or maybe he’ll stop farting before bed or whatever, right? And pretty soon, three, five years, seven years fall out, they call it the seven years itch for a reason, right? In Amazon, we should call it the like five month itch. Everybody gets it around five or six months and they suddenly realize, you know, I don’t want to be married to this product anymore. Like this product stinks, they fart. They don’t clean their shoes, they don’t pick up the dishes. They leave the dishwasher basically unloaded. Like I don’t want to be married to this product anymore. We’re gonna cover that, right, cause we can steal other people’s girlfriends ethically, morally and that’s probably most important to understanding how those topics come together.
– I can’t wait. It’s gonna be so fun. And so what everyone needs to do now, a spreadsheet, you start inputting your data, start getting familiar with the spreadsheet and the numbers you need to put in there, see how many green lights we’ve got on there. I’m definitely gonna be doing this for sure. I’m gonna input all my current products.
– I was gonna say go put your, go tell us what happens. Hopefully this is a good exercise.
– Yeah. Come on green lights.
– What’s different now is, you know, Kris five years ago would be still married to his product. But Chris now will be like, this is gone. I’m done with this one because you’ve been through that, we’ve been through that like I’m gonna push advertising, advertising, advertising, advertising, and it still doesn’t work. Like you can’t shine it up and make it sell more than it does.
– No, you really can’t. If you’re making a dollar in profit and you’re selling a thousand units a month, you’re not gonna get rich selling 2000 units at a dollar profit. Like it’s the same thing I see with people’s brands all the time. I just need to move more units. Well, how much profit are you making? Well, $1.50, but if I get my A cost down and I move another a thousand units next month, all my dreams are gonna come true. It’s like, no, sorry. That’s not how it’s gonna happen.
– It’s true. And that inventory costs, you’ve got loaded up in those products that are bringing you $1.50 per sale could be used for something that was bringing you 12.
– Once you see that line, there will be a line in your sheet that you will start to cut off. Even those that are potentially profitable or green light, once you restack those with your current products, you can make a business in three months, invert profit. I had a gentleman come in, John actually took him about five and a half months. When he came in, he was barely making it. He was moving a quarter million a year in sales, but he had about a 7% profit margin. Can you believe that? Like at the very bottom, I’m like, oh my gosh, dude, you’re making Amazon rich, man. No wonder nothing’s working for you. So we inverted his business. We showed him how to build the sheet and go through the product analysis component. He basically shaved off over half of the skews that he was currently selling. And then what then occurred is he started to raise the prices as the account turned around, the account health turned around, the profitability turned around and in six months he had gone from 250,000 to a million in revenues and increased 200% profitability in his business. So he just inverted that current business model and started to approach it very differently. So if you’re doing 100, 250,000 a year on Amazon and you are wondering, why is it not profitable? Why can’t I move? This is gonna be a great exercise for you to get to the next step, to basically turn the profitability around. But you’re gonna have to be very understanding that you can’t marry your products, right? You’re gonna have to get that emotion aside and get down to the numbers.
– This is important.
– Love it, love it. Can’t wait. Everyone get the spreadsheet, input the numbers and we’ll be back at this tomorrow. We’re doing this tomorrow. We’re doing part three and we can’t wait to dig into this. So everyone’s got a little homework now between the next episode, but we’ll have that link everywhere so everyone can get the spreadsheet. Neil, you’ll send that over to us.
– Yes, I will. I’ll get you a link for that, absolutely.
– I feel like we just started.
– We’re just getting started guys.
– I love this, I’m excited. I’m excited to go through this again. It’s a fresh perspective on current products that I have running and ways to evaluate new ones. So this is a fun process to do.
– I’m glad you guys enjoyed it. Hopefully those listening enjoyed it too, because remember don’t marry your products. We’re gonna steal somebody else’s girlfriend. That’s what’s happening next.
– Yeah, this is very valuable for long-term sellers. This is not just for new people looking to sell new products.
– No, no. If you want to sell your business at some point, if you’re already running and can’t figure out why you can’t get to the next level, next scalability, next tier, because I hear that a lot, right? How do I get to the next tier? It isn’t always just about launching products, right? It is about making sure you launch the right products.
– Yes. Take me to the next tier.
– That’s where I’m at. That’s where I’m at Neil.
– Let’s do it. Next tier coming right up.
– All right. We’ll do that tomorrow on the next episode. I can’t wait. Everyone, thanks so much for tuning in and we’ll be back at this again tomorrow. See you.