Starting an Amazon FBA business can be very profitable. With proper planning, execution, and hard work, you can enjoy great success. Below you will learn the keys to launching a successful business.
Importantly, a critical step in starting an Amazon FBA business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Start a Fulfillment By Amazon (FBA) Business:
- Create an Amazon Seller Central Account
- Determine the Type of Amazon FBA Business You Will Launch
- Develop Your Amazon FBA Business Plan
- Choose the Legal Structure for Your Amazon FBA Business
- Secure Startup Funding for Your Amazon FBA Business (If Needed)
- Register Your Amazon FBA Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Amazon FBA Business
- Price Your Products Accordingly
- Ship Your Products To The Amazon Fulfillment Centers
- Develop Your Marketing Materials
- Purchase and Setup the Software Needed to Run Your Amazon FBA Business
- Open Your Amazon Store For Business
1. Create an Amazon Seller Central Account
The first step to starting an Amazon business is to create an Amazon seller account. This is a free account and will be needed for you to list your items on Amazon. When creating the account, make sure that you provide accurate information as the account must be verified.
Here are some tips for choosing a name for your Amazon seller account:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of the products you sell.
2. Determine the Type of Amazon FBA Business You Will Launch
The next step is to determine the type of business you will launch on Amazon, or the products you will sell. This involves research into the products that are selling well on Amazon, as well as finding out what other sellers are doing and how they’re doing it.
When conducting product research, consider what your target market is, the other Amazon sellers on the platform, and whether or not there’s a niche in the market that you can capitalize on. Think about the product category you want to sell and how it fits into the current market.
Popular product ideas to sell on Amazon include:
- Clothing and accessories
- Health and beauty products
- Dietary supplements
- Books and media
- Toys and games
- Home decor items
3. Develop Your Amazon FBA Business Plan
One of the most important steps in starting an Amazon FBA business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – This section should summarize your entire business plan so readers can quickly understand the key details of your Amazon FBA business.
- Company Overview – This section tells the reader about the history of your Amazon FBA business and what type of Amazon business you operate.
- Industry Analysis – here you will document key information about the Amazon industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – Here you will document the key direct and indirect competitors you will face and how you will build a competitive advantage. Be sure to research and include other Amazon sellers that are a part of your space.
- Marketing Plan – Your marketing plan should address the 4Ps: Product, Price, Promotions, and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your Amazon business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your business generate sales?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Amazon Business
Next, you need to choose a legal structure for your Amazon business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include a lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Amazon Business (If Needed)
In developing your Amazon FBA business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for an Amazon business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding, and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an Amazon business that they believe has a high potential for growth.
6. Register Your Amazon Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your business name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your Amazon business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
Every state, county, and city has different business license and permit requirements.
Nearly all states, counties, and/or cities have license requirements including:
- General Business License: getting your Articles of Incorporation as discussed above
- Sales Tax License or Seller’s Permit: for selling products
- Zoning Approval: typically at the city or county level, this provides authorization for the construction or use of a building or land for a particular purpose
- Food Service, Processing, and/or Warehouse Licensing: to ensure safe food preparation
- Health Facility Licensing & Certification: to ensure safe rendering of healthcare services
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of Amazon business you launch, you will have to obtain the necessary state, county, and/or city licenses.
10. Get Business Insurance for Your Amazon Business
Other business insurance policies that you should consider for your Amazon business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Price Your Products Accordingly
The selling price of your products is one of the most important aspects of running a successful Amazon business.
You need to make sure that you’re setting prices that cover all of your costs, plus a fair profit margin.
To price your products effectively, you should look at competitors’ prices and compare them to yours. You should also consider the cost of goods, shipping costs, taxes and fees, labor costs (if applicable), and overhead.
Once you’ve determined a price for your product that covers all these factors, you can then adjust the price up or down depending on market demand.
12. Ship Your Products To The Amazon Fulfillment Centers
When you’re ready to start selling, you need to ship your own products to one of Amazon’s fulfillment centers.
Amazon offers a wide range of shipping options, from air freight and trucking to parcel delivery services like FedEx or USPS.
13. Develop Your Marketing Materials
Marketing materials will be required to attract and retain customers for your Amazon business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your own brand and seller account. Your logo will be used in your Amazon seller account, on your product pages, marketing materials, and so forth. The right logo can increase customer trust and awareness of your brand.
- Social Media Accounts: Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn, and/or other social media networks will help customers and others find and interact with your Amazon business. You may want to run ads on these platforms to drive traffic to your product pages on Amazon.
14. Purchase and Setup the Software Needed to Run Your Business
When selling on Amazon, you need to have the right type of software in order to operate your business. It is important to purchase and set up these types of software in order to succeed.
