March 4, 2024

How Amazon FBA Can Add Diversification In Your Portfolio.

From professionals in high-profile careers who intend to retire early, to business owners planning to maximize time with family and friends in their next phase of life, high-net-worth individuals would do well to diversify their income stream.

In addition to traditional sources like CDs and stock portfolios, more exciting opportunities like private-label E-Commerce stores are on the rise. With Amazon taking on the bulk of the labor by handling order fulfillment and customer support, owning an Amazon FBA store is one of the most appealing options in the space. 

But how does an Amazon FBA store measure up against other additional revenue streams? 

Calculating ROI when considering additional revenue streams

Before reviewing new potential streams of revenue, it’s important to have a grasp on the correct way to calculate the return on your investment

Conceptually, the benefit (or return) of an investment is divided by the cost of the investment and factors in potential losses. The results are shared as a percentage or a ratio.

Expressed as a formula:

ROI = (Net Profit / Cost of Investment) x 100

Keep in mind that ROI is calculated at a fixed point in time, and different time periods will result in different figures.  To be safe, take your resulting percentage and divide it by the amount of time it will take to ramp up to full profitability. 

E.g. a ROI of 30% over 5 years is 6% annually

On its own, your ROI percentage won’t be particularly informative. But it becomes a valuable metric when used in comparison with other potential ventures.

Diversification in your portfolio: how Amazon FBA profits compare

Aside from their ease of use (first-time sellers include demographics like stay-at-home Moms and college students),  Amazon FBA stores are skyrocketing in popularity thanks to the potential for a generous return on invested capital

While inexperienced sellers often make costly mistakes and end up with a net loss, business owners who partner with a consulting firm are positioned to see impressive returns. 

Comparatively: 

  1.  
  1. Stock market funds: average ~7% ROI per year
  1. CD options: average <6% ROI per year
  1. Apical clients’ Amazon FBA store: targets 80%-100% ROI over three years.

Which revenue stream is right for you?  

While ROI is a deciding factor, it’s not the only consideration when selecting an additional revenue stream. Here are some other variables to weigh:

Stock market funds

Pros: Higher rate of return than a CD, variety to choose from.

Cons: Variable, potentially volatile. 

CD options

Pros: “Guaranteed,” potentially insured. Predictable rate of return, not volatile. 

Cons: Fixed – No option to adjust for inflation should markets change, non-liquid. 

Amazon FBA stores

Pros: Long-term income, full ownership for more involvement and impact.

Cons: Variable ramp-up period to see returns.

When to outsource Amazon FBA management

If you’re considering selecting an Amazon FBA store as your additional revenue stream, it’s vital to remember that it is, in every sense of the word, a business

And like any business, staffing is key. When you rely on a network of trusted professionals for sourcing, branding, marketing, and ongoing management, you are likely to see much higher returns than if you attempt to sell on your own.

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The team at Apical is composed of experts from around the world, and our unique business model means that we don’t make money unless you do. 

Contact us to discuss how we can support you in achieving your wealth-building goals.