Looking for an Amazon FBA business plan? You're in the right place.
An FBA seller pays a factory weeks before Amazon pays the seller, then hands a share of every sale to Amazon in fees and advertising. That raises questions before the first order ships. How much cash does each purchase order tie up? What is left of a $36 sale after referral fees, fulfillment and ads? How long before the account stops losing money?
In this article we'll walk through a complete sample plan for a private-label Amazon seller in Portland, Oregon, section by section, so you can see how stock, fees, ads and payroll fit together before you write your own. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what's inside:
- The executive summary: see how to put a product line, its funding and its fee structure on one page
- The per-unit table: learn what a $36 sale leaves after landed cost, referral fee and fulfillment, the figure every later number depends on
- The ad budget: find out how advertising falls as a share of sales, and what it should buy while a listing earns its reviews
- The stock and loan plan: see how much of the raise goes into purchase orders, and how stock turns improve over five years
- The five-year profit, cash flow and balance sheet: understand how a slow first year turns into a profitable third
- The weak-sales case: have an answer ready for "what if sales are 20% short?", with the steps the owner takes in response
If you're planning a private-label product business, read this before you write your own. The business is fictional, so take what fits your product and change the rest.
In this plan
- Summit Ridge at a Glance
- Inside Summit Ridge
- The Kitchen-Care Shelf
- Who Clicks Buy
- Pricing and Fees
- Where the Ad Dollars Go
- From Factory to Fulfillment Center
- Priya Raman and the Team
- Financial Plan: Stock, Fees and Ad Spend
- Purchase orders, launch costs and the loan
- Unit economics and operating figures
- Revenue by sales channel
- Who is paid, and from which month
- Profit and loss after Amazon fees and ads
- Cash through five years
- Balance sheet: stock, loan and equity
- Break-even, stock turns and debt cover
- If sales run 20% under plan
- Sources
Looking for a amazon fba business plan template? The Toolkit builds yours with your own numbers.
Summit Ridge at a Glance
Summit Ridge is a private-label seller of kitchen-care and cooking bundles that opens in January 2027 in a 600-square-foot flex unit in Portland, Oregon. It sells ten branded bundles, such as a cast-iron care kit and a silicone cooking-tool set, through Amazon's fulfillment network, through its own website and in bulk to Amazon Business buyers. Founder Priya Raman owns 100% of the company.
The company raises $230,000: $150,000 of Priya's savings and an $80,000 bank term loan. Purchase orders take $54,000. Start-up costs, mainly testing, design and launch advertising, come to $50,900. Equipment is $6,500 and a reserve holds $118,600.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $361,000 | $699,988 | $986,425 |
| Net income after start-up costs | ($83,701) | $17,220 | $41,127 |
| Closing cash | $78,553 | $89,048 | $100,889 |
Year 1 loses $32,801 before start-up costs and $83,701 after them. January and February have no sales while the first containers cross the Pacific, and every month to August loses money at the EBITDA line. The account turns positive in September. Year 2 earns $17,220, Year 3 $41,127, Year 4 $37,452 and Year 5 $71,974. That is a 5.0% net margin in Year 5, which depends on a $36 core price, a growing brand site and repeat buyers; the plan does not claim more.
A weak year has its own table. With sales 20% under plan, later hires, less advertising, a pay cut and no payouts, the business still earns a profit from Year 2, stays behind the base case in every year and closes every year with cash.
The pitch is narrow. Home cooks who buy one item at a time pay for the research and the shipping several times over. Summit Ridge sells the pieces that belong together, tested for food contact, at $31 to $36 a bundle.
Inside Summit Ridge
Legal name: Summit Ridge LLC, an Oregon company taxed as a corporation. Owner: Priya Raman, 100%. Premises: a 600-square-foot flex unit in Portland for samples, photography and quality checks. No inventory is held there. Opening: January 2027. Samples are approved and two factories have quoted the first purchase orders in writing.
The company does not buy and resell other brands, and it does not run a retail store. Every product carries its own trademark, packaging and listing.
Why the company exists
Priya spent six years as a category analyst for a Pacific Northwest housewares distributor. She watched the same gap appear in marketplace listings: single items with thin reviews, and customers who ended up buying a second and third product to finish the job. She left to sell the finished set under one brand.
The 2028 checkpoint
- Revenue of $699,988 in the second year, with a profit after tax.
- Advertising at 12.3% of revenue or less, from 13.9% in the first year.
- Ten live listings, each rated 4.3 or higher with at least 20 reviews.
- Stock turning about 3 times a year by the third year.
The catalog
| Channel | How it earns | Year 1 share of revenue |
|---|---|---|
| Core bundles on Amazon US | About 7,000 units at $36, from month 3 | 70% |
| Second-wave bundles on Amazon US | About 1,800 units at $31, from month 9 | 15% |
| Brand website | About 850 orders at $49, from month 6, fulfilled by Amazon | 12% |
| Amazon Business and bulk | About 55 orders at $210, from month 7 | 3% |
The Kitchen-Care Shelf
Kitchen and home is a busy category on the marketplace, and the plan treats the first page of results as shared between established brands and unbranded imports, a planning judgment and not a measured figure. Summit Ridge enters at the middle of the price range, where buyers read reviews before they compare prices.