The key pieces of software you will need are as follows:
- Amazon Seller Software: Several different types of Amazon seller software can help you automate many aspects of your business, such as pricing, inventory management and customer service.
- Inventory Management Software: This type of software will help you manage inventory so that you never run out of stock. It can also help with order fulfillment and product returns if you are selling products outside of the Amazon platform.
- Accounting Software: Accounting software is essential for tracking income, expenses, taxes, and other financial elements of your Amazon business. While there are many different software options available, some of the most popular programs for accounting include QuickBooks and Xero.
Research the software that best suits your needs, purchase it and set it up.
15. Open Your Amazon Store For Business
Finally, you’re ready to open your Amazon store for business.
Make sure that your product listings are complete and accurate. If you are selling products outside of the Amazon platform, make sure you have a website or other online presence where customers can purchase from you directly as well.
Additionally, it is important to monitor customer reviews and feedback. This will help you identify areas where improvements need to be made in order to increase customer satisfaction and loyalty.
By following the steps outlined above, you can start a successful Amazon FBA business with confidence and success.
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How to Start an Amazon FBA Business FAQs
What is Fulfillment by Amazon (FBA)?
Fulfillment by Amazon (FBA) is an e-commerce service offered by Amazon. With FBA, you send your product to an Amazon fulfillment center and they store, pack and ship it directly to the customer including returns and customer service inquiries. This way, you can focus on the other aspects of running your business while letting Amazon handle the fulfillment and shipping process.
What are the Benefits of Starting an Amazon Business?
An Amazon FBA business offers several advantages over traditional e-commerce stores.
- Access to Hundreds of Millions of Customers: With an Amazon FBA business, you can tap into the extensive customer base of one of the world’s largest online stores.
- High Visibility: The products you offer on FBA have increased visibility through Amazon’s product search engine, which allows customers to easily find and purchase the products they need.
- Trust Factor: Customers trust buying from Amazon, resulting in higher conversions for FBA businesses.
- Lower Logistics Costs: You don’t need to worry about storing and packing products as this is handled by Amazon.
What are the Fees involved in Fulfillment By Amazon (FBA)?
Fees for Amazon FBA can vary, but typically include a monthly fee for the storage, shipping labels, and fulfillment fees. Additionally, you may be required to pay fees such as long-term storage fees, inventory removal fees, and disposal fees.
Is it hard to start an Amazon business?
There is no one-size-fits-all answer to this question, as the ease or difficulty of starting an Amazon business will vary depending on your skills, experience, and resources.
However, if you follow the steps above, you should be able to start your Amazon business without too much difficulty.
What type of Amazon business is most profitable?
The profitability of an Amazon business will vary depending on several factors, such as the type of products you sell and your ability to market them effectively.
The most successful Amazon businesses tend to be those that focus on selling unique or specialty items that are not widely available elsewhere. Additionally, a strong marketing strategy is key to growing your customer base and increasing sales.
How much does it cost to start an Amazon business?
There is no set cost to start an Amazon business. The amount of money you'll need to get started will vary depending on the type of products you sell, how much inventory you need to start with, and other costs associated with running your business.
In general, however, it is recommended to have at least $1,000-$2,000 set aside for starting an Amazon business. This money can be used to purchase supplies and cover shipping costs and other costs associated with running your business.
What are the ongoing expenses for an Amazon business?
The ongoing expenses for an Amazon business will vary depending on the scope of your business and the products you sell. Generally speaking, you will need to pay for Amazon selling fees, product storage fees, shipping costs, marketing expenses, and other associated costs.
How does an Amazon business make money?
An Amazon business makes money by selling products on the Amazon marketplace. When a customer makes a purchase, Amazon takes a portion of the sale as its commission and you receive the remainder.
Is owning an Amazon business profitable?
Yes, owning an Amazon FBA business can be very profitable. The profitability of an Amazon business depends on several factors such as the products you sell, and your ability to market them effectively and maintain low costs. If done right, owning an Amazon business can be a very lucrative endeavor.
Some of the key things you can do to make your Amazon business more profitable include:
- Finding high-demand, profitable products to sell
- Having good customer service
- Using effective marketing techniques
- Making sure your pricing is competitive
- Keeping a close eye on costs and expenses
With the right strategies in place, owning an Amazon business can be very profitable. So if you’re looking to start an online business, Amazon FBA could be a great option for you.
Why do Amazon businesses fail?
One of the main reasons that Amazon businesses fail is a lack of planning. This can include not understanding the market you’re entering, not having a good understanding of customer needs and behavior, or not creating an effective business plan.
Other common reasons why Amazon businesses fail include poor product selection and/or product description and not setting competitive pricing.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not having a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.