RMRB 41: Selling Best Sellers on Amazon

Jake Davis:
Hey listeners, welcome back to The Real Money Real Business podcast. This week I’m going to be taking a look at an Amazon FBA business that was created in January 2016 and is making $6000 every single month in net profit. Something that’s really cool about this business is that the product it’s selling is labeled as the number one best seller in a really competitive niche. I had the chance to sit down with the owner of this business to figure out how he came to do this.

Jake Davis:
Sean, thank you for taking the time to be on here with me today. How are you doing?

Sean:
Hey Jake, happy to be here. I’m doing very well, how are you?

Jake Davis:
I’m doing very well myself and very excited to discuss this business with you; I love talking about Amazon businesses. But before we dive into the questions that I have for you I want to go ahead and run through a little, quick summary of the business. Again, it was created in January of 2016, has a monthly revenue of $18,969, expenses of $12,982 to make for a net profit of $5987 which is generated on a 12 month average. Included in the sale of this business are one SKU, eight domains, and a trademark. Please note that inventory is not normally included in the list price; further details can be provided to active depositors.

Jake Davis:
Sean, can you tell us a little about your background in building and running online businesses?

Sean:
Yeah, totally. So my background, I would say, from a professional sense comes from learning SEO, like, way back. I guess it’s not that way back but probably 2012, I got really interested in SEO and I worked for a agency that provided e-Commerce services and SEO services and was looking around at all these people who knew how to implement SEO and how to get websites to rank highly in Google. And I asked them, “Hey, do you have your own site?” and they were like, “No, I don’t; I just do this for a wage.” And I thought well, why don’t I just start my own website and see how that does?

Sean:
So, I kicked it off with a lacrosse website, the sport, and it became pretty big; I applied everything I learned about SEO and started monetizing that through Amazon Affiliate, using their Affiliate program, and that turned out really well. That paid the bills and let me kind of focus on that full-time, hired a couple writers, and then ended up selling that last year to someone who was in internet marketing as well and really interested in expanding their product line. And so they bought that from me, I would say it was three years ago.

Sean:
I liked the affiliate model but I realized there was more money to be made in actually selling products myself instead of just promoting someone else’s and so I picked up the first amazing.com course that was, I think it was released in 2014. I had a friend who had it and they gave it to me and I ran through the course and used the very fundamental basics on finding a product to sell on Amazon. The whole model being you find a low competition, high sales niche on Amazon.com using various sales tools;and then you’re looking for things like light-weightiness, you want it to be light weight, you don’ want it be [inaudible 00:03:42] like an electronic that’s going to break, you might have a lot of returns. You want to find a few different suppliers, the ones that I’ve interacted with are in China; and then, you know, you import it, you ship it right into Amazon’s warehouses. That’s the FBA, Fulfillment by Amazon, process and then doing kind of some on Amazon marketing.

Sean:
And that’s where I bring in the SEO that I had learned, Search Engine Optimization, is I realized in Google I’m just trying to rank a website high in Google, and then I get paid, you know, for doing that; and then well, Amazon is just a search engine as well. What’s the first thing you do when you get there, you go to the search bar you punch in a keyword that you want for a product that you want and then, boom, some products show up. Product listings show up, which would be the equivalent of a website in Google, and so I figured there must be variables here that I can learn and apply those to then rank this highly and that’s what I did.

Sean:
With this product that I have for sale right now is the second product I ever sold on Amazon and that’s, I would say, yeah, probably the full background here.

Jake Davis:
So, why are you exiting this business today?

Sean:
I own two Amazon FBA businesses, one is this one which I’m selling and I started a second FBA business with a business partner and we sell completely different products. We’re actually in the food business, believe it or not. I’m what many call just a serial entrepreneur; I love learning a new idea, new business model, new profit potentials and I love jumping into that, building it, but I’m not the best at maintaining it over the long run. I can kind of maintain something over a year or two but I usually kind of have new ideas and new worlds I want to jump into; and this is one that I’ve held onto probably a year longer than I should have, probably should’ve sold it a year ago just to kind of move on but the money’s been pretty good so it hasn’t been a problem to hold onto that’s for sure.

Jake Davis:
When you look back over the last year, the numbers for this business, you notice that you had a very good July-August-September period and then a little low going into Q4. Can you explain, is this a seasonal niche?

