Thinking about starting a business in the world’s largest online marketplace? Launching an Amazon store can be a promising venture, but it’s essential to know the ropes. Initial investments can range from a modest $1,000 for a smaller inventory or dropshipping business to $50,000+ for a more diverse product range. Beyond startup costs, success on this platform demands several skills: mastering product sourcing, navigating Amazon’s intricate platform, successful digital marketing, and ensuring top-notch customer service.

While the profit margins typically hover between 10% and 30%, revenues can vary widely depending on product selection and market dynamics. Embarking on this journey requires diligence, but with the right strategy, the rewards can be substantial. Read on to learn how to make your mark on Amazon.

Considerations Before Starting an Amazon Store

Initial InvestmentRanges from $1,000 (small inventory or dropshipping) to $50,000+ (larger inventory with diverse products). Excludes Amazon’s seller fees.
Skills RequiredProduct sourcing and selection, inventory management, customer service skills, understanding of Amazon’s platform, and digital marketing.
DemandHigh global demand for online shopping. Niche or private-label products can be particularly profitable.
LocationHome-based to start. May need a warehouse or storage facility as inventory grows.
HoursFlexible. However, frequent monitoring is essential, especially during peak seasons.
Permits and LicensesGeneral business license (in some areas), plus additional permits depending on product type (food, electronics, etc.). Compliance with Amazon’s regulations is crucial.
Profit MarginTypically ranges from 10% to 30%, but varies widely based on product category and competition.
ChallengesIntense competition, managing reviews and feedback, adapting to Amazon’s ever-changing rules, dealing with returns, and maintaining profit margins in a competitive marketplace.

How to Start an Amazon Store

1. Create a Plan

Every business needs a plan to follow — a roadmap to your goal. Business plans keep you accountable as your ideas grow. Here are some important points to consider when designing your business plan:

  • What is the idea behind your business, and what consumer problems are you solving?
  • Have you set out SMART goals?

    S – specific
    M – measurable
    A – achievable
    R – relevant
    T – time based

  • What potential problems could you encounter?
  • What does your ideal customer or audience look like?
  • Are you entitled to any tax breaks or government grants?
  • What is your product and product category?
  • What does your selling strategy entail?
  • How will you raise brand awareness for your store or product pages?
  • Are you measuring your Amazon metrics to see where you rank as a best seller?
  • How many product listings do you intend to add, and at what frequency?

If you’d like a detailed explanation of how to create a business plan, then you’ll find a plethora of information in our small business plan guide.

2. Choose a Business Structure

What’s the best business structure when you start an Amazon store and seller account? Will you be a sole proprietor or a limited liability company (LLC)? The structure you choose depends on the plans you have for your business, the size, and your particular industry. 

As a sole proprietor, you have the freedom to make decisions for your business, and to operate flexibly. The paperwork is minor, though you may need to consider licenses and permits. Taxes are straightforward, and you can choose to claim some expenses against the business. However, you’re not legally separate from your company, and everything you earn is personal income.

The “limited liability” of an LLC protects the business owner, keeping personal assets and finances protected should the business not be able to pay back debts. An LLC can have multiple owners that make decisions together, making the process of qualifying for a personal loan easier.

You can file for an LLC online, but you may pay publication fees, filing fees, and name reservation fees. Keep in mind that the fee to file an LLC can vary from $50 to $500 or more, depending on your state. You can keep your costs low by using a free LLC formation service like the one we offer at ZenBusiness.

3. Determine your Costs

Before you start selling on your Amazon store, you’ll need to know your costs and whether they’ll be covered by your revenue. Creating a spreadsheet of costs can be a great way to keep track. Include equipment and materials, Amazon membership and selling fees, bank fees for transactions and payments, business taxes, website design and hosting, and even storage lease or monthly rental costs.

If you’ll have a brick-and-mortar storefront, check out the 100 most popular places in the U.S. to run a business. Check for tax breaks and local grants to help cover your business costs. The government rapidly increased funding during 2020, so there’s more help available for small businesses than ever.

To get ahead of your taxes, take a look at our webinar series. Taxes for an LLC can include employment tax, property tax, state sales and excise tax, as well as franchise taxes.

How Will You Fund Startup Costs?

