I’m going to give you a hint on how I can quickly calculate whether a product can be profitable or not. These are the numbers I look at before investing in a product for resale on Amazon.
The other day I already mentioned to you that there was an opportunity to invest for this Christmas. By doing the quick numbers, the payback time is actually much shorter. Even if we invested a whopping 100k in a matter of 3-4 months it would have already been sold.
Right now we are having a turnover of 60-80k per month. The 100k “target” for April in the end I have to discard because I did not take into account the impact that Easter has on sales in Germany. The first days of April have been exceptionally weak with days below 1,000 euros. The last two we are already at a more “normal” rate of about 2,500 euros a day.
100k investment is 250k turnover
The figures that I have put above and that I usually put in general always carry VAT. I attach great importance to cash flow although I am aware that what counts at the end of the day is the net profit you get from the operation.
If we buy a product for 10 euros, we usually sell it for 25 euros. That gives us a minimum ROI of 50 euros. If today we invest 100k, the product can last us 3 months in Amazon (assuming that we continue with a turnover of 80k or more per month). We didn’t even make it to September, which honestly surprised me a bit. To get to Christmas we would have to invest twice as much.
These principal amounts are not available right now. Today I have to do the numbers to see how far we get with what we have.
400k investment to achieve the 2021 goal
Until now, I had not really done the numbers to know approximately the investment necessary to reach the figures we have in mind for this year. If we apply the rule of the multiple of 2.5 we would need about 400k of investment to achieve one million turnover, obtaining a net profit of about 200k. In the end, as you can see, they are large numbers but small benefits and more if you take into account that this is not what I earn as a person but from this the whole company has to eat with the structure it has. Luckily to this day I still have a light cost structure that allows me to make a profit with these modest figures.
What right now it is clear that the million turnover is more of an investment challenge than anything else. The figures would come out without problems this Christmas, what we are a little short is in capital. We have to see how far we can really go with what we have today. 400k of capital should not be invested at once, that is clear and part of it is already invested. Still I estimate that 300k would still be needed.
Let’s go step by step. Today I do the numbers of what we can spend and then we will see with the rest.