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Can You Make Six Figures Selling on Amazon?

A reader Alex left the following comment “I have been reading your blog for a long time. I was wondering if you could provide an update on your Amazon business.”

Great reminder Alex! Since we’re getting so close to the 4th quarter and holiday shopping, it’s time to revisit my Amazon FBA Seller [1] business and see how it’s doing.

I did very little work on the Amazon business so far this year. Instead I focused on tax season and spending the summer with my kids. However, now that they’re back in school and it’s time to stock up for the holidays I plan to commit more time to it.

2013 Profits YTD

Interestingly enough, even without spending a great deal of time on it, the business has generated over $8,000 so far this year! Not bad for just a few hours of work.

For 2013 from January through August the base profits were $7300. I probably made at least another $1000 in additional money from online cash back [2], credit card rewards [3] and other incentives.

Can You Make $100,000 a Year?

I promised after I made my first $10,000 selling on Amazon [4] that I would be brainstorming ways to scale it to even bigger profits. I spent some time analyzing all of my previous numbers to build a model that would project how much I would need to buy to scale it to a business that generates six figures in annual profit.

Based on my numbers from last year, here’s what I came up with:

Inventory purchases: $180,000

Sales at 2.1 x inventory cost: $378,000

Expenses just over 29%: $110,000

Base Profit: $88,000

Cash Back on Purchases at 5%: $9,000

Credit Card Cash Back at 2%: $3,600 (at a minimum, it will most likely be much higher due to Rotating Cash Rewards Credit Cards [3])

Total Profit: $100,600

The amount of inventory you would need to purchase will be much different depending on what items someone sells. For example, reader Shaun [5] shared his strategy which is very different, focusing on electronics. His expenses are roughly 17% of sales, but he sells items at about 1.7 x cost. He would probably need to purchase an additional $40,000 in inventory to see roughly the same total profit.

Action Plan

Seeing that I’d need to buy $180,000 worth of inventory is sort of scary. However, remember that it’s not all at one time. If you sold the same $15,000 worth of inventory each month, you would never have $180k worth of inventory at one time. Then again, since I love to sell toys, the majority of my sales will be in 4th quarter.

So far, I have sold $17,000 worth of inventory and reinvested it in another $17,000 worth of inventory. To hit $180,000 for the year, I’d need to step it up considerably and purchase $36.5k in each of the next 4 months to finish out the year.

Hmm, now that I put it in writing, it sounds like a fun challenge! To get started, I need to fulfill all of my spending requirements on our new cards from my $1,800+ Fall Credit Card Application Spree [6] last week. Once that is done, I’ll have to see how much time I have left to continue making purchases. Making a goal is always a good first step… even if it’s a lofty goal!

If you have an Amazon business, have you calculated how much you need to buy to meet your goals?

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