It Takes Money To Make Money (Cashflow Issues With Amazon FBA)

Have you ever heard the saying “It takes money to make money?”

When I had my office job I never even thought of the phrase but now I find myself thinking about it quite a lot.

As I’ve quickly learned, with any physical product business, inventory ties up cash and it’s damn near impossible to grow when you keep running out of stock.

The 7 Figure Amazon Seller Demystified

If you’re an Amazon seller and you’ve spent anytime on Youtube, Google, or Facebook, you have undoubtedly seen the “gurus” bragging about hundred thousand dollar screenshots and huge revenue numbers.

And who wouldn’t brag about that?

I mean, afterall, it is a very impressive feat to create a successful Amazon business.

But here is the problem.

They might be making fistfuls of cash but what they DON’T tell you is HOW they actually got there.

From $5,000 to $1 Million

Starting out with a $5,000 investment might get you through your first order. If you’ve got a really cheap item, then maybe, just maybe, it will actually get you through a few thousand units.

But guess what?

A $5,000 initial investment isn’t going to turn into a million dollars anytime soon.

And this is the kind of story these guys are selling.

“You can make thousands of dollars with Amazon FBA and start today for as little as $2k!”

What they’re not telling you is that once you sell through that first inventory run you’ve got to reorder more stock which means more money.

And we’re talking about one product here.

Can you imagine if you wanted launch 2, 3, or even 4 products successfully?

YOU NEED SERIOUS CAPITAL.

The Truth About Amazon FBA

Anyone who is making good money with Amazon either had some serious initial capital OR found other ways to raise capital once they decided to expand.

They either did this by reaching out to friends and family, bank loans, credit cards, or some Amazon specific lending platforms.

In fact, nearly every 7 figure seller I’ve met told me that at one time they injected $30-$40k into the business to really ramp things up.

You think you’re going to be a millionaire with your measley $5k… Think again.

If you’re serious about this, you need to really consider what it will take and see if you’re willing to take that risk.

I started with about $10k in capital that I had set aside and have since maxed out two separate credit cards so that I could continue to reorder stock.

I’ve constantly been battling the inventory issue, running out of stock, not having enough capital to launch or test new products and growing slower than I know is possible.

It’s been incredibly frustrating but I’m at a point now where I’m tapping into various capital resources so that I can grow quicker.

THIS IS RISKY.

But, this is what it takes to make this work. Any business startup that you’ve ever heard of has, at one point, raised capital in order to keep growing.

I’m writing this post not to discourage people but to give people realistic expectations about this business model.

It’s a little disheartening when you jump in, start selling, and can’t seem to get ahead because your limited by your cashflow.

That being said, once you’ve had  a little success and validated your research, sourcing, and launch methods, it becomes much easier to take on a little more risk and borrow money so you can launch more products.

As I’ve written before, I’ve got a goal of making a million dollars by the time I’m 30. In order to do that, I need to have a business generating around $350,000 profit per year or more.

If I’m able to generate 100% return on my investment, then I need to have more than a quarter of a million dollars in inventory over the course of a year.

Let that sink in… More than $250,000 invested in inventory.

Where does the average person get money like that?

Well the gurus won’t tell you but…

Either someone’s got a rich mommy and daddy or they took out a bank loan (likely the latter). It is HIGHLY unlikely that all of that came from reinvested profits.

So be wary when you hear of success stories like this.

Amazon Rainbows and Butterflies

Investing hundreds of thousands of dollars in inventory is definitely possible but certaintly not easy.

Takes hard work.

Takes consistency.

Takes discipline.

Takes RISK.

Takes Money To Make Money

This model is where the phrase “takes money to make money” really comes into play. If you want to make money with Amazon FBA you really need to have some cash to get yourself off the ground.

The good thing that I’m finding out is that once you’ve got a few products selling well, it really isn’t too difficult to find access to capital.

  • Ask friends and family for a personal loan
  • Apply for 0% credit cards
  • Check out Upfund.io and Kabbage
  • Go to your local bank and apply for a Small Business Loan

There are some good options out there. You just need to believe in your business and let the numbers do the talking.

Making 7 figures with Amazon FBA isn’t impossible but definitely not a cake-walk.

So once you’ve nailed down a few products that keep running out of stock, it’s time to pick up the phone and get some cash.

You’ve got to take advantage of your momentum and no better time to do that when the products are flying off the shelves!

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2 Comments

  1. Rafael Loss Costa

    Really good post.

    I’ve watched a lot of videos from those gurus.

    Everything seems so easy when they speak. You are showing the real deal, here.

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