What You Need To Know When Starting An Amazon FBA Business

If you’re seriously considering starting Amazon FBA business this year, then here are 5 things that you need to know in order  to maximise your sales, your profits, and your chances of success.

Setting Up Your Amazon Account Correctly

Registering an Amazon FBA sellers account so that you can start flipping products for a profit sounds like it should be pretty straightforward, and it should be. But this is Amazon we’re dealing with, and if you haven’t been told already, they love to throw curveballs and make simple things as difficult as possible.

During the registration process, you’ll be asked what type of business it is that you’re running, with 6 options to choose from, one of which says ‘None – I am an individual’. Now if you’re just getting started and you’ve decided that you’re going to be doing Amazon FBA alone, you might think that this is the right response to go for – especially as Amazon doesn’t provide any more detail or guidance on what each of the options presented mean.

But selecting this option is a huge mistake if you’re looking to sell on Amazon to make a profit, because hidden in their seller documentation, Amazon defines an Individual as somebody that isn’t aiming to make a profit on their sales – they’re simply there to shift a few items around the house in order to recoup what they paid. Therefore, if you choose this option, you’ll very quickly get suspended for having the wrong account type as soon as it becomes obvious that you’re looking to make a profit.

Nine times out of ten, the right option to choose when making your seller account is ‘Privately-owned business’ if you have your own company or sole proprietor if not. Choose these options if you don’t want to be stopped by the amazon gods before you’ve even started.

Not Overpaying Amazon FBA Fees

As soon as you’ve created a sellers account with Amazon, the first thing that you need to do before anything else is go to the Help section and raise a case with seller support where you tell them that you are VAT exempt, which is going to be the case if you’re based in the UK and haven’t generated £85,000 in sales in the last 12 months.

The reason that this is super important is because being classified as VAT exempt by Amazon means that they won’t increase the fees that they charge you by 20% – which is the VAT rate. Doing this gives you a massive advantage over your foreign competitors because it means that your fees are lower than theirs and your profits higher, allowing you to run more discounts, get more sales and increase your ranking position in the search results, which can have the impact of doubling or even tripling your business’s performance overall.

If you’re not familiar with how VAT works and whether you’re likely to classified as VAT exempt, then speak with my recommended accountant, Osome, who are a digital accountancy firm that specialise in Amazon FBA. At the moment they’re running an offer where you get 2 months of accounting services for free.

Checking Your Product’s Dimensional Weight

Every single year, Amazon increases the amount that they charge sellers as part of their annual fee review. But as part of this year’s fee review process, they also silently introduced a new rule that could mean that your product is deemed to be far heavier than it actually is, which sounds kinda strange.

When assessing the weight of a product in order calculate the fulfilment fees that you’re going to be charged, Amazon now takes the “heavier” of the actual weight of the product, and the “dimensional weight”. If you’ve not heard of dimensional weight before, then don’t worry, you’re not alone. It was a new concept to me too.

The dimensional weight, also known as volumetric weight, is a pricing technique that freight and courier companies use to estimate the weight of a product based on its dimensions. The larger the product, the larger its dimensional weight is going to be, regardless of whether its made out of feathers or not. The justification for courier companies using this metric is that very large products take up lots of space in shipping containers and postal vans, regardless of how light they are. So, despite ignoring the concept of dimensional weight for years, Amazon has now jumped on board and also factors this metric in when calculating fees.

When looking up your Amazon FBA fees, don’t make the mistake of using the fee rate card to look up what the fulfilment costs are going to be according to your product’s weight. You also need to calculate your product’s dimensional weight, and if it’s the higher number of the two, use that figure when assessing what your costs are going to be. The best way to avoid making a mistake here is to use Amazon’s free fee calculator, enter in the dimensions and weight of the product that you want to sell, and you’ll be told exactly what you’re going to be charged. An important step to take to reduce the risk of what could be a very expensive surprise.

Getting Your Supplier To Confirm Your Order

Sending thousands of dollars or pounds to an overseas supplier that you’ve never met can be a scary experience, especially if you’ve never done it before. Regardless of how much you trust the mystery person that you’re about to send your cash to, there are a number of steps that you must follow if you want to avoid getting ripped off and destroying your Amazon FBA business inadvertently.

Firstly, make sure that you get a sample of the product that you want to sell from your supplier. If you’re going to be ordering thousands of units to sell on Amazon, you need to make sure that the quality if sufficient so that you don’t get a tonne of refund requests, bad reviews and a big hole in your pocket. Once you’ve received the sample and you’re happy with its quality, before paying your supplier for your main order, make sure that you get them to confirm every aspect of the order on AliBaba or via email – no matter how big or small.

One of the first mistakes that I made when I first started dealing with suppliers was skipping this step, which resulted in me having to pay an additional fee for colour packaging, because the supplier wanted to minimize their costs and give me a plain box instead. So, no matter how silly it might sound getting your supplier to confirm the colour of the packaging, the model of the product and so on, even if it’s really obvious – get them to write it down in the order summary so that your’e covered if things go wrong.

If at any point you don’t feel comfortable progressing -whether that be due to the sample not being very good or the supplier not giving you the most confidence, don’t let your emotions get the better of you. Back away and find another manufacturer. There are plenty more fish in the sea.

Don’t Cut Corners

Whenever you make the decision that you want to create your own business, your first instinct is likely to be that you should make use of free software, watch lots of free youtube videos, and cut corners in order to minimize your costs and maximize your potential profits – but the only thing this strategy is going to maximise is your chances of failure.

Cutting costs by taking shortcuts is one of the most frequent reasons that I see people not achieving success with Amazon FBA. Whilst a free product research tool might save you the $50 fee that a premium one such as Helium 10 costs, the reality is that free tools are free for a reason, i.e., they’re crap, and they’ll show you product opportunities with incorrect data, leading you to make poor decisions that will cost your business thousands.

I’ve seen so many people trying to save a few pennies by not getting custom made packaging and using the manufacturer’s poorly designed Chinese version instead, designing an awful logo in paint, and editing images using just Canva. The result every single time is a product that fails.

Whilst it might seem tough to do before your business has started earning any money, if you want to increase your chances of success, invest in the right tools and resources from day one, and do things properly. Shoppers on Amazon will notice, your conversion will be high, and you’ll make that money back tenfold in the longterm. Don’t be penny rich, pound foolish when it comes to setting your business up and finding a killer product, because it WILL come back to bite you.

The same can be said for learning how to sell with Amazon FBA by sifting through the thousands of free videos on Youtube. Sure, it is possible to learn the ropes by watching videos such as this one, but your chances of success are much higher if you get the help of a mentor and enrol onto a course such as the Smashers Academy, a programme that has been desgned to get you selling on Amazon as quickly as possible without making any costly mistakes. Above all, stay consistent, keep grinding, and don’t give up on your Amazon FBA journey.

If you want to learn how you can create an Amazon FBA business yourself, then check out my free training where I’ll teach you everything you need to launch your first product on Amazon and scale to $5,000+ in monthly profit.

Or if you’re ready to begin your journey and want to start with the best chances of success, apply to become a member of HonestFBA’s training programme where you’ll receive guidance & support from our team of 7-figure Amazon FBA seller experts whenever you need it.