How to Build a Business and Make a Profit from Online Arbitrage

//How to Build a Business and Make a Profit from Online Arbitrage

The internet is filled with opportunities to make money, and guides telling you how to do it. This one is a little different.

The main difference that we think exists between online retail arbitrage and other “make money online” opportunities is that we really believe this is sustainable in the long-term. It isn’t a “get rich quick” scheme, and it doesn’t hold the potential drawbacks of something such as arbitrage or matched betting, for example, where you can easily find yourself limited as to what you can make.

Retail and Amazon arbitrage is an opportunity to either make a little extra income or to develop a business from which you can make a living.

Let’s take a look at how you can go about growing your online arbitrage business.

Starting Small

We recommend that, even if you have access to a significant amount of cash, that you start small.

Take some time to get used to the processes behind building an online arbitrage business, and build your buying habits and routines slowly. Not only will this help you avoid common mistakes such as buying emotionally when you get started, it also means that if you decide early on that Amazon arbitrage isn’t something you see yourself doing in the long-term, you only have a small amount of product that you need to sell to get your money back and generate a small profit.

Starting small also means you can be realistic with what you can and need to do, and will also give you an indication of how you might expand to become more of a business when the opportunity presents itself to do so.

Develop Smart Habits Early

Today, as you stand about to embark on your journey of discovery within online arbitrage, you probably have no idea where it is going to take you.

However, if you want to grow this into a huge money making business, it’s great to develop smart habits from day one. Ensure you have things like accounting spreadsheets and financial trackers set up as a minimum. This way, you will have the things you need in place as you grow, and rather than suddenly needing to track what you’re buying and selling, where your cash is tied up, and what inventory you’re sitting on, one day in the future, you’ll already be doing it out of habit.

Take Care of the Amazon Side of Things

As our portal here at Tactical Arbitrage is geared up to help you take advantage of Amazon arbitrage opportunities, this guide is presented in the context of using Amazon to make a profit from your activities.

The first thing to do then, is to take care of everything related to Amazon.

First, you need to register for an Amazon seller account at Amazon Seller Central.

Once you have done this, you will then need to register to be part of the FBA (Fulfilment by Amazon) program, which you can learn more about here.

As soon as you’re ready to sell on Amazon and have a means of selling product, you can get started on the really fun stuff!

Deciding How and What You Want to Buy to Sell

Do you need to write out a full business plan before getting started with arbitrage?

Probably not, but it is definitely worth having an idea of what it is you want to sell.

The approach you take is up to you.

How and Where to Buy

If you use an online arbitrage tool such as ours, you’ll have access to a wealth of data that will show you what sells for the highest price, what offers the highest margin, opportunities to sell in high volume, and many other metrics.

You might be tempted to start out by buying from physical retailers or by searching for products yourself online. The drawback of these approaches is that you’ll spend a lot of time both in store yourself, sourcing your own products online, and then cross referencing back to Amazon if an arbitrage opportunity even exists. We’d suggest that these could be good options to look at as you grow your business, but in the early days you want to be taking the quickest possible route to growth, particularly as you’re likely to be continuing to hold up a job while you get this off the ground.

What to Buy

While all businesses rely on making a profit to succeed, if you’re looking to turn online arbitrage into something that looks like a real life business quickly, we’d recommend you focus on a combination of both higher margin and fast selling products – finding product that is both fast selling and high margin is the biggest opportunity here – where possible early on, so that you can grow your capital and buying power while maintaining cash flow into your bank account.

The beauty of using Amazon FBA for your online arbitrage activities is that you don’t need any specific product knowledge, as Amazon takes care of the customer service side of things for you. That’s not to say that you can’t decide to buy and sell products that you are interested in or passionate about, but you don’t need to worry about having specific product knowledge, for example.

The only knowledge you need is what you’re buying and selling for, and how much profit you’re going to make!

When It’s Time to Grow

There’s going to come a point where you need to decide whether you’re happy with your arbitrage activities reaching a certain point, effectively being a lifestyle business, or whether you want to grow into something bigger.

You might be thinking that this is something you should have decided at the start, but while the profits available in online arbitrage will always be appealing, you need to experience it – and see that it’s hard work! – to decide whether you enjoy it and if it’s a sustainable plan for you as an individual.

If you reach a point where you’re effectively working full time on your arbitrage business yourself, but are happy with the returns and are able to manage your lifestyle, and don’t want to grow any bigger, then that’s fine, and congratulations for getting there!

If you decide you want to continue growing, the biggest consideration is likely to be around taking on extra help.

The beauty of online arbitrage, particularly if you use Amazon FBA, is that the task list is actually relatively simple:

  • Sourcing products to buy – either via a tool such as ours, online yourself, or by travelling to actual retail stores.
  • Sending products onto your designated Amazon fulfilment center to be stocked for Amazon FBA.
  • Keeping track of the “admin” – what you’re spending, what’s coming in, and what you have “on hand” in terms of cash and inventory.

The nature of what you’re doing means that there’s an ideal opportunity to involve a family member or a close friend. A spouse is often an ideal “partner in crime” for online arbitrage as you can involve them closely in the business and maximise your growth, whereas if you decide to employ someone you need to factor in salaries and any benefits that you might be legally obliged to provide depending on your location.

Another option in terms of employment is to look at a solution such as a virtual PA, who can simply keep track of the “admin” side of things for you. The benefit here is that you can use a site such as Upwork or Fiverr to find an offshore solution, which will be cheaper than employing someone locally and will also mean you’re not responsible for their taxes or anything like that.

The biggest consideration when pursuing growth when you’ve reached the limit of what you can do personally is the impact that whatever you’re paying out will have on your margins. If you’re paying someone $500 a month to look after the “admin”, to source products, or to deal with Amazon on your behalf, how much more do you need to buy and sell in order to maintain your profit margins? Is taking on someone going to free up enough of your time to allow you to keep growing?

These are all questions you will face when deciding whether to take your online arbitrage activities beyond a side income or lifestyle business, and the answers will depend on your specific situation and on your own ambitions.

Building Your Business and Making a Profit from Online Arbitrage

Is it possible to build a real life business and make a profit from online arbitrage? Absolutely, but it won’t be straightforward or easy.

While the principle behind online arbitrage is simple, and there is money to be made from it, there is a demand on yourself to be “business like” from day one, even if you just start with a few hundred dollars to see what happens.

Remember, you never know where your online arbitrage journey could take you!

2019-09-30T10:12:19+00:00

Leave A Comment

2 + 17 =