There are multiple options available to fund a startup, with pros and cons to each:

  • The U.S. government offers business funding assistance, especially during the COVID-19 crisis. For a list of general loan options, head to the SBA’s website. 
  • Business credit cards: To use a company credit card, you’ll need a bank account open and approved for credit. Banks will want to see your LLC operating agreement before they’ll open a business bank account.  
  • Loans: Most loan officers will want to see an LLC operating agreement before offering assistance. When taking out a loan, consider the interest rate and the repayment plan.
  • Friends and family: Going into business with friends and family can be wonderful, but it’s also risky. Be sure to have things written out, agreed to, and signed by all parties involved.

4. Create your Amazon Store

Creating a name for your Amazon store can be an exciting challenge. Settling on one that shares who you are and what you offer can be tricky. It needs to be unique, but bear in mind certain words that are restricted. Your business name must end with “Limited Liability Company” or some form of the acronym LLC, Ltd, or L.L.C. Refrain from following up with “Incorporated” if your business isn’t a corporation.

Once you have a few ideas, search for them in Google to see if they’re already taken. Choosing a name that’s already earmarked by another company can lead to legal troubles. The last step is to secure a web domain name and create your social media pages.

5. Register your Business

Opening a business means you’ll have a few legal requirements that you need to fulfill. When you start your new Amazon store, make sure to:

  • Register the type of business structure you chose (i.e LLC, etc.)
  • Get your employer identification number (EIN) for your business. You can do this on the IRS website in a simple process. 
  • Be sure to look into license or zoning permit requirements for your area and type of business.
  • Purchase a business license from your local municipality.
  • Investigate a general liability insurance policy suited to your industry.
  • Open a business bank account to separate your business assets from your own (important for an LLC). Be ready to show your LLC operating agreement.

6. Get the Right Equipment

Purchasing equipment doesn’t need to be an all-at-once expense. Start with a comprehensive list of items that you need to make the business run. Prioritize what needs to be purchased first and what can come later. Before you go out and buy new items, also see what you can utilize from items you may already have.

Every business needs a specific list of equipment but there are a few common items for businesses that are taking their store online with Amazon:

  • Computers
  • WiFi
  • Laptops 
  • Printers
  • Paper supply
  • Stationery
  • Camera 
  • Lightbox 

You may have many of those items already, but the camera and lightbox are key for taking original product shots. Other startup fees may pop up, like a website, domain registration, hosting, content and Amazon fees.

7. Market your Amazon Business

Creating a social media space for your business is a wonderful way to network and connect with others, as well as building your ideal audience avatar. Facebook, Twitter, and Instagram pages can help you craft your business’ brand voice that tells your story. Sign up with Google My Business to set parameters for your business like maps, reviews, and blogs.

After you’ve established your presence online, look into advertising your Amazon store on these platforms. It’s never been easier — or cheaper — to get started with online ads, even with the smallest of budgets, and these platforms can immediately help you target your ideal online shoppers and bring them right into your digital storefront.

Beyond that, follow social media pages and groups that will allow advertising, and spend time commenting on other users’ posts. Make use of local business directories, businesses and advertising opportunities to spread the word about your products, and what you have to offer. 

As you grow your business and nurture your reputation, your business name will be spread through word of mouth. When you feel confident, take time to craft blogs with keywords that are relevant to your field of work. LinkedIn can also be a great way to connect with potential customers and clients, to partner with local businesses, and offer exchanges and competitions to relevant social media pages.

There are many existing businesses on Amazon that can give you a feel for what your store may look like. But at the core of each is a business model that makes a brand work for Amazon.

Amazon has a few different options for business models:

  • Private label: When a retailer renames or rebrands a product that’s already sold under their own label
  • Wholesale: Bulk purchasing low-cost items to resell individually on Amazon
  • Retail arbitrage: Purchasing new products from physical stores at low costs to resell on Amazon
  • Online arbitrage: Purchasing goods from an online source at low costs to resell on Amazon
  • Dropshipping: No stock changes hands. The store transfers orders from customers to the manufacturer
  • Handmade: Self-created products sold on Amazon under your own brand name

Ready to own your future?

Starting an Amazon store doesn’t have to be a tricky transaction. Amazon’s low-risk, high-reward offerings and minimal startup cost make it an attractive option for many. The behaviors of consumers change just as quickly as buying trends, but Amazon does much of the heavy lifting for you as you build your customer base. They also make it easy to get started through their Seller Central platform, where you’ll set up an Amazon FBA to start listing your products.

We’ll form your LLC today so you can hit the ground running for just $0 + state fee. Past that, we’ll introduce you to the best resources to help run and grow your business as efficiently as possible.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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