Proven Book Sourcing - Amazon S3



Proven Book Sourcing

Know Your Numbers

00:00 Bryan Young: Hey, Bryan Young here. Today's video is Know Your Numbers. So I get emails and I get questions on the seller forums all the time, and everybody wants to know, "What should my target inventory be? How many books should I plan on having at Amazon before I start paying myself?" Because the idea is when you first get started, what I highly recommend you do is invest in inventory. And then once that sells, roll all 100% of those profits back into the business, whether you're paying for supplies and equipment, but more importantly buying new inventory. And so the idea was as you continue to snowball the growth of your company, you get to a certain level and you can stop investing 100%. Now you're still gonna need to invest a percentage back in, at minimum, to replace the books that are selling. But there should come a point where you're comfortable taking some money out of the business for yourself. And ultimately, that's the goal. So people wonder what does that number look like and how long will that take? We'll discuss both of those questions in this video series.

01:04 BY: So before we dive into some numbers, I'm gonna share with you my numbers, my inventory levels, my sell-through rate, and maybe what you can expect if these numbers would apply to your business, but there's so many factors at play here. It really would be hard... It would be difficult for me to say with any exactness that my model, or what I recommend, is gonna work for you guaranteed 100%. First of all, it boils down to the quality of books you have. So everybody's business model is different. If you're focusing on textbooks, let's say, your main sources to acquire inventory are university liquidation centers and used bookstores, your average sale price is probably gonna be a lot higher. And maybe you won't sell as many books as somebody who's selling lesser valuable books, but maybe overall the profitability of your company is better, and the profitability per book sold is better. So then you might not need to sell as many, you might not need to sell the volume that somebody who's focusing on lesser valuable inventory would need to sell in order to hit these goals, these numbers.

02:05 BY: And also, just having a lot of books at Amazon isn't necessarily a good thing. It's the quality of books that matters. So you could have a lot of books, you could have tens of thousands of books at the Amazon warehouses. But if they're books that have been there a long time, and they're not gonna sell, then it's hard to really count those towards the goal. 'Cause again, you wanna put together a nice size inventory of quality books that all have a decent chance of selling, so that you can get a good idea of how many good books you need in order to pull profit off. And also demand for books change depending on the time of the year. So if you're trying to sell books in the spring and in the early summer, it's gonna be a lot harder for you than if you're trying to sell books in textbook season, so from August all the way to January. So although I'm gonna lay out some general numbers, general sell-through numbers that I feel like are kinda right in the middle, depending on what season of the year you're in is gonna determine how fast your books sell. So the template that I'm offering you isn't necessarily gonna apply perfectly to all seasons.

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03:06 BY: Let's first look at my inventory. Currently, in stock, I have 21,332 books. And that's how many books I have in stock right now. Now in the last 13 weeks, I just pulled a bunch of data together, and I found that we sourced 9,194 books. So we're bringing in 707 books per week on average, over the course of these last 13 weeks. So I'm gonna kinda use this as an example, and we're gonna use that example to help us kind of figure out what sell-through rates look like, what size inventory you'll need to be able to make the kind of profits you're looking to make.

03:35 BY: So conversely, our weekly sales, our 13-week sales rather are 4,747 books, which means we're selling 365 books on average per week. So we bought 9,194, sold 4,747. We're purchasing 707 books per week on average, and we're selling 365 books per week on average. So as you can see from these numbers, well at least in this 13-week period, we are expanding. We're not just replacing. If those numbers were equal, if we were selling 365 and buying 365, then it'd be a wash and inventory levels would be maintained. In this period, we're buying much more books than we are selling. Total revenue for the 13-week sales was 65,000. That's gross revenue. That's how much they sold for on Amazon total. And our gross profits were $40,000, which again that's after Amazon fees, after shipping fees and all that, less, we need to deduct expenses and the cost of goods sold.

04:40 BY: So let's take a look at the numbers here, the book inventory. Over the 13-week period, we had a net gain of 4,332 books so we add in 4,332 books to our inventory over the course of those 13 weeks, which averages out to about 342 books extra every week. And like I said, current inventory, 21,332. So over the last 13 weeks, we sold about 25.5% of our total book inventory. So if you boil that down to per month, that's about 8.5%. And then per week, it's right around 2%. So I thought it'd be kinda neat to take these averages, these numbers that I've discovered, and apply them to the inventory as a whole and find out how many books we're selling all year as a percentage of our inventory, and kinda figure out where our profitability is from that angle. So we sold 474 books at an average sale price of $13.80 each book. So that's our average sale price. Now remember, our minimum purchase price is $10.95. But our average sale price is $13.80, so above our purchase price, which is good. And again, like I said, if you're selling high-dollar books, your average sale price is gonna be higher. It's gonna kinda mess up these calculations quite a little bit.

05:53 BY: And then if you're selling really cheap books like if you're doing bulk and you have all this inventory coming in, you might as well sell and you're selling books for, at an average, less than $10, which is totally fine. Again, it's gonna affect how many books you need to have in stock of that variety for you to be able to start paying yourself. And we estimate profit at $5.74 each book, and that calculation includes $5.11 in Amazon fees. That's just the fees from a standard-sized book. I calculated the fees with the FBA revenue calculator, came to $5.11, and then our cost of goods sold, so the cost for us to acquire the book, pay a sourcer to buy it, pay a lister to list it, pay a manager to manage it, and I kind of rolled in all the other expenses that we might have, like boxes and tape and subscriptions, and I came out with a generous $2.95 per book. So a 13-week profitability is $27,247 in profit. So that amounts to about $2,095 a week. So that's a great number. That number does not include money that we'd want to reinvest into new inventory. So depending upon how much money we wanna reinvest in new inventory will have an effect on our weekly profit. We can talk about that here in the next few slides.