Sean:
Yeah, I have a product that is very seasonal, a different product than this. It’s super seasonal; it makes all it’s money in the summer and then doesn’t do anything the rest of the year. So that’s what I would call a truly seasonal business; this product I would say is relatively stable in sales with nice spikes for those months that you had just said. So I would say its in between seasonal and non-seasonal, yeah.

Jake Davis:
Can you explain your role as the owner in running this business?

Sean:
Yeah, at this point it’s pretty simple. I would say, you don’t have to do this, but daily I just pop on to Amazon, just to kind of take a look at the rankings, make sure everything’s fine with the listing, nothing happened overnight unforeseen that, you know, maybe sometimes Amazon publishes updates and listings get suppressed and stuff like that; but it’s quite rare. The product’s in compliance with Amazon all the time so something like that should never happen but the amount of work needed to keep this going is so little that popping onto Amazon for 30 minutes a day to take a look at the rankings and make sure everything’s fine, it’s a pretty easy, you know, $6000 a month to do something like that.

Sean:
So that’s more of the day-to-day, I’ll also take a peek a competitors just to kind of see what’s going on, if they’re pricing differently. The primary thing is making sure that the product retains it’s best seller tag, these products had the best seller tag in the category for 2 years. I’ve had the product for 3 and I got the best seller tag a couple years ago and, so just maintaining my price to make sure I’m keeping that because if you have a best seller tag on a product you’re seeing a 20-30, sometimes 50% increase in total sales from having that. So that’s pretty important to keeping the high profit for the business.

Sean:
The rest of the time that I spend on this business, I would say every one, two months I’m interacting with the supplier I have, just to plan out the next order; which again, planning out, it’s all pretty set and done. I place two to three orders a year, import it from China, and it’s pretty set, forget from that point of view; but I just need to jump in every couple months to interact with the supplier, link them up with my freight forwarder and kind of oversee the shipment a little bit. When I say oversee it’s just to make sure it’s getting from port, you know, a port in Ningbo to a port in Long Beach, California; and then getting that product over to Amazon’s warehouses. So, there’s kind of that daily, weekly kind of peeking at things, making sure it’s fine; and then a few times a year, every few months, every couple months interacting with the supplier and my freight forwarded just to get the product restocked.

Jake Davis:
So you very clearly have been very successful at selling this one SKU. Have you thought about adding more SKUs or is there not room in the niche for it?

Sean:
Yeah, that’s a great question. It’s something I get from all my business colleagues, friends, are like well yeah, why don’t you just launch some more products just like this; and the reason I didn’t do it is, it might sound silly, it’s that it’s not really that new to me. I want to jump into new products, new industries, and do new things and so the fact that I haven’t done it isn’t because there isn’t opportunity, it’s because there actually was opportunity and I just didn’t want to do it. So I’ve actually, although I do love product research around this niche and discovered two, three, four; yeah, about three or four products that I’ve already kind of pre-vetted, done competitive analysis, you know, profit margin analysis. As well as, luckily enough, my current supplier for this product makes these ones I’ve found, so you only have to work with the same exact supplier who I’ve had the relationship with for over three years and they’ve always delivered each and every order.

Sean:
So there’s definitely, I’d say three or four additional SKUs to launch with this product under the same exact brand or with the same supplier so for someone who maybe hasn’t done Amazon FBA yet, it should be a pretty straight-forward, low risk path to expand the product line and expanding profit.

Sean:
Also, there was one more thing I wanted to say about that, this is something that I think is an important component to the additional products I found for this niche, is that you can launch them as variations on the existing listing. What that does for you is you don’t have to do a giveaway to try and make it rank; because every time you make a new product listing you show up nowhere in Amazon and you need to basically inflate your sales or make them look high by doing giveaways to boost your ranking. That requires money, it requires a certain kind of expertise and special sauce. It’s something you can definitely learn and I can teach you but at the end of the day, it’s nice for these other variations I’ve found, and I have an Excel spreadsheet and everything on all these products that I’ve done the research on, to just create them as variations on the listing so that you don’t have to do a big giveaway and a launch and spend thousands of dollars giving away product.

Sean:
You just create a variation and you know, let’s say in theory you’re selling a thousand units a month through the current ASIN; you launch this second ASIN as a variation on this listing, that’ll maybe sell 200 to 300 units a month. And then you launch a third ASIN and that one will 200, 300 units a month so there, if you get another two ASINs up, you’re almost double your revenue in profit.

