How to Start an Amazon FBA Business: Keys to a Successful Online Store

How to Start an Amazon FBA Business: Keys to a Successful Online Store

Whenever you get an idea of compiling a small business plan for your future company selling online on Amazon, or maybe you already have one, and you are thinking of improving its strategy, you should be looking for ways to do it. Doing business requires all of your dedication, time, and effort. Having a limited budget for Amazon small business needs does not help either.

But what does it take to build a prosperous business? What significant parts of your Amazon small business plan might be/are missing? What are the ways to automate your small business to help you clear your headspace and turn your workflow into a smooth and easy process? We are willing to share the answers to all of these questions and more!

Contents:

1. Amazon: yay or nay?

2. How does Amazon FBA work?

3. What does DBA stands for?

4. Amazon SKU

5. Amazon FBA business: Taxes

Amazon: yay or nay?

Amazon is the largest e-commerce platform at the moment. You can find literally any product or item there. One of the main reasons to choose Amazon and create your own Amazon business account is the unlimited profit potential: you can grow as much as you wish.

On the other hand, breaking Amazon’s selling policies may lead to serious consequences, such as shutting your Amazon business account down or Amazon’s withdrawal of your money, so you should remember to stay honest. You might also have to deal with unscrupulous sellers, who might steal your listings or do something else in order to spoil your selling process.

After all, Amazon small business owners have to risk it. However, it is up to you to decide whether the risk is worth it. You may get acquainted with an expert opinion about the pros and cons of selling on Amazon Marketplace.

How does Amazon FBA work?

Let’s suppose you were wondering: “What is Amazon FBA?”, “How to start an Amazon FBA business?”, and “How to make money on Amazon FBA?”.

The Amazon FBA program may help you bring your business to a higher level. Allowing Amazon to manage your logistics makes operations easier. A huge amount of customers shopping on Amazon is also tempting for retailers when deciding where to search out new customers.

As a result, products from your Amazon small business become more visible to millions of Amazon customers while providing world-class fast shipping and acclaimed customer service.

A guide on what to include in your Amazon FBA Business Plan

An Amazon FBA business plan template assists in giving your small business a good start and further growth. It takes an essential amount of work to set up your business positioning, analyze the way to achieve your goals, and make sure that your Amazon small business is capable of succeeding in e-commerce.

Here are the basic parts of the detailed Amazon FBA Business Plan Template

1. Executive Summary

This is the most critical part of Amazon FBA business planning. It is where you introduce your business and consolidate all key elements of your plan – an essential tool to structure your Amazon FBA business for sale. Ideally, this is recommended to be completed last in order to summarize each section of your plan.

2. Company Description

This is an overview of your Amazon small business. You may include your mission and vision, company formation information, founders, location, and notable achievements, if applicable. It features three important sub-sections:

  • Main objectives: This answers your goals and purposes of starting this Amazon FBA business.
  • Products or services: This is where you identify your Amazon small business products. This involves the development stages, product images, pricing, past test results, and anticipated future products.
  • Value proposition: This defines your edge over the other competitors. Your value proposition is there to answer the questions, ‘What do you offer, what makes your Amazon FBA business different, and why do you do what you do?’. Essentially, this gives you a good gauge of how clear your business trajectory is.

3. Marketing Plan/Analysis

An absolute must-have! This serves as a vital guide for the merchant as to which marketing activities need to be done, how they will be executed, and where the future goals tie into your Amazon FBA Business Plan.

It holds the key information that all your partners and potential investors are going to want to know. You may include the following to your Amazon small business, depending on your needs:

  • SWOT analysis: Strengths, weaknesses, opportunities, and threats. This analysis focuses on determining the best opportunities to pursue in order to achieve your Amazon FBA business growth goals
  • Financial projections: Based on your expected sales figures, how much do you envisage your Amazon FBA business turning over?
  • Target market research: Target market size, total addressable market (TAM), market research/trends, and what you do. Note: to learn more about trends for any particular niche, try the Google Trends tool, and Jungle Scout web app.
  • Customer segments/target customer profiles & personas: This is where you identify mass and niche markets for your Amazon small business. Here, you identify the groups of people who are most likely to buy your products and the qualitative factors that matter most to them.
  • Customer relationships: Strategies to build a lasting relationship with your target market.
  • Brand and product positioning: Where in the market does your brand sit? Are you offering a premium range of items on your Amazon business account? Does your brand convey cheap and cheerful? Is design a major selling factor?
  • Elevator pitches and taglines: quick and creative ways to describe your Amazon small business.
  • Marketing Amazon FBA business plans/channels to be used: Include details of whether you plan to reach customers via paid ad placement or organic search engine ranking, affiliate outreach, or a combination of all three.
  • Marketing ideas and strategies: planning this ahead of time will ensure that any money you spend on advertising your Amazon small business, you have considered first, and can track progress. 
  • Estimates of ‘cost per action’ of any testing conducted: this can include cost per click, cost per conversion, sampling costs, and more. Whilst it can be very easy to get bogged down in detail, it’s important to only focus on metrics that actually matter to your business.

4. Operational Plan

This part is intended to organize the moving parts of your Amazon FBA business and allow for a practical understanding of the industry and your products.

