Some many of you will read this and disagree with what I am about to say. But you know what, Nessa and I are in the business for the lifestyle, not the work. And that’s why we go against a lot of the “conventional” practices of sourcing for your Amazon business.
As some of you already know, we are moving to Quebec City for 5 weeks in December and after that to Mexico and beyond! So, it is more important than ever to really hone in on what will best cater to our Digital Nomad lifestyle.
That’s why we sat down last week for several hours and really hashed out not only what kind of lifestyle we want to live but how we can achieve that lifestyle through our business choices. We’ve deemed it “The NewlyPreneuer’s Manifesto.”
Let’s kick it off with our lifestyle…
Why do we work? What makes us focus so much on making money? Is it not to have more fulfilling experiences with family and friends, traveling the world and just doing whatever it is that makes us happy?
Exactly! That’s why we are making such a conscious effort to draw the line between work and living. While we love what we do, we know that it can only bring us so much satisfaction. So we’ve identified what it is that we want our work to bring us. Here are our main takeaways:
Determined Digital Nomads
Don’t know what a Digital Nomad is? Neither did I until Nessa broke it down for me. Basically, a Digital Nomad is someone whose business gives them the flexibility to live anywhere they want in the world, at any time, completely at their discretion – given there is a decent Wi-Fi connection.
Needless to say, we have been on a constant quest to become Digital Nomads. Finally, only a few months after quitting our 9-5 jobs, we will officially start our Digital Nomad lifestyle in Canada and then Mexico. Who knows where it will take us after that. But one thing is for sure, that we don’t have any plans on “settling down” in the near future.
We want to explore the world and experience different cultures. Thanks to Amazon FBA, Online Arbitrage, newfound wholesale opportunities, Private Label and one of the best FBA Prep Centers in the country, we can run our business completely digitally without ever touching another product.
Sad to say, but Retail Arbitrage is not in our future. It just doesn’t align with our lifestyle priorities. However, it is THE REASON for us growing our Amazon FBA business so rapidly. So please do not take this as words of discouragement for doing RA. We are absolute believers that it is the quickest way to grow your biz, but it is only the first level of sourcing products.
Passive Income…Myth or Reality?
Ah, passive income the 8th wonder of the world. Some just think it’s a myth, but it’s true. Tell me, have you gotten sales today from your Amazon business without lifting a finger? There ya go. I love coming back from surfing and seeing the sales that rolled in. Very cool.
This income source is what we are all about. Again, it goes back to being Digital Nomads. We only want to dedicate our valuable time to business activities that generate solid returns with minimal time. I know, it sounds too good to be true. But it’s certainly a reality.
Over the past year, we’ve taken action and refined our business model over and over again. Now, we have one of the best sourcing strategies for us, which we’ll get into later, all because we know what it is we want out of life.
Bottom line, our supply chain is such: Buy lots of one item, have them shipped to our Prep Center, Prep Center ships to FBA, FBA ships to customer, we get paid and repeat. That’s it! Anything that comes in the way of that process is weeded out.
Love <3, and Lots of It!
We want to live a meaningful life. What does this include for us?
Good health. Low stress. Continuously learning. Travel. Speaking different languages. Sports. Experiencing different cultures and food. Spending time with family and friends, in foreign countries. Most importantly, loving each other.
Short and sweet, but if something comes in the way of this we’ll quickly remove it from our life.
Passion for Freedom, Like Braveheart Minus the Rack
We want to do what we want, when we want, where we want. This is not just something for today, but for many years to come. Despite our success with our online business, and all we’ve accomplished to this point, we still have skeptics amongst our family and friends who really wonder when we’ll “snap back to reality” and get a “real job.”
That’s why we are not only putting our money towards what we want to do today, but what we want to have in the future. Nessa, being the CFO, has relentlessly devoured various finance books and we have been following the “Profit First” strategies by Mike Michalowicz. Basically, it comes down to paying yourself first no matter what and being consistent.
That way if anything should happen to our business in the future we are prepared to take it in stride, with low stress and a clear mind. Because MARK MY WORDS, I will NEVER work for someone else again, except my wife. The freedom of being an entrepreneur is both liberating and addictive. And it is one of the best addictions you can have.
Identifying our true priorities has allowed us to clearly reevaluate our sourcing criteria. And it has no doubt changed quite a bit. There are 5 main criteria that we have pinpointed.
Larger Quantities & Easily Replenish-able > 3 Units
Starting out with Retail Arbitrage, it is less common that you’ll find products that are replenish-able. We had been buying 1 or 2 of an item most of the time. While the ROI was great, it’s very time consuming to constantly be seeking more deals that aren’t replenish-able. And the same thing goes for Online Arbitrage. All the time and effort that goes into finding a deal can really take its toll. Sometimes I felt like I was going “postal.” And this obviously goes against our lifestyle ideals.
