Four reasons most new FBA businesses fail

I was chatting with someone the other day, and one of the topics that came up a few times was the idea of new sellers frequently “failing,” in terms of becoming successful full time resellers.

In no way is this list inclusive, and in no way do I pretend to know all the answers.

What I do know, however, is that if you are treating FBA as a business, and NOT a hobby, then some things need to be taken seriously in order to succeed and grow.

Here are four reasons why small/new FBA sellers fail to reach their goals. In no particular order.

1. Running out of money

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Cash flow matters.

Everyone repeats this, and seemingly knows it on an intrinsic level.

However, not everyone seems to grasp the magnitude of it, and definitely not everyone seems to abide by some simple tips to improve cash levels.

Do not remove money from your business if your business is expected to grow.

Of course there are exceptions to ever rule, and everything depends on your goals as a seller. However, so many new sellers decimate their cash flow by pulling money out.

I did not remove money for a year, and put EVERY SINGLE PENNY back into my business. At the time it was a serious side hobby, and I wasn’t sure which direction it was headed. But I knew for sure that it had potential as long as I continued to invest in it.

Chris explains here some numbers showing the importance of reinvesting everything.

If you remove money from your business, you are simply stunting growth.

You will be like a hamster, stuck at the exact same levels of sales you were last month and last year.  That sounds super fun.

There is no easier way to explain it. You want more sales? Reinvest the profits. Add to it if you can, but certainly reinvest the profits.

2. Poor Management

That pretty much means YOU.

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60% of small businesses are not making a profit? Holy Schnike.

Here is an infographic that gives some cut throat numbers on small business success and failure.

It says that 30% lose money, and 30% break even.

WOW!!

Are you in that 60% of failing business?

Do you even know if you are? Do you know if you are making money? Did you read Mike’s blog last week?

I urge you to read what Mike had to say about knowing your numbers, and if you do not know yours, then steps need to be taken.

We have posts on this site about Inventory Lab and taxes and numbers and if you are ignoring all the technical portions of FBA in favor of more gum road lists or BOLO’s, well, you are probably in trouble long term.

3. Bad Business Model

This one is really dependent on you. There are a virtually infinite amount of models to run this business.

From bundling to private label to OA to RA to clearance only to liquidation to books to anything you want really.

There are some people who refuse to sell items that profit under $5, and there are some people who sell thousands of items a month that profit “only” $2.

There is no right or wrong way to run your business, with this one tiny caveat:

You must be making money.

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If I had a million dollars We wouldn’t have to walk to the store If I had a million dollars We’d take a limousine, ’cause it costs more

If you are not making money, then you are not succeeding in growing your business. There will be technicalities of course, like taking on “good” debt, or not making money in terms of extra cash because you are reinvesting it all in more inventory. But from an assets and liabilities perspective, if your assets are not growing and liabilities shrinking, you are likely on a path for doom.

4. Burnout

Not the Bill and Ted kind of burnouts, those “bad” kids in the corner with the funny smelling smokes.

I’m talking about stress burnout.

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It can come on like a freight train, and stop you dead in your tracks.

Or.

It can come on like a ninja at night, and sneak up and cut your head off silently.

There are many reasons. Doing everything yourself (prep centers and repricers can help solve this problem). Using credit cards to get miles or cash back, and then not paying those credit cards. Working all day at your day job, FBA ing all night, and ignoring your spouse or significant other. Not fast forwarding commercials. Singing Bohemian Rhapsody in front of people. There are all sorts of ways.

If you are not taking steps to get healthy and stay healthy, both mentally and physically, you are setting yourself up for disaster.

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Now what?

Well, if you are in this boat, or notice even one of those things as true in your business (and there are many other failings as a small business owner, I only touched on a few), there is hope.

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There is hope.

There is always hope.

Especially when it comes to being in business, and being in the ecommerce arena. Because by being fortunate enough to work online, we are familiar with how to work a computer. That is truly more important than you realize, so do not just discount it as “common sense.”

Because you can work a computer, you can find the answers to all these problems.

You can google them. You can research them. You can correct them.

You can come to the Facebook group and ask more questions.

You can search this blog for more answers.

What you must realize though is that while it is not a permanent problem, you cannot ignore any one issue for too long.

If you do, they will only get larger, either in reality or in your head, and both can end badly.

So fix the issues you have in your business, so you can meet the goals you have.

Wait, what?

NO GOALS?

FYI there might be a swear word in this video.

(That video is my son, and while this was unintentional to teach him the f word, once he said it I sure as hell wanted to get it filmed because its hilarious)

If you are lacking goals in your business, time to get some.

Cheers.

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