Some Numbers to Consider

If you shake up the way you look at selling online, you will notice that it isn’t that far away from investing (actually it is almost identical). This is a business model that I put together based upon some of my readings and knowledge. This is not something that I recommend, but it might work perfectly for some people. I like to toss ideas out there for you to consider to expand your mind and ways of thinking.

Most people think of selling online as a business, but I look at it as an investment (and a business). In the world of investing, the magic sauce that makes it all work is compound interest. If you look at your initial investment into inventory as your principal and your ROI as your interest, you can learn some interesting things about how to make some serious money. The chart below is something similar to a chart that I saw back in high school in regards to retirement accounts. I am going to take the same concept of retirement and convert it into Amazon selling.

Take the following chart for example:

Investment Return Total Money Back
$1,000 10% $1,100
$1,100 10% $1,210
$1,210 10% $1,331
$1,331 10% $1,464
$1,464 10% $1,611
$1,611 10% $1,772
$1,772 10% $1,949
$1,949 10% $2,144
$2,144 10% $2,358
$2,358 10% $2,594
$2,594 10% $2,853
$2,853 10% $3,138
$3,138 10% $3,452
$3,452 10% $3,797
$3,797 10% $4,177
$4,177 10% $4,595
$4,595 10% $5,054
$5,054 10% $5,560
$5,560 10% $6,116
$6,116 10% $6,727
$6,727 10% $7,400
$7,400 10% $8,140
$8,140 10% $8,954
$8,954 10% $9,850
$9,850 10% $10,835
$10,835 10% $11,918
$11,918 10% $13,110
$13,110 10% $14,421
$14,421 10% $15,863
$15,863 10% $17,449
$17,449 10% $19,194
$19,194 10% $21,114
$21,114 10% $23,225
$23,225 10% $25,548
$25,548 10% $28,102
$28,102 10% $30,913
$30,913 10% $34,004
$34,004 10% $37,404
$37,404 10% $41,145

This chart assumes that you reinvest all of your earnings back into inventory. You can see that a simple $1,000 investment can turn into $40,000 in as little as 40 full turns of your inventory at a 10% profit margin.

A ton of people focus on high returns (which is my preferred business model), but how many times have you passed on an item that had a return of 30% with a really low sales rank? There could be a business out there for someone who is looking for these kinds of deals.

Now lets look at an example that shows what a 30% return would look like:

Investment Return Total Money Back
$1,000 30% $1,300
$1,300 30% $1,690
$1,690 30% $2,197
$2,197 30% $2,856
$2,856 30% $3,712.93
$3,713 30% $4,827
$4,827 30% $6,275
$6,275 30% $8,157
$8,157 30% $10,604
$10,604 30% $13,786
$13,786 30% $17,922
$17,922 30% $23,298
$23,298 30% $30,288
$30,288 30% $39,374
$39,374 30% $51,186
$51,186 30% $66,542
$66,542 30% $86,504
$86,504 30% $112,455
$112,455 30% $146,192
$146,192 30% $190,050

In just 20 periods (or turning of inventory), you could take $1,000 and make it $190,050 by just finding inventory that returns 30%.

The biggest issue with this idea is scalability. Are you really going to be able to find enough inventory to purchase during each period. With enough research and planning, I think it is possible, but it will take some work.

I’ll do one more example if you were able to find 40% return on all your items.

Investment Return Total Money Back
$1,000 40% $1,400
$1,400 40% $1,960
$1,960 40% $2,744
$2,744 40% $3,842
$3,842 40% $5,378
$5,378 40% $7,530
$7,530 40% $10,541
$10,541 40% $14,758
$14,758 40% $20,661
$20,661 40% $28,925
$28,925 40% $40,496
$40,496 40% $56,694
$56,694 40% $79,371
$79,371 40% $111,120
$111,120 40% $155,568
$155,568 40% $217,795
$217,795 40% $304,913
$304,913 40% $426,879
$426,879 40% $597,630
$597,630 40% $836,683

I hope this has given you a new way to look at Amazon selling. Like I said above, this model is something that is shared to sharpen your mind and get you thinking about new ways to make money by selling on Amazon.

Cheers!

CW

 

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