07:17 BY: So what does this mean for you? Because my numbers are all fine and dandy, but how can you take what we've just learned about my business and apply it to your business to give you some good tangible goals? So the question, how many books do you need to have at Amazon in order to start pulling out a profit for yourself? Since everybody's situation is different. Let's just say,

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you wanted to earn $1,000 per week in profit, that's after all the expenses associated with fully outsourcing a used book selling business. How many books would you need to have in stock, following my model? And then if you wanna make more than $1,000, that's fine, but you can use this as a base model to figure out how many books you need to have in stock.

07:57 BY: So, hypothetically, let's say, we had a 15,000 book inventory that we maintained. So for the entire year, we always kept it at 15,000. If we sold 10% of our inventory every single month, that'd be 1,500 books. Now, 1,500 books translates to 18,000 books for the total year. I just multiplied that by 12. And then I wanted to find out exactly how many books were sold per week, because we're trying to establish a weekly profitability target. So if you divide 18,000 books divided by 52 weeks, you get 346 books per week. So if you have 15,000 books in inventory, and that's a maintainable level, and you sell 10% of that per month, that amounts to 346 books per week. And if you sell those at a profit, a net profit of $6 each, that equals a total gross profit per week of $2,076.93.

08:55 BY: So in order to maintain a 15,000 book inventory, how much are we gonna need to spend? Because if we wanna pull $1,000 in net profit out of the business, we're obviously also gonna have to sustain that 15,000 book inventory. So in order to do that, we need to take that 18,000 books that we sold over the course of the year, and we need to replace that and so we take the cost of goods sold. For my example, that means that we spend, on average, a little over $2.95 per book, and that's out the door. That's sourced, that's purchased, that's finder's fees, that's supply costs, everything rolled into one book is $2.95 times 18,000 books, which would mean we would need to spend $53,100 on new books every year to maintain that level. Now, if you divide that by 52, that gives you a weekly expense of $1,021.15.

09:48 BY: So hopefully, you're tracking with that. I know it's really conceptual and confusing, but it just boils down to we're selling 18,000 books every year with this model at a 10% rate. We need to replace those 18,000 books. If we estimate their cost at $2.95 per book, that equals $53,000. Divide that by 52 weeks in a year, we get $1,021.15 worth of expenses. So we take the gross profit we got for our 346 books per week at an average sale price of $14 each, subtract that by how much it's gonna cost to maintain our inventory, the 15,000 book inventory at Amazon, we'll come out with an estimated weekly net profit of $1,052.78. So if you wanna make $1,000 a week, you'll need to build a 15,000 book inventory and then maintain it.

10:37 BY: So that kinda gives you a ballpark idea. If you wanna make more than $1,000... 'Cause $1,000 per week, that's $52,000 a year in what will eventually become passive income. And obviously, if you're doing the work yourself, if you're doing all the sourcing and the listing, then you can dramatically lower your cost of goods sold number. You're gonna be able to either make more with the 15,000 book limit, or you can stock less and make about $1,000. So hopefully, that gives you kind of the ballpark range that you should be aiming for.

11:09 BY: So what about a 25,000 book inventory? I was just curious. I said, "Okay, 15,000. What about 25,000?" 'Cause we're almost at 25,000, and I think we've been to 25,000 before, but what would that look like as far as sales are concerned? So if we sold 10%, that's 2,500 books per month, which equates to 30,000 books per year, which would equal 577 books per week, which would be a gross profit, so before investing in new inventory, of $3,462 per week. So to maintain a 30,000 book inventory, we'd need to spend $88,500 on new books, and that'd be a weekly expense of $1,701.92. So what does that add up to here? So $3,462 gross profit minus $1,701, which is expenses for new

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inventory, equals $1,760.08 in weekly net profit or $91,524.16 per year. So you see, if that's your goal, if your goal is to build a business and outsource other work, you'll need to find people after you've scaled and grown it up to 25,000 book inventory limit, all you'll need to do, as long as you're finding quality books, is find 577 books per week to add to your inventory, and you can estimate that your weekly net profit will be right around $1,700, which is pretty good.

12:33 BY: So hopefully, this video series helped. I know these are very rough estimates, but feel free to do some of these calculations on your own. You know how I approach it. You can figure... You can estimate what your monthly percentage of inventory sold is, then you can kind of do some computing on your own if you already had some experience selling on Amazon. If not, feel free to borrow my numbers, you can adjust them. I would really... After crunching these numbers for this presentation, I'm very motivated to get that 9% up higher because it should be. I'm also motivated to kind of pay more careful attention to how fast we're growing our business because I don't mind adding in more and more books to Amazon inventory, but there is a point where I wanna stop growing and I just wanna start paying us because we are investing quite a bit of extra money into new inventory, and if we do that forever, then we're never gonna catch the windfall.

13:24 BY: So once again hopefully, this helped. If you have any comments, questions, or concerns, I'd be happy to help you out. Thanks for watching. Have a great day.

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