How much do you need to start an Amazon FBA business?
Amazon FBA startup cost is $5500 to $13,000 to have all the tools you need for the best chances of success. If you're trying to start FBA with the most bare-bones budget, then it's plausible to start with $3500 but this could actually hurt your success rate.
Here are the breakdowns:
Amazon Seller Central Account
There are two selling plans available, Individual and Professional. To launch a sustainable Amazon business, you'll need to sign up for a Professional Seller account:
Software – Product Research Tool
If you don't research your first product, there's a good chance it will flop. Even experienced sellers can't predict the future when launching a new product. So the wise move is to use proven tools to help analyze data. Then you'll be ready to make an informed decision.
I recommend Jungle Scout:
(Another option is Helium10 with a range of $39.00/month – $99.00/month, depending on plan)
Inventory – Samples
Negative reviews kill a new FBA business. Ordering samples is one way to guard against them. Evaluating samples takes the guesswork out of the product selection process.
This also protects you from blindly chasing high profit margins – because when a junky sample arrives, you'll know it would've been the wrong choice and wouldn't have been profitable.
However, the supplier won't manufacture samples for free. As a new seller, you'll pay the production and shipping costs.
Inventory – First Order
This is where your Amazon FBA product research pays for itself. If you've ignored your emotions and selected a product based on the numbers, your launch has a much greater chance for success.
There are many opinions whether it's better to sell a low-ticket item or a high-ticket item. For our example, we'll look at a typical wholesale price point (below). For a new seller, 500 units is an appropriate first order quantity.
Assumptions: Retail price listed on Amazon will be ~ $26.00 per unit. Product will cost $6.00 per unit to manufacture, including the product cost ($4.50) plus shipping ($1.50). At $6.00 per unit times 500 units, the initial inventory investment will be:
It's wise to purchase a GS1 Company Prefix Barcode, which provides benefits for growing your brand in the future. For instance, the GS1 Barcode gives you more control over logistics and allows you to create coupons in your Amazon account.
The minimum order quantity for a GS1 Barcode is 10 and costs $250.00. This is a good investment, since it provides a new seller with 10 unique barcodes - this will make future product launches quick and efficient.
TOTAL – Mandatory Costs
Think of mandatory costs as the funds required to begin selling on Amazon. If you don't have this minimum investment amount, FBA may not be the best business model for you.
As noted above, it will take a minimum of 3 months to complete the above tasks. (With reviewing samples and possible shipping delays on the first full inventory order, plan for longer.)
Although not mandatory to launch a product, running Amazon pay-per-click ad campaigns is the most efficient way to drive traffic to a brand new product listing that has no rankings. In most cases, you need to run PPC for a while so that you get reviews in order to rank.
Investing in PPC also gives you access to the Amazon Advertising Reports. These reports provide valuable product data, plus make it easier to plan, optimize, and measure marketing strategies.
As a new seller, you'll need to generate product reviews and encourage customer loyalty. The quickest way to do this is through giveaways.
There are different promo options – pick one that doesn't break your budget. Many sellers choose to offer a 100% product rebate on a fixed number of "freebies." Other sellers prefer to offer a deep discount for a limited time immediately following launch.
After researching Amazon business models, many new sellers are attracted to Private Label FBA.
In the private label model, you establish your own brand from scratch.
For this reason, launching a private label product may result in copy-cat competitors and Amazon listing hijackers.
Trademarking offers protection against these rogue sellers.
TOTAL – Recommended Costs
Think of recommended costs as the additional funds needed to speed up growth and stabilize your business.
You can be successful without spending this money, but it will take a lot longer and expose your business to greater risks.
For this calculation, the total below is based on the upper end of the price range listed for the "Amazon PPC" and "Trademark" categories.
This cost covers logos, packaging, product inserts, etc.
These days, many people have the software and do-it-yourself design skills to at least launch an initial product. So you can postpone this expense until later.
But if you want to look more professional, you'll eventually need to invest in design work. Since the sky is the limit with design costs, each new seller must consider their unique budget.
Selling electrical wire differs from selling women's clothing. So this decision depends on your product category.
A new seller must scrutinize their competitors' listings – specifically, look at image quality.
If sellers in your product category use attention-grabbing photos, you may need to invest in professional images to win the click.
Second Batch of Inventory
Ordering additional product is an investment that will support sustained growth while you wait for revenues to ramp up. Most importantly, you don't want to go out of stock because it will hurt both your Best Seller Rank and organic keyword ranking.
Assumptions: This calculation is based on the $6.00 product listed in Mandatory Costs – replenished at two-thirds the initial inventory order (335 units):
New sellers often handle accounting on their own at the beginning. With basic business skills, it's certainly possible.
But since your plan is to stick with FBA and build a sustainable business, you'll eventually need better financial tracking for expenses, taxes, etc.
A good option for new sellers is QuickBooks "Simple Start":
FBA Training Course
In my experience, the best way to get started with Amazon FBA is by following a good course.
Unfortunately, the free Amazon FBA training videos you find on YouTube are not thorough enough.
The high quality paid courses come with a lot more than just step-by-step videos, they also provide ongoing support which can cut learning curb significantly. We have reviewed many Amazon courses over the years and have come up with our own list of the best Amazon FBA courses.
TOTAL – Optional Costs
Think of optional costs as the funds needed to have all the tools you need for the best chances of success.
For this calculation, the total below is based on the upper end of the price range listed for the "Design Work," "Professional Photography" and "FBA Training Course" categories.
Frequently Asked Questions
Technically, yes. But it won't be the type of business you've been reading about in this article! Here's what you'd have to do:
Yes, but check out our full article on profitability. And get educated on the challenges – here are a few:
Everyone's story is unique, but I've found some common mistakes and discussed them in Why 83% of People Fail at Amazon FBA:
Bare Bones FBA Startup
If you're tight financially, you can get started on Amazon with $3,720.00 (Mandatory Costs detailed above).
Standard FBA Startup
If you have the funds, plan to invest $5,520.00 (Mandatory Costs plus Recommended Costs detailed above).
Optimal FBA Startup
For those with stronger finances, investing $13,495 increases your odds for success (Mandatory Costs & Recommended Costs, plus Optional Costs detailed above).
From my FBA experience, I advise having about $15,000 available to commit to your new FBA business. Also, new sellers should consider this "hands-off" money for 1-2 years.
Pro Tip #1: Profits need to be reinvested back into the business for at least the first 1-2 years, primarily to fund new product launches.
Pro Tip #2: This article only covered FBA Startup Costs. Don't forget, Amazon has been increasing their fees each year. So you must account for fees in your overall business plan:
In closing, there's no guarantee any startup business will become profitable. Treat Amazon FBA as a long-term business venture, not a hobby – this is your best chance for success. In business, always plan for things to cost more and take more time than you expected.
My Online Business Portfolio in 2023
Amazon FBA: $15K NET per month (After 50% split with a partner)
Local Lead Generation: $52K NET per month
The Reality: FBA is a great opportunity, but not the only way to make money online. Lead Gen is another powerful business. For some people, it might be a better fit.
Check this page out: Local Lead Generation vs. Amazon FBA
Interesting article! I would share it with my friends who are planning to market on amazon. Thanks for sharing, it is really helpful.