310 When can I go Full time with my Amazon business?
This very important question came up recently with one of my mentoring clients, which is a very common question among Amazon sellers. For more information on mentoring, you can find that at amazingfba.com/mentoring.
Goals on personal income
“I’d like some very rough goals in the way of income and what I should be shooting for to actually be able to take 20-25k for myself to live on and go full time with this.“
This person is roughly $13,000 a month of income.
The $64,000 question!
Long term goal – have as full time income
Take it seriously. Assess the business model and determine if it’s right for you. And if it is, do everything you can, such as seeking mentoring, to make the most of it. Give it at least a year.
Can suffer 1-2 years working on part time. This seems realistic. You don’t even necessarily have to quit your full time job. There is a member of the 10K Collective that still has a day job. He’s looking to leave it, but he’s not in a rush.
Comparison points need to be sensible.
- Don’t set unrealistic expectations for your business, even if it was possible for someone else to do so.
Get a spreadsheet, and you can make a plan for what you want to make as working capital in your first year.
- It may even be up to $80,000.
- This is rare, but two members of the 10K Collective were able to do this, so it is possible.
For more realistic expectations, generally p,eople do￡50-100k per month before going full time.
- For example, Ashley Pearce mastermind member that was on the podcast before, in episodes 252 and 253
- He was full time about 2-3 days per week. He had an arrangement with his boss that allowed him to work this schedule before going full time with his Amazon business.
Number of SKUs, and longevity of profit in those SKUs
- It may be that you get a product that is in fashion for a time and make a lot of profit, and then other sellers catch on, and the profit starts to go from it.
- That’s when having a strong brand and staying dominant is really critical.
Therefore, if you only have 1 or 2 products, you are not very diversified, and it’s not a very safe bet.
Length of time business running
- If you can manage to keep your business afloat for 3 years, you can likely do 1 or 2 years more.
You have to think about explaining this to your spouse, or kids, or whoever may be involved in your life. So it’s important to have a solid business case.
It’s not just about the numbers, it’s about how you feel. And you don’t want the pressure on yourself or your Amazon business. There’s no guarantee how it’s going to play out.
Working capital is the amount of money you can put in, and there has to be a relationship between that amount, and the goal amount you set for yourself.
You can’t build a serious business by putting tiny amounts of money in.
Often, people think of their business finances as they do their personal finances, but they are really different.
With an inventory based business, if you make ￡10,000 per month, you’ve got overhead along with a gross margin.
- Margins tend to get better as your business grows because you can order more in bulk, but the overheads increase as well.
You will kill your business if you have a profit margin of less than 10% is the rule of thumb.
- If you want to grow your business, you probably shouldn’t take any money out of the working capital.
- Basis 20% net profit therefore 10% personal income
Businesses need to be big enough, not only to serve your needs as a business owner but to survive in a marketplace with other people who have more money to spend.
If you’re in a very competitive market, it doesn’t matter how much money you need to live off of, your business needs a lot of capital to compete with other people who are well capitalized.
If you are in a highly competitive market, you need to make sure you are investing in it like crazy.
According to The Star Principle by Richard Koch, a really valuable business, a star business, takes the biggest market share in a market that is growing more than 10% a year.
- The rule of thumb for these businesses is to invest, invest, invest.
- Don’t treat a really successful business as a cash cow.
- You should take enough out of it to live off of, but the main focus should be growing the business.
If you would like more tailored answers to your questions and your business, please go to amazingfba.com/mentoring.