That’s why we we will no longer be buying products that we cannot buy 3 or more units of. And ideally, these items will be replenish-able, meaning that we can reload on them at any point in time. While this can come from Online Arbitrage, it will most likely mean more Wholesale deals and Private Label sourcing.
R to the O to the I > 50%
Over the past few months, our standards were 30% Return on Investment (ROI) and up. However, our time is precious to us and we have decided to up the ante. Now we are at 50% ROI. Yes, we’ll be passing on lots of deals, but when we find those products that are replenish-able at 50% ROI it’ll be time well spent and will translate into that much sought over Passive Income.
(Inventory Lab makes this a breeze to calculate and track so I don’t have to test my mad math skills. Click HERE to get 1 month for FREE!)
For those who want to calculate ROI the old school way, below is what you’ll need to do.
ROI = Profit / Buy cost
Profit = Amazon Revenue – Buy Cost
Buy cost = Price + Sales Tax + Inbound Shipping + Prep fees
Low to No Competition < 20 Sellers
With this being our first Q4, we decided to buy an Online Arbitrage Sourcing List from a very reputable company, where we get 5 products a day that meet a certain criteria. Unfortunately, it hasn’t led to many positive results. Besides the fact that the products have extremely low profit margins, this list is distributed to over 50 buyers!!! After buying a few products and getting them into FBA, we quickly noticed that all of these products were in a race to the bottom. Meaning that the prices were dropping like flies.
That made us take a step back and ask ourselves how much competition do we really want to deal with. So, we came up with less than 20 sellers total. Any more than that, and there’s just too much price competition which eats away at our ROI and takes time away from money making activities.
From now on we’re’ targeting, more than ever, low competition, long tail products. We’d rather buy a product that takes longer to sell but gives us 100% of the Buy Box share, than take a shot at the Roulette table with all of these low ball sellers.
$40/$40 Rule for Buy & Sales Price
Falling into the same thought with competition, the higher the Buy or Sales Price the less competition. Because most Amazon sellers like buying stuff that is around $5 and selling it for $20. That’s where you’re exposed to higher percentage of fees, more competition and lower margins as a result.
Taking a look at what products we’ve faced the most competition on versus the least competition, we found that $40 is a pretty solid number. That means that we will only source products that we can buy for $40 or sell for $40 dollars. Either or needs to apply.
Think about it. If you can buy an item for $40/each, how many Amazon sellers have the cash flow to sink $400 into buying 10 units? We do! We have managed our finances well enough, and have leveraged the great benefits of credit cards to give us lots of buying power to go after these types of deals.
On the other hand, if the Amazon sales price is $40 and we are getting 50% ROI we are still in a pretty comfortable position to make a solid profit. The larger the numbers, the better!
Double Digit Profit Margins > $10
I’ve said this a bunch of times already, but our time is valuable. And buying items that yield less than $10 profit just ain’t worth, well, our time. We want to make $50-$100+ off items, ideally. That’s time well spent. Those deals are out there, trust me. We are selling lots of products for those types of returns. Just checking the stats, our Year To Date Average Price/Sale is $90.19.
So this isn’t something new to us, but we are just trimming the fat so we don’t waste our time on little profits.
Reflecting On Our Manifesto
Those are the major buying decisions that have rapidly become a staple of our business. And using those principles, we’ve already managed to spend over $5K this week on inventory, between Online Arbitrage, Wholesale and Private Label. And yes, we did make our last, very successful Retail Arbitrage run on Tuesday. According to Inventory Lab, the profit out of that LONGGG day of shopping will yield us just over $2K in profit.
You’ll notice that I didn’t mention anything about Rank or Reviews. Why? Because we have targeted niches that we know well. And when you know a niche well enough, you know if a product will sell or not. So looking at a rank isn’t going to make or break our buying decision. Like I alluded to earlier, we are much more inclined to wait 2-3 months to sell one high ticket item than buying something that sells 20 a day, for under $25 bucks and has 100+ sellers whittling down the price. I mean, it’s not like products are born with ranks. They are earned. We’ve successfully taken newly launched products without a product listing, created the listing and they are some of our best sellers. (Warning: This is a more experienced approach and would encourage those new to selling on Amazon to strongly regard Rank and Review.)
Now that we’ve spent all of this time brainstorming, putting our strategy on paper, writing this article and sharing it with you all, I think it’s time for Nessa and I to spend some “us time.” Maybe I can convince her to go surfing with me in these frigid waters. After all, I did surprise her when she got back from Pilates this morning with an amazing breakfast and rip-roaring fire. And that’s what it’s all about. Putting in spurts of time so that you can have the freedom to let go when you want to, and just do whatever your heart desires.
It’s time for you to write down what it is you want out of life and figure out if any of our decisions apply to you. Then, go and implement them. Whether you follow our strategies or not is your decision, but that’s the beauty, you have the complete freedom to do what you want with your business and make your dreams come true!