If you are starting out on a shoestring budget, much of the operational plan will be irrelevant. However, we have included a detailed checklist of components to consider for small businesses with access to larger amounts of capital and bigger plans. Here are the most important things to keep in mind:

  • Facilities and space needed: Either within Amazon FBA warehouses or if you are also handling warehousing, then this would include the space needed in your own house/distribution center/other facilities.
  • Technology needs: There is a range of software and cloud-based technologies that can be useful for simplifying the operations of an Amazon FBA seller business. 
  • Equipment needs.
  • Supply chain management: Stock requirement prediction tools such as Forecast.ly and inventory management applications like Cin7 can be very helpful.
  • Logistics and distribution plans: Consider including details about your prep warehouses and freight forwarding partners.
  • Quality control checks.
  • Legal and accounting needs.

5. Management & Organization

In a nutshell, this section of your Amazon FBA business plan discusses the management and industry experience of your team and provides a rundown of the assigned people for each task.

You may be keen to include some or all of the following, depending on your needs:

  • Founders and executive team.
  • Any owners and shareholders.
  • Board of directors.
  • Consultants and special advisors.
  • Key team members and department heads.

6. Financial Plan

This is a critical part of your Amazon FBA Seller business plan because this is where you show the exact figures and a run-through of your current financial state, thorough startup cost, forecasts, and goals.

This is geared towards providing secure funding of what you need and a product/business development budget. For those who loaned the startup funds, it is here that you want to include a repayment schedule, rundown of the exact use of funds, steps you plan to reach your goals, payment schedule in detail, petty cash funds, and contingency funds to your Amazon small business.

Here are some prompts for what to include:

  • Revenue streams: Look at what you are charging and if you could be charging more. How are you receiving your payments, and does it contribute enough to the overall revenue of your small business?
  • Cost structure: Pin down fixed and variable expenses to give you an opportunity to see what you can improve on.
  • Current balance sheet: This is applicable for the existing Amazon FBA business.
  • Past two years’ financial list, if applicable.
  • Projections for 12 months and annually through 5 years.
  • Break-even analysis.
  • Cash flow projections.
  • Income and expenses.
  • Expense projection.

7. Appendices

This includes the finer details that are referenced throughout the Amazon small business plan.

You may want to include the following:

  • Articles of incorporation and company status.
  • Shareholders agreement and company constitution.
  • Resumes of founders and key team members.
  • Copies of insurance contracts.
  • Licenses.
  • Trademarks and patent registrations.
  • Employment and supply contracts.
  • Appraisals.
  • Deeper research data or links to references.

What does DBA stands for?

DBA stands for doing business as. If you want to register your Amazon small business name, it needs protection. First of all, you do not have to reveal your personal name or your formal business entity name, as you may create a different name under which you can manage your small business. Secondly, opening a business bank account becomes possible with a DBA and Federal Tax ID Number (EIN).

Let’s say you would like to open an optical shop, but you don’t want to operate under your own name. What you could do is file a DBA for Perfect Vision and start doing business under a new name. 

You might decide to turn Perfect Vision into an LLC, and if it is doing so well,  you might want to expand into sunglasses and accessories. You wish to stay under Perfect Vision LLC but also sell under Sunny Accessories. In this case, a DBA helps differentiate the businesses without creating various corporate structures.

Do not confuse an LLC and DBA. An LLC is a formal business structure, whereas a DBA is another name for your company to operate under.

Amazon SKU

An Amazon SKU is a unique code used to track a product for inventory and sales purposes. Typically, it includes product attribution details such as size, color, and any other pertinent information that you can glean at a glance.

One of the most confusing things for Amazon FBA sellers is understanding the difference between an Amazon SKU and Amazon’s ASIN. An ASIN is an Amazon SKU to identify a product universally and should NEVER be used as your SKU. An ASIN simply means a product exists on Amazon FBA business for sale, but it is not your SKU. When listing products, configure your own SKUs and don’t let Amazon configure them for you or rely on ASINs.

Amazon SKU in your inventory management system will make it possible for you to:

  • Record loss
  • Make strategic inventory forecasting decisions
  • Track item location within your warehouse
  • Improve inventory accuracy—no overselling
  • Identify shrinkage
  • Reconcile inventory in your inventory management system with items actually in stock
  • Make it easy for employees to look up inventory for customers
  • Perform profit analysis by the Amazon SKU to determine best/worst sellers via attributes
  • Use the same SKUs on all your marketplaces
  • Have better communication with vendors
  • Pick, pack, and ship orders faster
  • Understand how long the product has been in inventory

Your accounting system needs to be able to integrate with your inventory management system. If you plan on selling on multiple marketplaces, it will act as a hub for your SKUs. It’s important that you do not forget to use the same SKU on all marketplaces.

Amazon FBA business: Taxes

The amount of tax depends on:

  • The identity of the Amazon FBA seller
  • The type of item or service purchased
  • The time and location of fulfillment
  • The shipment or delivery address of your order

Taxes for certain products or services also depend on city, county, or state laws. So you will need to either consult your accountant or have neat accounting books to file Tax reports on your own. You can read more about tax calculations on Amazon.

To sum up

So is Amazon FBA business worth it? Amazon is one of the best platforms for selling online. However, it has its own quirks, so consider all the advantages and disadvantages.

What we know for sure is that the bigger your profit grows, the more complicated it becomes to keep track of your financial activities, nor is it a fascinating part of the business  in general. If you choose the Amazon FBA for your retail store, it would be wise to automate all the possible processes to the fullest. After that, you may get more time to work on building strategies, planning, and growing your Amazon small business.

Synder team

Synder team

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