Is Becoming an Amazon Seller Right for You?

Before you start your Amazon business there are a few key areas you need to focus on. You will need to establish if there’s a demand for your products, look at potential benefits and pitfalls, understand how your business finances might look and ensure everything is in order.

In short, you need a business plan for your Amazon business before you start selling.

1. Analyze Your Amazon Business Idea to See If It’s a Good One

Think about your Amazon business idea, the skills you have and whether you can find the right products to sell. You can start doing this by carrying out a SWOT analysis — look at your strengths, weaknesses, opportunities, and threats.

• Strengths — your skills, experience, expertise, insight, and anything else that can drive business success. Strengths would be having a good mind for administration and maths, being a strong researcher and having an inside understanding of the products you want to sell.
• Weaknesses — any areas where you lack skills and experience or you believe there may be an internal issue with your Amazon seller business or products. Weaknesses would include not having the skills to effectively find a profitable marketplace, bad calculations on profit margins and ineffective handling of inventory or cash flow.
• Opportunities — areas where your Amazon seller business can grow, get new customers or deliver products your customers are likely to need. This might mean expanding into new regional Amazon websites, expanding the products you offer, manufacturing and selling your own products or taking advantage of seasonal trends.
• Threats — external threats from competitors, changing marketplaces, rules and regulations. The main threats you are likely to face are due to changing Amazon regulations, pressure from competitors, bad relationships with suppliers and new sellers coming into the marketplace.

A SWOT analysis is an excellent way to start thinking objectively about your business. Here’s a great guide and worksheet for performing your own SWOT analysis.

2. Do Market Research and Validate Your Amazon Seller Products and Services

Before you launch your Amazon seller business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:

• See if there are any market research reports for Amazon seller businesses — locally, nationally or internationally. Some helpful tools include using Amazon itself to conduct research or taking advantage of specialist tools like AMZInsight, eComEngine or JungleScout. You can use these to find niches and products or to understand other competitors in the space.
• Identify your products and suppliers — your market research will help you find the right niches to focus on. Once you’ve done that you can start exploring suppliers who can provide your products at the right price. We recommend starting with some of the largest supplier marketplaces like Alibaba, Salehoo or Wholesale Central, although there are lots more out there.
• Validate your products and services — test if people will commit to spending real money on them. We recommend doing this by looking at how similar products currently sell on Amazon and just ordering limited numbers of products to test and validate the market.
• Get involved with business communities and discussion groups — ask questions about your Amazon business. You can find links to some excellent discussion groups later in the article.

3. Understand Your Amazon Business Model and Financial Projections

All businesses need a business model — the way you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.

You will also need to look at financial projections for your Amazon business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue out for the next month, three months, year and two years. The key to success is getting a rock-solid idea of your profit margins — you will use any gap between the supplier price and the selling price to pay all your business costs, wages, Amazon fees and taxes.

4. Write a Business Plan for Your Amazon Business

Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:>

1. An executive summary of the most important points from your business plan
2. Your goals and what you hope to achieve with your Amazon seller business
3. A description of your business, background information, and context
4. A market analysis and likely demand
5. An overview of how your business is structures
6. Your business model
7. How you will market and sell your offerings
8. Financial projections, revenue, and profitability
9. Appendices

We’ve got the perfect guide to writing your business plan.