How To Invest In High-Ticket Dropshipping eCommerce Businesses
This article talks about how to invest in high ticket drop shipping eCommerce stores.
I want to tell you everything I possibly can about investing in a high ticket dropshipping store I bought a few of them myself now and I know what you should look for and what you should avoid. It is really important that you know these things before you start investing.
First things first, the difference between a starter store and cash flowing business is huge.
- Don’t have any traffic coming to them
- No actual dropshipping suppliers yet
- Ranges from demo stores which are basically just a website put up with some fake or demo products uploaded.
- May have a supplier’s product and dealer agreement set up - no sales and traffic data.
- A great way to get started as they cost less than buying cash flowing business.
- Our TurnKey program is all about building demo stores for investors.
We build stores, recruit suppliers, and upload their products. The store is ready to launch when we hand it over. It is a great way to get started and it cost a lot less than buying actual cash flowing business. You can be sure that you are going to build it right from the ground up.
It is a great way to invest but understand that it is not cash flowing. It does not have any proof of sales. It does not even have proof of concept yet.
When we build it, we model our competitors and try to build the best thing upfront. We still cannot exactly prove that it is going to make money until it starts making money.
One thing an investor and I like to do is buy a cash-flowing business. This way, you get some data and what products are already been selling and what categories are popular. You get to know what traffic methods that store is going to bring in. When you buy that cash flowing store, you get to pick it up from where it is. It is probably going to be making sales after you buy it.
When you buy a cash flowing store the owner before you may have taken some orders that are back-orders and those might have a chance to get refunded or charged back. You have to work with the owner as the store gets transferred over. This is to make sure that all the orders get taken care of. For the most part, it is a way better way to go because you are going to be buying something that already has proof of concept that has best selling products.
Cash flowing businesses, generally speaking, the way people want to go except they cost a lot more. When this store has gotten 12 months of data, you are going to be paying somewhere 24X to 32X multiple on that store on monthly net profit. That is two to three years almost worth of monthly net profit.
If you take the total revenue it makes for a month. Let’s just say it is taking $20,000 a month in revenue, that revenue amount is around a 20% net profit margin so you have a $4,000 net profit minus other expenses, that is going to be 10% - 15%. Thus, the net profit is $2,000 in net profit. $2,000 x 24 is equal to $48,000. It can cost a lot more to get a store that’s cash flow as opposed to a cash flowing store.
You have to determine whether that is right for you. Usually, if you have $50,000 to invest, that kind of thing is a better deal than spending $10,000 to get a really well built out starter store because you already have proof of concept and have already traffic set up for you. Generally speaking, it will be easier process to bring it on and scale it because you have a bit of history. Usually, we go that route when we are investing in stores.
Starting stores works great as well. You just have to have an understanding of how to do all this stuff. How all the marketing works and how to set up a store the right way.
The next thing that I really like to hone in when I am talking to investors on how to invest in high ticket drop shipping stores is you have to be careful what niche you sign up for. The number one thing you want to research in a particular niche is:
- Is it profitable?
- Are the products high ticket enough?
- Are the profit margins from the products high enough? This is so you can pay for your ads, marketing costs, and your team.
- Is the niche trending? You can find this out by checking the keyword search volume and Google Trends.
- Are there enough dropshipping suppliers in the store? This will enable the store to allow big businesses to be built and for it to scale.
- Do you, as an investor, have the skills or passion it takes to grow this business?
You have to remember that you cannot just take on a store and be totally unpacked about it. You must have a skillset related to it. Either that, if you are really good at building businesses and it does not matter what niche is it. If you are an eCommerce veteran that kind of thing would apply to you but if you are an eCommerce beginner that wants to invest, it’s more likely you are going to have a better time with it if you have some kind of prior skill set or some passion related to the niche.
It is really important to understand your budget to buy a store. You don’t want to invest all the money you have because you are going to be really hoping and praying that the store comes through for you. What if it has ups and downs, it’s going to be tough to manage. You want to invest all your money but you really want to invest just the right amount. Also, you are still going to invest in the store in order to grow it and scale it. You can’t just expect to buy a store and keep it going to grow. If you just keep it going and it’s going to level up or down, you have to continue to grow a store over time in order to expect the revenue to grow up.
If you don’t have a ton of prior experience in eCommerce yet, you got to buy from someone who is going to provide you with training or you got to sign up for training before you buy.
THE RIGHT EXPECTATIONS
You’ve got to have the right expectations and this means with your return of investment versus your time expecting to get it back. You have got to expect that your store is not going to provide you an instant return on investment. That $2,000 in that profit may go down or it may go up. You have got to expect that it is going to take a little bit of upfront investment to grow the business and to get your initial investment back.
The cool thing is you buy it 24X or 32X within a year or two if the store grows, you can pay off that investment faster.
SPECIAL ANNOUNCEMENT FOR INVESTORS
I have a special announcement to make for all the investors out there that are looking to buy a cash flowing eCommerce business or a starter store and that is the eCommerce Paradise Marketplace. We are now selling our own demo stores, turnkey stores, and cash flowing business as well as allowing people to set revet store owners that want to sell their store. We list those stores on our marketplace and allow investors to come and buy them.
If you are looking to invest, go check out our marketplace and get your free guide to investing which is a lot more in-depth than this video. Go to eCommerceParadise.com/investors. You will be able to get the training that you need in order to know what you need to know before you invest in an eCommerce dropshipping store that is the high ticket.
You can check out all of our listings, you can choose one and buy one right here or contact me and book a time to talk to me about investing in a particular listing that we have. We can also discuss investing in general.
I am excited about this and I know it is going to be a huge benefit to the community of investors that want to be able to get an eCommerce business asset.
Get the free guide now at eCommerceParadise.com/investors.