Gross margins

I am working on my business plan and am inquiring what a reasonable assumption for gross margins should be. I am not looking for the homerun product that generates very high margins, just a range to do initial cash flow projections. My end game plan is to open a retail store. I plan to start with drop shipping, adding normal wholesale purchases, than open up a brick and mortar store. The first phase is more to get familiar with suppliers and getting my feet wet. I do not expect to replace my income with this first step. Ideally, I will be cash flow break even within six months and returning $500-$1,000/month net cash flow within one year. Are these assumptions too aggressive?

Hi Mich800

With your profit margins, it is really up to decide. if you want 10, 15 or 20% or more. What you must realize that it is a very competitive market especially on online auction sites.(eg E-bay). What you can do is use Salehoo Research lab to find product that do well with product that interest you. Complete an in-depth market analysis on those products so you can ensure that you are competitive and that you are on track to reach your GP goals.

If you plan to start out with drop shipping, think of some products that interest you and you can make some money from. Best bet would be to find 1 supplier that you can build a good business relationship with gaining better purchase discounts over time. As time goes on you will gain more confidence with trading and you will want to spread your wings to other suppliers to extend your product range and gain better prices. If you throw your self in the deep in with a lot of products and alot of suppliers, you will stress your self out to the max by managing mutiple customer orders, warranty claims, Refunds / Returns as well as after sales service.

Keep it simple to start off with and build from there!

I have considered a retail store myself but it is a long time goal due to the necessary requirements needed to make it successful. Thing like right area location where there is high traffic, lease and rent, wages and other overheads, costs involved setting shop, all your money will be held in buy and hold. plus other things like advertisement, business registration. a lot! lol :p

If you are drop shipping you don't have to worry about breaking even as you have no inventory. your estimates of how much money you would like to make are very reasonable but you would have to devote your self full time to get there in that space of time.

It is good to see that you are very realistic as drop shipping will not make you rich over night nor will it replace an income immediately

Everyone at Salehoo is really helpful and we give you the necessary tools you need to make your business a success

Hope this has been of some help :o)

Kind Regards

Cody
Cozziemomo NZ

Great advise Cody - Thanks for helping out as usual! :)

Welcome to the forum, mich800 - nice to have you with us!

Also, another thing you have to consider is that you can't expect too much margin when dropshipping since product prices when sourced through dropshippers are a bit inflated compared to those from wholesalers. For higher profit margins it is best to go to the source - wholesalers or manufacturers. Liquidators are a great source too!

Keep in mind that it is very helpful to have a goal to aim for but don't get frustrated if your aim does not hit your goal the first few times. Take it as a challenge! Learn from it and grow :)

All the best.

Right on Richelle ! :o)

Here is a great quote to keep to going, even when times seem tough.

A dream doesn't become reality through magic; it takes sweat, determination and hard work.

Colin Powell - U.S Sectary of Defense

Cody
Cozzimomo NZ

That is my plan Cody. I really do not have any interest in Ebay and would like to initially build a webstore to work on my branding and marketing. There will be certain monthly costs such as hosting, merchant banking, advertising/marketing. I understand that drop shipping yields will be lower. I do have a couple suppliers picked out for analysis but have not decided on a company name so I have not had an opportunity to actually set up accounts and view the drop ship prices relative to general market retail.