You’ve heard me talk about drop shipping a lot already, since this is the business model I’m using with my stores. I think it’s a fantastic way to build a business.
This post is part of a series called Businesses for Beginners.
You’re not going to see an immediate income by building a drop shipping store, but it has a high potential, higher than most of the others in this series.
Drop Shipping with Your Own Store
Unless you’ve been reading about online business, you probably haven’t heard the term drop shipping before – I certainly hadn’t.
Drop shipping basically means that you’re selling something that you don’t have. You don’t have a warehouse full of products; you sell things and then tell other people to ship them to your customer. You are simply a middle man.
There are a few reasons I consider drop shipping with your own store more like a “real business” than some of the other businesses for beginners.
You’ll build a store on your own domain, and you’ll do your own customer service. You’ll have to coordinate with suppliers and shipping issues. You figure out how to market your store.
The biggest distinction is that you’re building an asset that you can sell. Once you build up an income, you can generally sell the store for around 18-20X your monthly profit.
So let’s say you start to generate $1000/month profit, you could automate it so that it’s mostly passive and you just get to keep that income every month, for not doing very much work. Or, you could sell the whole business for $20K.
Either way that’s pretty nice right?
How Does It Work?
Basically, you create a store and find suppliers who will allow you to sell their stuff. Then you advertise your products on places like Google Shopping.
Someone clicks on your ad, comes to your website, and makes a purchase. You then tell your supplier to ship the product to the address the customer provided, and charge the customer’s credit card.
The supplier ships the product out and charges your credit card, for a lower amount than you charged your customer. You keep the difference.
And that’s it – it’s pretty simple. As with everything though, there are subtle complexities to the model that will make or break your business.
Choosing a Niche
By far, the biggest factor in your success or failure is the product you choose to sell.
Believe me, I’ve seen this happen – some products sell themselves. You might spend tons of time creating a beautiful website and nobody buys your product. On the other hand I’ve seen incredibly simple, ugly websites making a killing.
A big part of this business model is finding suppliers who will allow you to sell their stuff. You will be building relationships with these people and will work with them regularly – that’s the goal at least.
Not everybody is willing to work with just anyone who asks, so you’ll have to get your people skills out, call some suppliers up and sell yourself to them. You’ll get a lot of noes, but you’ll get a few yeses.
How Do You Actually Do This?
Well, you could experiment endlessly with one failed store after another, or you could learn from someone who has done it already, who has a step-by-step system for you to follow.
Drop Ship Lifestyle Course
Can you guess what my preference would be?
If you’ve followed my blog for a while, you probably know that I learned how to build my drop shipping stores from a course called Drop Ship Lifestyle, by a guy named Anton Kraly.
If you want to get into drop shipping I’d suggest you buy the course, which I believe is about $1300. You’re probably thinking that’s a ton of money, and it is, but how much did you spend on college? Books for one semester alone probably cost more than that.
I’m not here to sell you the course, but I’ll tell you about my experience.
It’s a great course with a fantastic forum where people are super helpful. I learned everything I needed to know, but more importantly, through the course I met other entrepreneurs who have become great friends.
For the last two years I’ve gone to the retreats that Anton and his crew put on in Thailand, which have been simply amazing. Those retreats set my life on a different trajectory – I know that’s a big statement, but it’s true.
I’ve already written a ton about the retreats, so if you want to know more, or just want to see what an awesome time we had, check these out:
Series of posts from the 2014 retreat
Write-up of the 2015 retreat
Who Should Start a Drop Shipping Store?
This is a good business model for beginners, but it’s going to take some patience as you build your store. Generally, they say, it takes about 2 months of working on it full time before you can make your first sale.
Since I was working in my free time while I had a full-time job and a family, it took me about 5 months to get my first sale.
Aside from the cost of the course, you need very little money to start. If I had to guess, I’d say you only need about $300 to get a store going.
It’s a great business model, but honestly, if I were starting all over I’d probably start with drop shipping on eBay.
Plus, the cost of the course has risen dramatically since I started, as Anton has added a ton more content to it over time. Now it’s a substantial investment to join, so if you don’t have the funds, or you’re just a little more conservative with your hard earned cash, you can use the money you make drop shipping on eBay to pay for the course.
What’s the Potential?
The income potential from drop shipping is whatever you make of it. I have friends who failed and quit before they made any money, and I have friends who are making much more than they were from their day jobs. Heck, I made around $10k in profit one month.
I’d say you should be able to generate $1k-10k profit and up from a successful store. It just depends on your niche and how much you’re willing to hustle and build.
Don’t go in thinking you’re going to be making $10k/month right away though. Generally, a decent store will make $500-1000 profit per month. A great store will make $2k-5k.
Having said that, you shouldn’t expect a steady income either. Being an entrepreneur means your income will go up and down. That’s just how it is. I still haven’t hit that $10k number again, but you better believe I plan on making that much and more regularly.
Drop shipping stores have a pretty high failure rate. My first store is mostly a failure and my new store failed several times before it became successful. You just have to know this going in.
If I had to guess, I’d say 1 in 5 stores make it, and it’s almost completely random luck – based on the niche you choose.
I have two things to say about failure. One is it’s not actually such a bad thing. Failure is just feedback. It’s letting you know that something isn’t working and you need to make a change. It’s not personal, and it’s not that the methods don’t work, just the way you were doing it this time didn’t work. And you learn an awful lot in the process.
Second, the goal is to fail as fast and as often as possible. Remember, if four out of five stores fail, you want to get to that fifth store as quickly as you can. Don’t spend months or even years, like I did, trying to make your first store work. Take the lessons and move onto the next one.
Where to Learn More
I’ve written pretty extensively about my experiences drop shipping. A good place to start is with my 45 day new store challenge.
When I started my new store I challenged myself to do it in 45 days, and I wrote an update every week. You can watch the whole process of building a profitable store, and all the challenges I faced.
I’ve also written quite a bit about drop shipping in general. Click here for all my drop shipping related posts.
Do you have any questions about drop shipping? I’d be happy to help out, just let me know in the comments.