A reframing, putting Amazon back into perspective in comparison to career alternatives.
I write this as a reminder to myself first and foremost, but hopefully other sellers can benefit.
Lately I’ve been finding myself discouraged with sourcing, and finding products that you should only realistically grab 2-4 units of. I became spoiled from huge sales on high velocity items during the Q4 rush where prices were increased and retailers had their lowest buy costs.
But I’m a numbers guy. I like numbers. So let’s actually run them.
Let’s assume an average sales price of $50, and that we’re making 30% ROI on the item after prep costs. This is conservative. Once you get good, you can manufacture higher margins for yourself, but I digress.
So that’s $15 per unit. Let’s say you’re buying an average of 3 units per product, which is very low and very doable, that’s $45 profit per product. So let’s assume you’re able to find only 2 products like that in 1 whole hour of sourcing. That’s $90 profit per hour. If you were to treat it like a 40 hour work week, that would be a $180k/year in profit.
But let’s assume you only want to work, say 5 hours a day. At that rate of finding product, which is very very doable, that’s $115k in profit per year if you stagnated at that and didn’t improve on your sourcing efficiency.
You might say, okay that’s all good in theory, but I need a ton of money to do those numbers. Well let’s run the numbers. At 30% ROI, and a very conservative 60 day turnaround time (you can realistically be at 45 days), that’s 6 turns a year, or once every 2 months. So you’ll want to make $19k profit every turn at 30% ROI, which comes out to $64000 in total spend.
You might say “that’s too much money, I don’t have that kind of money.” Remember, I’m giving you the absolute bare minimum expectations here on ROI, turn speed, and at 0 reinvestment.
Are you able to bring your average ROI up to 40%? That’s very very doable when you’re talking lower velocity items. That just brought down your total spend needs to $47,500
Are you able to bring your average turn time from 60 days to 45 days by working with a prep that’s on the east coast, ensuring they’re not holding on to your product for longer than a day or two, and going wide on products rather than deep so they sell out faster? You just brought your spend needs down to $35,625, to make the same $115k in gross profit.
Are you able to live frugally for a year, renting a cheap studio, or moving in with your parents, avoiding vacations and unnecessary purchases, and bring your living expenses down to $3k/month? You just brought your initial required spend down to $18,279.
$18,279 to start, and 5 days a week, for 5 hours a day, paying yourself $1500 twice a month for bills, TO MAKE $115000 IN GROSS PROFIT. And all you need to do is spend an average of $138/hour to do it. That’s 4 units of a single product that you buy for $35, and make a 40% ROI on, or 2 products of the same criteria. You’re saying you can’t find $138 an hour of products at that criteria? You should just go back to your 9-5 at that point, because that is way more than doable after you’ve gotten halfway decent at sourcing.
So 5 hours of sourcing, 5 days a week, spending $700/day, at a 40% ROI criteria, to replace a six figure job. Sounds fantastic. But that’s not taking into account all of the added benefits of doing this INSTEAD of a $100k/year 9-5. Let’s go through a few of those benefits.
Did you run into a big sale and are able to spend a few grand in a single day? You’ve got the ability to cut your number of hours worked by becoming better and more efficient at sourcing. Can’t do that at your 9-5.
Hired a VA or two and trained them to source for 8 hours a day the way you want them to? You just bought back your time for $10-20k a year. Now you don’t source at all, and make the same amount spending an hour or two a day purchasing and managing.
@RoadRunnerBird1@UziCryptoo It's really not. Used cars older than 9 years can't get any lower than 9% even at credit unions with a 750+ credit scores. That's the floor these days.
@shipwreckedcrew Be glad theyre at least pitching it to you. Last 2 places I've gone they've baked the warranty, gap, and wheel and tire into my payment and I have to play 20 questions to figure out why my payment at my APR for the amount I should be financing makes no sense. Bunch of crooks.
@depreciationguy Average stay < 7 days to deduct the cost seg against ordinary income, right? If I have say $150k of bonus dep. available after cost seg, but I only want to take $70k of it that year, can I defer the other $80k for another year?
@ChrandLord Please do a whole section dedicated to the marketing/sourcing you do to find your leads too, or if you cold call how you pull lists. Appreciate it my man
@TristenPalori If you were thrifty you'd do your own brakes, and buy tires off unitedtires with 80% of the tread left on them and you'd be looking at getting it all done for $2000 less. Even if you had to buy the Bauer 20V 1/2 inch high torque you'd still save $1800 and have a new cool tool.
@ChrandLord Some advice if you try it: in addition to the educational and instructional stuff, record a vault of your calls with the identifying info edited out so people can see the theoretical applied in practice.
@tech_felon @_contraryan If your idea of peace is an aluminum tin that you can't lay down sideways in without your head and toe touching each wall... It just looks claustrophobic and his flex is he owns it outright
@jeremy__taggart Oh snap you’re in Pittsburgh you might have to be my agent once I begin my W2 job next year. I’ve been looking for an agent in Pittsburgh knows the small MF investment side of things
@jeremy__taggart Did you use basic percentages or did you calculate it based on the actual age of stuff in your house? If percentages what did you decide on?
@tech_felon @_contraryan Yes, because living in a secluded sardine can is stupid. Look at old money in New York they all happily rent on Central Park West because it doesn’t affect their compounding of wealth and they enjoy the walkability, the community, and the amenities.
@GenZMultifamily How do you reach 45% capex ratio? Do you just always keep that money in reserves no matter what or do you begin to move a bigger percentage into free cash flow once you hit a certain number in the account?