Amazon guys who work in the millions, are these guys numbers right?

[Castillo]

I saw this post on reddit about this guy's numbers, they seem insanely low to me. Is this guy just f*cking up horribly or is this how it really is?

Imgur

 

[Dramolion]

7.1 million minus 6.3 million = 0.8 milllion or 800k
dunno how long this took, but it seems like a nice margin to me.

 

[pmaloneus]

You're not reading between the numbers, a big salary or perks could be in any one of those categories and might be beneficial to have the company make less in net income.

 

[Rabby]

I don't sell on Amazon, but wow, their fees are soaking up almost $3mm of revenue. I wonder if that is usual. He's paying $2.2mm for products, paying Amazon $2.8mm, and selling the stuff for $7.1mm.

I guess the question is whether he's getting more for that $2.8mm than he could do on his own for the same cost. If he describes himself as an "Amazon seller," maybe he has no intention of finding another fulfillment service, or fulfilling his own orders, or building his own presence off Amazon?

He's appears to be making $400k +/- per year, unless he has some Harvard MBAs helping him sell stuff on Amazon. That's comfortable. If his life isn't too hectic with Amazon providing the platform, fulfilment, etc., maybe he's good with this. My gut tells me that an ambitious person could be a lot more efficient with that $2.8mm per year, but they would have to take on more of the business operations.

 

[Castillo]

This guy has 10 employees btw. He pays hinself 50k and then after everything he took home 40k..

He made 90k take home that year. How is that good?

 

[Rabby]

Ha. No, that's ridiculous.

 

[Castillo]

Did over 7M revenue last year. Here is my P&L. : FulfillmentByAmazon

 

[Rabby]

@Castillo Good heavens. He's doing this all wrong. 7 years in business for this? I wish people would take finance seriously, especially when they go into business. He could be making 3 times the income on less than 1mm revenue.

My original reply assumed this was his passive income business with maybe an administrative employee and some outsourced help.

I can't imagine how someone messes up an operation this badly, year after year. (In their first two years, sure, I'll give them a learning curve.) Why bother with the millions in revenue? His model is defective, so red-lining it like this just causes problems and raises his blood pressure.

 

[CareCPA]

From what I've seen (and I've seen quite a few), some of those numbers are pretty out of whack.

Amazon fees at 30% of revenue are about average.

Payroll is too high. I have clients selling millions with 0-1 employee.

Rent is too high.

Professional fees is too high.

This guy has good revenue, but really needs to focus on optimizing expenses to have a successful business.

 

[Castillo]

From what I've seen (and I've seen quite a few), some of those numbers are pretty out of whack.

Amazon fees at 30% of revenue are about average.

Payroll is too high. I have clients selling millions with 0-1 employee.

Rent is too high.

Professional fees is too high.

This guy has good revenue, but really needs to focus on optimizing expenses to have a successful business.

What I don't get is how he has all of these employees + a manager and still works 10-12 hours a day to make 90k a year?

 

[CareCPA]

Also, 45k in interest?

28k in software?

Literally all of those expenses are way too high.

 

[Rabby]

Yeah, several of the expenses look ridiculous. Is he renting retail space on the main strip?

Come to think of it though, there is one expense that is horribly low, and that's insurance. This guy is on the precipice of disaster. He has 10 employees, rents some apparently giant space, has 7mm in product sales (hopefully no choking hazards), and all of his insurance costs less than $700 per year? Bullshit! His workers comp should cost more than that if he's in the US. Plus he should have CGL, commercial property insurance, business interruption, and probably cyber liability, EPL, and I would argue for some others if it wouldn't bore everyone to tears.

I'm amazed he's made it 7 years doing things this way. If he doesn't have worker's comp, that exposes him to heavy fines and felony charges, on top of the unlimited liability for injuries to his employees. If he does have WC, then he probably doesn't have any other insurance, like product liability.

In his reddit post, he said he "doesn't plan to be sued this year." Oh boy.

 

[Walter Hay]

This appears to be a classic case of shooting for big turnover and forgetting about profit. I often see people selling their wonderful courses on how to sell on Amazon, eBay etc., and they always boast about their turnover.

Big total sales has nothing going for it except to boost your ego. Isn't profit the name of the game?

In my first business I enjoyed not only very high profit margins, but my turnover was several times greater than that achieved by a small competitor who bought business by selling at low prices. I knew what his product costs were, and I knew that his gross margin was pathetic, and his turnover was only about the same as mine.

I didn't mind the competition, because he handled all the big volume, low margin business, requiring several employees, and I needed none. That left the space open for me to sell at several times his price, because to his mind, the volume I was selling wasn't great enough.

My business was bought out by a merchant bank in conjunction with a senior executive of a multi-national company. My competitor's business barely made ends meet, and eventually closed down.

A lot of work - a lot of worry - a lot of responsibility. What's the point?

Walter

 

[Envision]

Almost positive he's wholesaling on Amazon NOT selling his own products. I've seen P&L's like this from large retail arbitrage/wholesale AMZ guys.

His COGS are completely out of control for him to be private labeling and producing his own goods. This is the downside to running that type of model, sure you're selling shit that's already out there but your costs to operate skyrocket when you don't get the margins on production.

If you did 7-8M in revenue you're net would come in around 1.5-2M. If you're turning over 400k gross sales per month on Amazon you're net is about 20-25% of that if you know what you're doing and if you're at that level... you know what your doing.

EDIT: Just read the thread and this guy is doing private label. He's probably got the worst P&L i've ever seen in my life and his business is net negative if you look at it's value vs. it's debt.

Its a good thread to read if you're into FBA/selling online the guy is actually giving good insight

 

[biophase]

So what I see is:
$7M sales
$3.2M Amazon fees - which seems normal including PPC
$3M COGS - which seems a little high (my opinion it should be more like $2.1M)

He says he has 10-12 employees. Rent is $6.5k for 12k sf.

His operating numbers seem pretty close to mine except I don't have all those other fees like interest, profession fees, contract labor, etc... I've got 4 employees, my rent is way more expensive at $5k for 5k sf.

I feel like his expenses should be around $400k-$500k even doing $7M.

I would love to see numbers more like this:
$7M sales
$3.2M Amazon fees
$2.1M COGS
$100K Other fees
$1.6M Gross Profit

$500K Expenses

$1.1M Take Home (About 16%)

 

[Dignium]

Yeah, several of the expenses look ridiculous. Is he renting retail space on the main strip?

Come to think of it though, there is one expense that is horribly low, and that's insurance. This guy is on the precipice of disaster. He has 10 employees, rents some apparently giant space, has 7mm in product sales (hopefully no choking hazards), and all of his insurance costs less than $700 per year? Bullshit! His workers comp should cost more than that if he's in the US. Plus he should have CGL, commercial property insurance, business interruption, and probably cyber liability, EPL, and I would argue for some others if it wouldn't bore everyone to tears.

I'm amazed he's made it 7 years doing things this way. If he doesn't have worker's comp, that exposes him to heavy fines and felony charges, on top of the unlimited liability for injuries to his employees. If he does have WC, then he probably doesn't have any other insurance, like product liability.

In his reddit post, he said he "doesn't plan to be sued this year." Oh boy.

For anybody in touch with this guy: please warn him about his lack of insurances, this is legal hell waiting to happen with him and his business. If I knew him I would have already warned him.