Amazon FBA: Passive Income Business?

Some people want to treat their FBA business as passive income. They source the product, launch it, and then just leave it to tick over.

Of course, you can do that. But you really shouldn’t! Things change all the time on Amazon and you need to spend time regularly checking what’s working and what isn’t.

First of all, you need to check what’s happening to prices. If you have 30 or more SKUs then you really ought to think about using an automatic repricer. You may want to give it certain rules to follow, such as ignoring any competitors who have fewer than 10 reviews or under 3 stars, and not pricing below your break-even point. But you’ll need to check pricing from time to time so you can see strategically where the market is going, and work out whether you need to squeeze a lower cost price out of your supplier to remain competitive.

And then there are ads. For instance, if you don’t check your ads at least monthly, you won’t spot that percentage of ad spend that never converts to any sales. That’s where money is leaking out of your business. You really need to keep checking, and if a keyword doesn’t work for you, stop spending on it.

Also, check whether you need to add some negative keywords. For instance, if I’d been an apple farmer thirty years ago I would have been able to run an ad saying “Apples! Come and buy!” Today, you would want to include iPhone, iPad, and computer as negative keywords, because you don’t want people heading your way and getting ticked off because all you have are nice green and red fruit!

You might also want to look and see if there’s a particular theme, like you’re not doing well in one particular category, or you’re not doing well with search terms that relate to a particular demographic or product feature.

You need to check on how much the keywords that work are costing you. You may have seen that certain keywords are just fantastic for bringing in business, so you put a lot of investment into them. It’s working as far as selling lots of product is concerned. But if your ACOS goes way up, you may not be making much profit because your ads are so expensive.

Make sure you check the stats for each product, not just the total for your portfolio. The 80/20 principle applies – 20% of products can destroy 80% of your profitability if you’re not careful!

All of this used to be more difficult a few years back, but now you can access most of the information in Seller Central. You really have no excuse for not doing it.

Of course, if you really hate doing this job, and are a whiz at finding great new product and sourcing it super cheap, you might decide to outsource it to an ad agency or a freelance. When you grow your business, you need to think this way, to maximize the value that you personally can contribute and free up your time to do it.

But with a smaller business, you’ll need to do this all yourself. Make sure you do. And if friends look enviously at your business and say “Hey! I could do that as a side hustle!” you’ll know enough to put them off thinking that it’ super-duper easy money.

Because FBA can be very profitable, but it’s also hard work!

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