It’s a popular question – when should you expand into more products? Often, Amazon sellers hear two conflicting words of advice. On one hand, they’re advised to focus on one product at a time. On the other hand, the sellers who are killing it on Amazon swear it’s because they took a leap and invested in as many SKUs as possible.
Which is it?
A little of both.
Anthony Lee explains and lays out an easy formula that will take you from one or two products to as many SKUs as you think you can handle.
Reasons to Limit Your Products When You First Start Out
It’s true. The best thing to do when you start out is to start slow and within your means. There are several reasons for this. You don’t want to overextend yourself or run out of capital because that could mean the end of your business before it’s even out the gate. However, …
Expand Into New Products as Soon as You Can!
So when, exactly, is the right time? There’s a delicate balance between replenishing existing stock and expanding into new products, but once again, there’s a formula.
Make sure that any deposit from Amazon covers the 30% deposit on a new order.
For example, if you’re working with a typical 40-50% profit margin, your Amazon deposits are going to be around 60-75% of the sale price. Be sure that you NEVER take on an inventory order that exceeds 25% of your monthly revenue.
But What If Your Sales Aren’t Predictable?
However, this formula only really works if you’re making consistent sales each month. What if you’re hot one month, cold the next, and you don’t know how you’ll be after the holiday season? In this case you can figure out your average monthly sales and work with that number. Be conservative though. And don’t place a new order until you have the money in the bank to pay off an existing order – this goes for a new product order or restock.
Remember – be conservative with your predictions, but be bold with your plan to expand.
You can always afford the orders you have the money for.
Have a System When It’s Time to Expand
The numbers will change with your particular products, but here are the steps that will provide a safe and profitable transition into product expansion.
- Allot a certain percentage of profits to new products.
- Do the research on a certain number of products
- Identify a certain number of potential prospects
- Contact a certain number of suppliers
- Place a certain number of sample orders
That “certain number” in these steps will depend on the percentage of profits you’re allotting to new products.
This is an easily customizable system that you can hand over to employees so they can do the legwork for you and get new products on the market faster.