How to make money on Amazon FBA – my advice to a beginner

I met an old friend of mine at a café the other day.

He launched on Amazon 3 months ago, and I’m giving him some pointers (I’ve been doing this for 7 years and spend $13m/year on Amazon Ads across 200 accounts). Some context for you: he’s doing $5k/mo right now with 2 SKUs and is just about breaking even.

His ultimate goal is simple: treat Amazon like an ATM machine 💸💸💸

His dream?

Every month, he wants to draw cash from the business to finance a cool lifestyle. Cars, travel, family, fun. Heck, head to Great Wolf Lodge this weekend. Refresh the Amazon app next to the indoor pool. It’ll be nice.

And the more he can take out, the better. And I, for one, think this is great. If run properly, Amazon FBA businesses can indeed be cash flowing machines that don’t require a lot of day-to-day operations. IF run properly!

But here’s the thing:

Getting the business to that point is hard. For 1 main reason:

Cashflow.

It’s the #1 killer of Amazon businesses.

I can’t tell you the number of Amazon FBA businesses I’ve seen with lots of REVENUE, but not much PROFIT. The phrase “I have a 6 figure Amazon business” means nothing to me because I’m like “OK, but how much does the business actually make?”

These are physical products and they’ve got real costs: materials, manufacturing, shipping, Amazon fees, etc. And on top of that you’ve got to pay to advertise the darned thing?!

You can see how margins quickly go to 0%.

Maybe you’ve had a SKU or two like this.

How are sellers expected to sell at a loss, then place another large inventory order? Where’s the sense in that?! Lol.

The solution:

Start with a monthly profit goal in mind and work backwards from there.

Also known as “profit first”.

Here’s the plan I sent my friend (keep in mind, he’s doing $5k/mo right now with 2 SKUs):

“I find it helpful to start from the goal and work backwards. So, say you want to make $10k in bottom line PROFIT (not revenue) per month on Amazon. That’s when Amazon gets interesting and starts to look like a full-time income. $10k/mo profit isn’t the final goal. But it’s a nice milestone. Working backwards: $10k profit → $50k monthly revenue (assuming 20% margins) → right now, we’re at about $5k/mo with 2 SKUs (that’s $2.5k/mo/SKU). Assume we can scale this to $5k/mo/SKU because we can further optimize/scale with ads → we need at least 10 total SKUs in-market. So that’s on you! I’d launch some very low MOQ SKUs in the same, non-seasonal [NICHE REDACTED FOR PRIVACY😉] and see what the market likes. Decide carefully, but cut quickly (like the old adage “hire slow, fire fast”). It’s like soccer: without enough “players” (products) on the field it’s not likely that we’ll “win the game” (make the $10k/mo profit). Unless we get a smash hit. This does happen, but it’s unusual. So, we can’t bank on that. 1st order of business: more revenue. Specifically, raise our 2 main SKUs to $5k/mo each. Minimum.”

I then sent him a custom-made advertising plan, describing what campaigns to launch next. Then he launches them and makes more money.

Would you like one, too?

I’d be happy to do it.

Because I know how powerful Amazon can be. And how much freedom it can unlock. That’s why I do this job!

You can write back and let me know: pat@asteroidx.com

So here’s to you and your next 10 grand!