An Amazon drop shipping firm acts as a go-between for consumers looking to buy items and companies that offer them. A drop shipper receives consumer orders, purchases the items from a different shop, and then ships the things straight to the customer. This reduces the costs and time involved with conventional distribution routes.
Table of Contents
Follow these ten steps to start an Amazon drop shipping business:
Plan your Amazon Drop Shipping Business Create a Legal Entity for Your Amazon Drop Shipping Business
Register your Amazon Drop Shipping Company for Taxation.
Create a Business Bank Account and a Credit Card
Create an accounting system for your Amazon drop shipping business.
Get the Permits and Licenses You Need for Your Amazon Drop Shipping Business
Purchase Amazon Drop Shipping Business Insurance
Create a brand for your Amazon drop shipping business.
Make a website for your Amazon Drop Shipping Business.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. We’ve put up an easy guide to getting started with your Amazon drop shipping company. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
Fortunately, we have done a lot of the legwork for you.
What are the expenses associated with starting an Amazon drop shipping business?
One of the primary benefits of the drop shipping business model is the absence of initial money required. You do not purchase the product until there is a sale. You also don’t require packaging materials or to pay for delivery directly.
You simply need a few hundred dollars left aside for failure on the part of your distributor if you have a computer with Internet connectivity. (If your wholesaler fails to deliver, you’ll have to source the goods anywhere you can and at whatever price you have to pay in order to maintain the customer connection and prevent a poor review.)
You won’t even need to earn enough to subsist at first if you maintain your day job and start your company part-time, selling simply a few things to test the market. You don’t need your own internet business, but if you want, you should invest a few hundred dollars on logo design. Here’s an intriguing article on the advantages of having your own ecommerce business, even if you just sell on Amazon.
At the very least, you should be able to launch your firm with $1,800 to cover the cost of a computer, Internet connectivity, logo creation, and emergency money.
What are the continuing costs of operating an Amazon drop shipping business?
If your wholesalers fail to provide as promised, your sole costs may be the cost of repairing relationships. You may create an internet shop for free or for as little as a few hundred dollars.
Who is the intended audience?
In this company, you’ll have two “clients,” and you’ll be the crucial mediator between the two. Your end consumers are the people who purchase your stuff. Their profile will be determined by the product you are selling. The wholesalers who will satisfy your and your clients’ demands are the other crucial stakeholders. Your suppliers must be trustworthy, reliable, and simple to deal with. Check online for customer complaints or any other feedback that may trigger a caution before doing business with them.
How does an Amazon drop shipping company generate revenue?
You will not keep stock or transport bought products. Your only way to make money is to sell items held by wholesalers at a sufficient markup to produce a profit. For example, if you can discover a wholesale product for $15 that Amazon buyers demand at a $25 price point, you’ll earn a $10 profit on the transaction after deducting your selling costs.
How much money may you charge your customers?
Most products should be marked up by 30-50 percent. This will cover your time and any selling expenses while also returning a reasonable profit.
How profitable can an Amazon drop shipping company be?
Some drop shippers have made fortunes. There are no restrictions. However, here’s an intriguing piece on the actual chances of earning $1,900 per month working part-time.
How can you increase the profitability of your company?
You’ll eventually get used to the drop shipping business model and find out how to make a profit. When this occurs, think about extending outside the Amazon platform. Drop shipping sales are permitted on eBay, Shopify, Etsy, and many other ecommerce sites. If you run your own ecommerce site, you may choose a choice of platforms or even go platform-free to eliminate any selling expenses.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
Establishing a legitimate company organisation, such as an LLC or corporation, shields you from personal liability if your Amazon drop shipping firm is sued.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. Businesses use a net 30 account to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for State and Local Business Licensing
To run an Amazon drop shipping company, you may need to get certain state permissions and licences. Visit the SBA’s reference to state licences and permits to learn more about licencing requirements in your state.
For information on local licences and permissions, visit:
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Market and Promote an Amazon Drop Shipping Business
After you’ve gotten your feet wet, think about starting your own ecommerce shop. Brand your firm with its name and logo to attract repeat business. This is significant since the majority of your clients will be unaware that your company exists. They’ll imagine you as Amazon, which will not promote repeat business.
How to Keep Customers Returning
Adopt social media platforms like Facebook, Instagram, and Twitter as you brand your company. Use social media to advertise attractive offers and highlight the product line you represent.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP 10: Install your company phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.