Jake Davis:
Hey listeners, do you want to find a business that is just right for you? Head on over to Empire Flippers and have a look at our marketplace; where you can see real businesses making real money, just like the one we’re looking at today. In fact, don’t miss out; head over now, share your email address and we’ll send you hot, fresh new listings of successful businesses every week to your inbox. Now back to the interview.

Jake Davis:
Aside from adding new SKUs or ASINs, what are the other opportunities for growth that you would take advantage of if you were to keep this?

Sean:
Yeah, so if I really wanted to spend a few years on this business and grow it a couple of things that I think would be huge is Amazon continues to expand into more and more and more countries; they have Amazon Japan, Amazon Mexico, Amazon Canada and they’ve made it really easy to like, sell in those marketplaces. I haven’t looked at it lately but in some cases they’ll just copy the entire listing that I’ve created into say amazon.mx, Amazon Mexico website, and then they’ll even ship the inventory, like move the inventory around for me and ship it. So I would say other than expanding the product line I would take a look at the different Amazon marketplaces, and Amazon even has a representative that you can talk to about this, and start selling in other marketplaces because it’s basically the same Amazon FBA process but instead of selling Amazon US you’re just selling Amazon Canada or Amazon England or whatever. So I think that’s definitely a route to go if you want to keep everything online and on Amazon.

Sean:
I know too like Walmart for example, they’ve contended with Amazon decently well, I mean Amazon’s market share is insane but Walmart just added next day shipping for their products. So you could vet out maybe one or two other e-Commerce platforms and start selling the product on those.

Sean:
And then lastly is, this is a certain product that there are thousands of small stock, thousands of small retailers like craft DIY, craft home goods retailers that I actually have a massive list of; and so I would potentially consider opening up a wholesale account, maybe on your website, on the website of this product and maybe doing a little direct response sales and marketing. Giving these people a call, giving them emails, to see if they want to buy, you know, 10, 20, 30, 50 units at a time. And so they’re a lot smaller accounts but I bet in numbers if you were, you know, able to sign up a few hundred and you had consistent wholesale orders with these people and these retailers then that would be another opportunity if you were somebody who really liked or maybe wanted to diversify off Amazon and also maybe have a little bit of a skill set around sales and marketing and, you know, working with distributors and that kind of thing.

Jake Davis:
You also have some domains purchased for this business, correct?

Sean:
Yeah, definitely. The domains I have, so I have the main brand and I have that in dotcom. That’s a pretty small website, I did put a few pages up there and if you look up the brand for this product you do see it, it shows up number one in Google; and then the other domains I bought, the keywords are basically what this product is. So I think there’s seven of those, just random ones that when I was getting into this niche; I just love going to GoDaddy right away and just kind of seeing what’s available whenever I’m exploring a niche and I bought these up. So they’re pretty good URLs, a couple of them are just the dot Net and the dot Org of the brand just to make sure no one else is going to buy that and then some of the other ones are dotcoms that are actually they’re literally the main keywords for this product so I have the main keyword dotcom fro this product. So yeah those are included in the sale as well.

Jake Davis:
Do you feel like there are any potential risks associated with this business that a new owner should be aware of?

Sean:
Yeah, I think that thing about this product and this business is that you really are at the mercy of Amazon to a certain degree. If you’re someone that can be more compliant in general and kind of understand Amazon’s terms of service and what they’re doing to change and grow as a marketplace; you’re going to be able to enjoy the growth that Amazon does. If you’re not paying attention then certain, you know, marketplace-wide changes are going to happen and if you’re not on top of it then your product ranking might drop, there might be a chance for other competitors to come in. So I think that just operating in the Amazon FBA world in and of itself is just a little bit of a risk because it’s so unknown, it’s to some degree less regulated; but Amazon has put some procedures in place for sellers to feel more comfortable selling. There’s Brand Registry 2.0, they actually just launched another platform if you have a trademark that you get even more brand protection from counterfeiters and stuff. So, some of the risks that were posed for businesses a couple years ago, even this last year, Amazon’s been filling in holes and making sure if you do have a legitimate product, great brand, that you can preserve that on their platform.

Sean:
Then to touch on within Amazon, some of the potential risks is, I would say, just the ever increasing competition is something that you’re going to see in any product niche, you know following product lifecycle that there’s just going to be more and more competitors coming in. So keeping an eye on those and adjusting your product offering and adjusting your pricing appropriately are two things that the next owner of this business is going to have to do. And I would say, just going back to growth opportunities, I would say not only is launching new products a growth opportunity, it’s very much I would say, it is also preventative and it’s protective of the money and the profits that it’s currently making.

