3 Steps for a Summer Shape-up for Your Amazon Business

Let’s take a few minutes before the rush of Q4 to get ourselves ready for a successful selling season. Here are three steps to focus on this summer to get the most profit from your products and the most out of your efforts for your eCommerce business.

1) Invest Wisely

Cash is limited, so determine how you will get the most out of your inventory buy.

Analyze the profitability of your top-selling products. I recommend picking the top 20% of sales in terms of revenue and the bottom 5% of revenue. Are the top sellers making at least a 30% margin? What can you do to improve the margin? Negotiate for better terms, change suppliers, or get a better shipping deal? What about increasing your prices?

If the top revenue products are selling below 25% gross margin, and you have other products selling much higher, is it prudent to spend a significant amount of cash to fund those low-profit products? Not usually.

When you look at the bottom 5% of revenue, are you making enough on these products to justify the use of cash? If cash is limited, and it usually is, look for the best way to deploy it. Let go of legacy products that don’t bring you the cash needed to continue buying and growing your inventory.

2) Know Your Advertising Costs

Understand how the cost of advertising impacts your margin. If you make a 15% gross margin, which is low, and then spend the entire amount on advertising, you are not contributing cash to your other costs such as profit, owner pay, taxes, operating expenses, etc. If your products don’t make enough after advertising to help you increase your inventory spend, you will not be set up to grow.

Also, ensure that you are timing your advertising spend to product availability. In consulting with clients, we repeatedly see them paying for advertising on products that are nearly or completely out of stock. If your replenishment products are going to be a few weeks getting back in stock, then slow or cut off advertising until it can be productive for you.

3) Take a Break!

I just returned from a 4-week vacation where I was completely disconnected from my business. My team ran the business in my absence. The experience gave me a lot of clarity about the future direction of my company. It gave my team the opportunity to gain confidence in their ability to run the business. It helped us both see areas to improve so that we can continue to grow.

This was the third year I’ve taken a 4-week vacation and it was the best one yet. We have improved every year. It didn’t happen overnight — I planned the first one for 18 months!

You don’t have to start out with an extended leave but do take some time off. Even a week will start to help you put your business into perspective. It will help you remember why you went into business in the first place. It will help you connect the dots that your business is there to serve you, not the other way around. Before the rush of Q4, take some time for yourself, your family, and your business.

I know numbers can be overwhelming, but it is crucial that you understand them to be a successful Amazon business owner. Work on the first two steps before things get really busy this fall. Then reward yourself with a break. When you get back to work, you will be able to focus on the main metric for any business — gross margin.

Take Control of Your Money

Check out my book Profit First for Ecommerce Sellers to learn how to use Profit First for your Amazon business. If you need help getting your numbers in order before Q4, this is a great place to start. I also offer an online course if you prefer a more structured format.