Make Amazon FBA profit – avoid this “cash flow trap”

I recently asked David, a 7-figure Amazon seller, how he picks what to sell (the full interview is here in case you want to check it out). 

He’s an accountant by trade so he had a good, logical answer: 

“Run the numbers first. Some products don’t even make sense on paper.” 

Meaning: 

With some products, just by running the basic numbers, he knows it’s not going to work (before spending a cent!). 

David is picky. 

David requires a minimum 4x markup. 

If he’s going to sell a product for MSRP $100, his landed COGS (cost of manufacturing/goods + cost of shipping to Amazon) should be no more than $25. This way, turning a profit is very likely. Obviously, 5-6x is better. But 4x is his floor. 

If sellers don’t approach Amazon from this “profit first” perspective, sellers can fall into what I call the “cashflow trap”. And it’s an absolutely horror story: 

– order 1000 units 

– sell 1000 units over time, but sell at close to break-even (what with launch costs, Amazon fees, etc.) 

– forced to re-order to stay in stock and keep revenue up, but this new re-order comes out of pocket 

– this business is making REVENUE, but not PROFIT! 

But… we started selling online to have freedom and control over our lives. And revenue’s not going to help with that. Only profit can help with that! 

And also, if a seller ever wants to sell their Amazon FBA business (to an aggregator or strategic acquirer), ecommerce businesses are valued on monthly take-home profit, not topline revenue. So, profit builds enterprise value, as well. 

If you’re the type of seller who wants profitable growth, it’s extremely achievable. Keep in mind David’s 4x markup rule. And then, start running Amazon Ads to scale. If you want some free advice in regards to your Amazon store and building your brand, my team is here to help. 

We are Amazon specialists, it’s all we do, and we can talk to you here: