How I Made $100,000 Selling on Amazon Last Year

Posted by Madison on March 17, 2015

I know many of you who also pick up some side money selling on Amazon have been waiting for these numbers… last year our Amazon business generated over $100,000 in total profits!

We had just over $290,000 in sales and sold over 8,400 items last year. Here’s how!

100000 Selling on Amazon

Background

If you are a new reader, and this is the first you’ve heard about my adventures selling on Amazon, here is some background on how it started.

What began as a side project after reading Selling On Amazon: How You Can Make A Full-Time Income Selling on Amazon turned into a $10,000 profit in the first year, a $50,000 profit in second year, and now in the third year met my goal of making six figures selling on Amazon.

Since I’ve detailed my experiment selling on Amazon from the beginning I know many readers are also trying it out, sharing their success stories along the way.

Many of you have expressed that you use these income reports as a comparison for your own profits to analyze how you are doing and compare results. Let’s break it down!

Profits From Selling on Amazon

Here is how my Amazon FBA Seller numbers broke down for 2014:

  • Sales: $292.6k
  • Cost of Items Sold: $113.8k
  • Shipping, Warehouse, Overhead, Workers, etc: $16.3k
  • Amazon Fees: $72.4k

Base Profit: $90.1k

Additional money made on the purchases (which included online cash back, credit card rewards, a free trip to Steamboat etc): $12.1k

Total profit: $102,200.

As always, because Amazon allows holiday returns through January 31, I make sure that January this year isn’t a negative number. If so, I’d need to mentally subtract it from my 4th quarter profits last year. Just like the prior year, sales continued and more than outweighed any returns in January. We ended January 2015 with a base profit of $3k after all the holiday returns.

In addition, we carried over quite a bit of inventory into the new year. I wanted to adjust my expenses to properly account for prepaid expenses that weren’t sold yet. I calculated my inbound shipping and packing expenses that were prepaid at $1.60 per item. I also adjusted for any credit card bonuses and cash back on the unsold inventory. The net change was actually only $2k difference since the changes offset each other. Since it was such a low amount relative to the overall numbers, spending the time running the numbers both ways was probably a big waste of time!

Successful Doubling of Profits

As I mentioned we made $50,000 Selling on Amazon Last Year. What’s the difference between the 2 years and how did I double it?

There were three factors that I implemented this year that made the majority of the difference:

Outsourcing. I outsourced all of the inventory processing this year. I used My Inventory Team to receive, prep and ship all of my inventory to Amazon this year. This was a major improvement in process that allowed me to scale the business.

Innovation. After a lot of thought (because I’m a huge cheapskate and buying a $200 book makes me ill), I bought a used copy of Online Arbitrage. I will write a more detailed review in the future, but implementing some of the strategies in the book more than paid for it. I was already buying the majority of my inventory online, but it opened my eyes to buying inventory directly from Amazon! In addition, it gave me some ideas that I used to brainstorm other ways to innovate and automate my purchasing.

Time spent. While I didn’t ship much this year since I outsourced that piece, it did take a significant amount of time just to purchase and track over $200,000 in purchases. 80% of the purchases were done during October and November. If I had to guess, I probably spent 5-6 hours a day while the kids were in school over about 7-8 weeks. I also spent another 1-2 hours per day during December for monitoring prices, bookkeeping (I use QuickBooks), and staying on top of everything. Almost all the work was done during the 4th quarter; overall I spent about 300 hours total.

Making Improvements

Inventory. We ended the year with $98k in inventory. In the previous year I sold too much inventory the week after Thanksgiving and didn’t have enough to sell in December. I handled that much better this year, but I obviously swung too far the other way and ended up carrying a little too much inventory over into the New Year. However, it is a nice cushion to provide additional profits (like the $3k in January) without much work.

Taking Losses. Some of the inventory above that I carried over may not be very profitable. In addition Amazon changed some of their long term storage rules so I’ll have to focus heavily this year on How to Cut Your Losses Selling on Amazon. Hopefully, the future profits will offset any of these losses!

Action Plan

While in reality I didn’t spend a lot of hours on this project (compared to other ways to generate a similar income… like an actual job), it was a lot of my time and it did feel a bit all consuming during the 4th quarter. It was on my mind all the time during the holiday season!

It’s a fun hobby, but as we all know, I have lot of other money making ideas that I like to pursue. In addition, I need some time to focus more on my first priority… writing here for all of you! I’m sure I’ll pick it up again in 4th quarter, but I think now that I proved to myself I could meet my stretch goal, I’ll probably scale it back to a more reasonable time commitment. My ideal would be to find a sweet spot where I minimize my effort and time and maximize the profit.

Once again, I’m happy to answer to do another Selling on Amazon: Reader Q & A. What questions do you have?

If you have an Amazon business, how did you do last year?

More on Amazon





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Comments to How I Made $100,000 Selling on Amazon Last Year

  1. Great article. I have a few questions.

    – can you share an example of buying online vs going to stores to find merchandise to sell online

    – how did you handle sales tax for all the states. I found this reporting process to be a pain and a lot of work

    – are you set up as a LLC or just a sole proprietor? If not LLC what are your concerns to protect yourself if a suit is brought against your store for selling a product that causes some type of issue.

    Thank you,c

    Claude

    • Hi Claude,

      Sure! Here’s a good example, you could buy this Furreal Friends puppy online last year for around $15. During the holidays it sold for about $45. I sold 170 of them.

      The sales tax. Yes, it’s a nightmare. I download all the reports and file the taxes myself. It’s on my to-do list to write macros for all of the spreadsheets going forward. Hopefully that will cut down on the time involved. But I agree, this is a huge pain point.

      We are not sole proprietors. I set up all of our businesses as LLCs or corporations. No matter what the structure is, I do think that liability insurance is a MUST when working with the selling of any product!

      Madison

      • Hi Madison
        Based on the content I read from you, you have been in this for 3 years, just curious when did you set up your business LLC?
        If not prior you signed up amazon FBA and your first sale, I suppose you recommend LLC for anyone wants to do amazon FBA, new or pro? (This was not mentioned in starting this business post)
        Can you provide tips, tool or guidance on outsourcing? I can’t imagine it will be any less work especially dealing oversea, different products and different factory at once
        Thanks

        David


      • Hi
        Based on the content I have read, just curious out of the 3 years you joined Amazon FBA, when did you set up your LLC? before you paid Amazon FBA?
        Can you set up LLC / corporation after you paid Amazon FBA or first sale?
        Do you recommend LLC / corporation for new comers and pro?
        Can you give a few guidance or tool how you outsource because I imagine with different toys from different factories cannot be easy for you
        Thanks

        David


  2. How did you deal with the almost instant price pressure from competitors also purchasing online. Local deals seem to have much less issues in this regard. Thanks!

    Jake

    • Jake,

      One of the ways I minimized the price pressure was to buy ALL of an item online. It’s much easier to control the price that way.

      Also, I tried to buy items that weren’t highly advertised. That way, I often only had a handful of competitors instead of a hundred.

      I do agree with you though, local deals have so much more profitability built in since they are harder to get.

      Madison

  3. also, Was your strategy of buying massive quantities of each item the same? If so, how did you get around retailer item limits. Thanks

    Jake

    • Jake,
      Yes, I still bought massive quantities. Even more in some cases!

      When faced with an item limit, I often tried to find the same item at a different store. For example, Walmart.com was a great source this past year since they often price match Amazon and Target, but didn’t have such restrictive item limits.

      The invisible hand plugin is a must for quickly finding the other stores.

      Madison

  4. Hi, great results!

    You bought amazon flash sale itmes to sell back on amazon?!?!?!? How did you get away with this? Isn’t that against Amazon’s rules?

    Was it impossible to scale to 100K via local sourcing or you just could not handle all the inventory and shipping that would have required?

    Thanks

    Unique

    • Hi Unique,
      No, buying on Amazon for resale is not against their rules as long as you don’t resell lightning deals. I don’t really know if it would have been possible locally, or if I could have handled the inventory, because I never explored that route. I have limited time while my kids are at school and my other businesses and volunteer commitments take up a good portion of it. I look to outsource and automate any processes that I feel others can do better than I can or at a cost below mine. One of those is receiving the inventory and shipping it in, when I first started that was something I identified right away as using a lot of my time, but I couldn’t really add value to. If someone had the time and enjoyed it, they might be able to do it themselves.

      Madison

  5. Hi,

    Did you find that you were spending as much time searching for online deals via deal sites and major retailer clearance/sales sections ect. as with local in store scanning clearance items?

    Jonathan K

  6. Amazing job & eye opening returns for only 3-4 months work.

    A few questions…

    You mentioned to another writer above that you ignored advertised deals.

    Did you ignore the well advertised deals like emailed deals of the day, weekly flyer deals & dealsite listed deals?

    Did you have to manually search the entire clearance section of online retailers to find good deals? If so, was this tedious for you?

    Thanks!

    Xavier F.

  7. Hi Madison,
    I really love getting your newsletter. It has helped me a lot and has tons of great material.
    In doing a little more research on the Amazon FBA program and Retail Arbitrage, I discovered that there is a lot of confusing information on the web about this business.Some people are saying that there are so many sellers on Amazon that it is becoming increasingly difficult and the competition is fierce and finding good inventory is becoming more difficult as well. Now there are tons of people selling “courses” online on how to do this business.
    What are your thoughts on these comments?
    Did you experience any great difficulty with competition or finding good deals on inventory? What do you think about these so called “courses”. Are they really helpful or just another way some people are trying to ring out some money on what they think might be a business on the way out.Do you think there might still be somewhat of a future in this?
    I really do appreciate the work you’ve put into this.
    Paul H.

    Paul H.

    • Hey Paul,

      Yes it is increasingly hard to make a buck on Amazon because of AMAZON! Every time I get something into the warehouse and priced to sell, here comes Amazon selling it for way cheaper than I can. How do you compete with that? You wait! After all you have already bought 20 or 30 or 100 or how many ever of this product. Now you have your money tied up in something that if you went to sell it, you may break even at best. I have thousands of dollars of stuff sitting in my house waiting for AMAZON to get out of the way so I can sell it. If it is not for Amazon selling it cheap, you can better believe someone else will be selling it too cheaply! I often wonder, how is that person making a profit! I got free shipping, all the discounts, ebates, etc and I still can’t sell it that cheap. So if you get a good seller, expect AMAZON to step on you! I would be terrified to buy as many as Madison is suggesting because now you will have a huge amount of dollars tied up in something that AMAZON will crush you on. Madison, can you add some insight to this?

      Bill W

    • Paul,

      One other thought to the readers of this thread. I have used the approach of outsourcing the inventory handling. You better make sure it is a fast seller because if not, you are paying storage fees on a ton of inventory. I like to meter out my own shipments so if I have to wait for an item to become profitable, I am not paying storage while I am waiting.

      Bill W

  8. So did you actually end up with 102K in cash. I asked because I noticed you said you ended with 98K in inventory. Did you reinvest your earning and are holding it as inventory?

    Trillionaire

  9. Madison,

    Are you on facebook? I remember a few years back seeing your whois was registered in Middleton, WI. I’m in Beloit. Read your articles about selling on Amazon. Made my first sale Feb 2015. Will finish 2015 with over $280k in sales. Maybe meet up in person to discuss strategy or something?

    Tommy Z

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