Jake Davis:
If someone were to come to you and say “Hey Sean, you’ve been successful with Amazon and online business in general, what advice would you have for me as I’m looking to get started,” what would you tell them?

Sean:
I get this question sometimes, and it feels really crystal clear to me right now, and it’s understand how you learn. Like understand do you learn from face-to-face, do you learn from YouTube videos, are you an autodidactic? Can you just go read up on stuff and understand how things work? Do you need to go to conferences, do you need a course, do you need hand-holding? So kind of understand how you learn best and then just go and find those avenues for learning.

Sean:
For example, if you’re someone who learns in person, sign up for an Amazon conference; Amazon provides some of their own conferences. A lot of third-party sellers who do millions and millions and millions online a year on Amazon, they put conferences together. So go there, meet other people, see what they’re doing, go to the workshops. If you’re someone like me, I’m very much autodidactic, I can just learn by going on Google and YouTube. I just basically Google the problem I’m having, like, you know? “Can’t get ranking higher in Amazon.” I’ll literally just go Google that and find blogs and experts and YouTubers who are talking about this kind of stuff and then I’ll go and apply it myself.

Sean:
So that would be my single biggest advice, is understand the type of learner you are and then go, figure out, and put yourself in places where you can learn appropriately; because as long as you’re learning and applying it’s like, with the internet, information’s out there. All you need to do is get it into your head and then get it into practice and then you’re going to be just fine.

Jake Davis:
Would you commit to a non-compete?

Sean:
Yeah, absolutely, I would commit to a non-compete to not sell an Amazon product in this niche, because like I said I have a second Amazon business that I run. It’s a completely different industry or niche, or market, I should say so I can sign a non-compete to not sell this brand or this product or anything in this niche or category for sure.

Jake Davis:
How much support are you willing to offer a new owner during the transition period?

Sean:
Yeah, being an entrepreneur my time’s pretty valuable and so I’m willing to give email support definitely, 30 days during the transition, questions that come up; and then, quite honestly, if I like you, as a seller if we get along I really don’t mind having phone calls. You know, if you make the sale easy for me then I’m a very kind person, I authentically want to help so if we have a good relationship through the sale of this business I’m going to be very available for phone calls. If you hit me up six months from now and have a problem, I’d be happy to have a quick Skype call or answer your email or something like that. So I’d say 30 days during the transition and getting you up to speed and, you know, if things come up in the future that’s totally fine. I’m not going to be away from my computer for long.

Jake Davis:
Are you open to negotiating for something like an earn-out?

Sean:
For this business I’d like to sell it straight up, no earn-out, cash up front. Yeah, so I’d like to sell it all up front, no earn-out.

Jake Davis:
Awesome. Sean, thank you very much for taking the time with me today. Before I let you go, my final question: If you were looking at this business from the perspective of a potential buyer, why would you feel like it was an asset worth buying?

Sean:
I touched on a couple of those things in the interview so far. I feel like a really key one is that this product has the best seller tag and has had it for a couple of years now. It has the most reviews of any product in this niche, so it has the most number of reviews. It’s ranked number 1 and number 2 for the Most Wished for and the Gift Ideas for its niche. It’s got hundreds of page one Amazon rankings, it’s got lots of page one rankings in Google; if you were to go Google the keywords for this product the Amazon listing itself ranks number 1 or number 2 for a lot of those. I’ve got a registered trademark, Amazon Brand Registry.I just made a couple updates to the product; I’ve got the lower product cost that I was able to negotiate with the supplier, I reduced the product packaging to reduce the cost of shipping as well and I moved from air freight to sea freight on-going so the freight costs are going to be lower.

Sean:
And then too there are actually some online publications, not really anything big but just review sites, that this product was featured on and that helps with Google juice, Amazon juice, and just kind of total exposure. So, I would recommend this to someone who maybe hasn’t been an Amazon FBA yet and maybe even tried to launch a product and it didn’t go well; or they just know they don’t want to try and launch a product and they have the money and they want to buy something and expand it, I would definitely recommend this product for someone like that.

Jake Davis:
Yeah, and the reality is that you have these peak months last year, as we touched on earlier, but the rest of the year is very consistent, very smooth, no issues. So, I mean it really seems like a solid product and a solid business.

Jake Davis:
Sean, thank you for taking the time with me today, I really appreciate it.

Sean:
Absolutely, thanks for the time, Jake.