Need some advice

[cottonbuds]

Hey everyone. I seem to have found a product that has good profit margins and suits me as an individual. The issue is the product is made from a natural/plant material and so the production quality will be difficult to maintain beyond a certain scale say beyond $5 million a year in revenue. The farmers who control the raw material sell it now for cheap as it is a useless part of a cash crop but can increase their prices for the manufacturer once they see the demand for the product. The manufacturing process is simple and can be setup with an investment below $5k. It is difficult to get contracts/agreements done with the farmers as the plant is grown in a third world county. What are you guys thoughts? How should I approach this? This will be my first business venture if I move forward but then I want to transition to other eco friendly products that involve a bit more manufacturing effort (barrier to entry).

Here are also some rough numbers. I think they are okay but wanted to get the opinion of some more experienced people.

Amazon Retail Price per unit $20.00
Purchase Cost per unit $1.50
Shipping Cost to US per unit $1.00
Amazon Sellers Fee (15%) $2.25
Amazon Fullfilment Shipping per unit $2.50
Amazon Ware house Storage per unit $1.00
Marketing per unit $1.00

Total initial Investment per item (purchase price + shipping + marketing) $3.50
Total Profit Before Tax per item $10.75

Any advice/suggestions are welcome. Thanks in advance for your

 

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[MTEE1985]

The person you want input from is @biophase on this.

My thoughts are that while it is well thought out, if it is as difficult to contract with the farmers as you say then you’d better be very sure you have a big market for it. 25% margin isn’t ideal, but if you can sell thousands a month making $5.00/unit then you have a nice little business.

Is there currently a market for the product? competition? Are people searching for it?

 

[cottonbuds]

The person you want input from is @biophase on this.

My thoughts are that while it is well thought out, if it is as difficult to contract with the farmers as you say then you’d better be very sure you have a big market for it. 25% margin isn’t ideal, but if you can sell thousands a month making $5.00/unit then you have a nice little business.

Is there currently a market for the product? competition? Are people searching for it?

Thanks fro the input. From the amazon reviews based on 1 review per 50 sales (2% review the product), the annual sales on amazon are about 500k without much advertising on social media etc. The search results have been increasing slowly on google trends etc. The product can also be pushed offline through a few good channels. Because of the eco friendly nature of the product, it can easily be marketed.

 

[cottonbuds]

The person you want input from is @biophase on this.

My thoughts are that while it is well thought out, if it is as difficult to contract with the farmers as you say then you’d better be very sure you have a big market for it. 25% margin isn’t ideal, but if you can sell thousands a month making $5.00/unit then you have a nice little business.

Is there currently a market for the product? competition? Are people searching for it?

Also wanted to apologize. There was a mistake in my excel sheet from a previous size calculation. The profit margin is about 50% not 25%.

 

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[MTEE1985]

50% is great if that’s what you believe it will be.

If you’re just looking for validation you won’t find it here. Nobody in this forum can or will make the decision for you. From what you’ve stated you think it could be big (difficult to scale after $5mil) but from what you’ve also said, a 50% margin on even $2mil in sales would be phenomenal. I wouldn’t worry about the hypothetical problems with being “too big” at this point.

You sound like you’ve thought it out logically, believe in it and are determined to make it happen. I think you have your answer.

 

[cottonbuds]

50% is great if that’s what you believe it will be.

If you’re just looking for validation you won’t find it here. Nobody in this forum can or will make the decision for you. From what you’ve stated you think it could be big (difficult to scale after $5mil) but from what you’ve also said, a 50% margin on even $2mil in sales would be phenomenal. I wouldn’t worry about the hypothetical problems with being “too big” at this point.

You sound like you’ve thought it out logically, believe in it and are determined to make it happen. I think you have your answer.

Thank you. Yes, I think it is worth a shot. Will move forward with speed.

 

[MTEE1985]

Good for you, and remember, you won’t fail. Successful financially or not you will learn a lot along the way.

I’d also recommend an execution thread once you get the ball rolling to document your process.

 

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[Money_master]

I did not see any accounting for returns, shipping issues, damaged product ( Yes Amazon is very good at that) negative reviews and competition. Seems like very shallow research to me.

 

[cottonbuds]

I did not see any accounting for returns, shipping issues, damaged product ( Yes Amazon is very good at that) negative reviews and competition. Seems like very shallow research to me.

How would you account for that? Maybe $ figure per item? I haven't seen many returns on the product on Amazon and I am paying top dollar to source the very best product available. Still meeting with suppliers etc but I expect to have the best product on amazon and I have included the item cost to reflect that.

 

[Money_master]

May be try to guess the amount you will need in your budget. These are the biggest pitfalls people don't see on Amazon.

 

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[biophase]

Fixed your numbers for you.

Amazon Retail Price per unit $20.00

Purchase Cost per unit $1.50
Shipping Cost to US per unit $.50 ($1 is way too high for a small product)
Customs $.25 Just guessing?
Amazon Sellers Fee (15%) $3.00
Amazon Fullfilment Shipping per unit $3.10 (That’s the minimum)
Amazon Ware house Storage per unit $.50 (just a guess but $1 is not right)
Marketing per unit $4 (assuming ACOS 20%)

Profit per unit with organic sales $10.75
Profit per unit with PPC $6.75

Btw returns will be 2-3%