Why bundles
A bundle raises the order value above the point where Amazon's fulfillment fees take an outsized share. A $36 bundle pays about $5.44 for fulfillment and storage, 15% of the sale. A $12 single item pays a similar fee as a share of a much smaller sale.
The marketplace's own rules
Amazon sets the referral fee, the fulfillment fee schedule, the storage charges and the account standing rules, and it changes them. The plan treats the fee rates as planning figures, and the seller reads the current rate card before each purchase order. A fee rise of two points on every Amazon sale costs about $15,700 a year at the Year 3 revenue.
Who the business competes with
| Alternative | What it offers | Why a buyer might choose it | How Summit Ridge differs by design |
|---|---|---|---|
| Established kitchen brands | Name recognition and large review counts | Trust | A set that completes one job, priced against buying the pieces singly |
| Unbranded imports | The lowest prices | Price | Food-contact test reports and a seller that answers messages |
| Big-box retail aisles | Same-day pickup | Convenience | Delivery through Prime and a wider choice of sets |
| Single-item listings | Cheap individual pieces | Buying one item | One order, one shipment |
The table describes types of seller. No individual competitor is named.
SWOT
Strengths
- A founder with six years of category data and supplier contacts
- Bundles lift order value and spread fixed fees
- Fulfillment, returns and customer shipping handled by Amazon
Weaknesses
- About 88% of Year 1 revenue comes from Amazon channels
- Minimum orders tie up cash before reviews exist
- A one-person team in the first nine months
Opportunities
- Prime Day and the fourth quarter, whose dates and rules Amazon sets, which concentrate demand
- A brand site that builds a repeat-buyer email list
- Bulk orders from small businesses and property managers
Threats
- Fee increases or a change in ranking rules
- Copycat listings after the first reviews appear
- A product-safety complaint that suspends a listing
- Tariff or freight increases on China-made goods
Who Clicks Buy
The new-kitchen buyer
A renter or first-time owner in their late twenties or thirties furnishing a kitchen from scratch. She wants a coordinated set and reads reviews for durability.
The gift buyer
A shopper buying for a housewarming or wedding in November and December. Order value is higher and the product is bought once.
The repeat reorderer
A buyer who comes back for replacement parts of a bundle, or for a second set. This buyer is reached through the brand site and the email list, not through ads.
The small-business buyer
A short-term-rental host, a property manager or an office manager buying four to eight units at once through Amazon Business. Bulk orders average $210.
How many orders
Year 1 ships about 10,200 units. Brand-site orders average about 1.3 units and bulk orders about six. By Year 3 the business ships about 26,900 units, and by Year 5 about 36,800.
Pricing and Fees
Core bundles. The average sale is $36.00 after coupons, with direct costs at 51% of price, as the unit economics table in the financial plan sets out. Bundles are priced within the band of competing sets and not undercut. The $36 core price is a planning figure; the seller checks comparable sets on the marketplace before setting it, and kitchen sets sell across a wide range.
Second-wave bundles. The average sale is $31 and direct costs run at 52% of price, because fulfillment is a larger share of a smaller sale.
Brand site. The average order is $49. Amazon Multi-Channel Fulfillment ships it, there is no referral fee, and card fees are 2.9% plus $0.30. Direct costs are 44% of price.
Bulk. The average order is $210 for about six units, with direct costs at 51%.
Annual rise. Prices rise 3% a year from Year 2 on every line. Coupons and promotions are already netted out of the figures.
Where the Ad Dollars Go
The Year 1 advertising budget is $50,000 of running spend and $22,000 of launch spend paid from the raise. Running spend is 13.9% of revenue, about $4.89 for each of the 10,200 units. It rises to $86,000 in Year 2 (12.3% of revenue), $106,000 in Year 3 (10.7%) and $142,000 in Year 5 (9.9%), and a growing share of it buys traffic for the brand site. Repeat buyers reached by email cost little to reach, which is why the share can fall, but it is the softest figure in the plan.
| Item | Year 1 | What it is expected to do |
|---|---|---|
| Sponsored product ads on core bundles | $22,000 | Early rank for the six launch listings |
| Sponsored brand ads and video | $6,000 | Brand searches and the second-wave launch |
| Prime Day and fourth-quarter bids | $8,000 | Peak-season visibility |
| Brand-site traffic (search and social) | $14,000 | The first 850 site orders at about $16.50 each |
| Launch coupons and Vine enrollment (launch) | $14,000 | The first reviews on each listing; program terms confirmed with Amazon |
| Launch ads, first two months (launch) | $8,000 | Initial rank before organic sales build |
The first reviews decide whether ad spend can fall. A core listing rated below 4.3 on its first reviews has its matching second-wave order cut before the month-5 payment, and the budget moves to the listings that hold 4.3.
From Factory to Fulfillment Center
The supply chain
Two factories in coastal China make the bundles, with a third supplier qualified for the silicone pieces. Orders ship by ocean freight to a prep partner in Portland, which inspects, labels and forwards cartons to Amazon centers. Lead time from order to shelf is about 10 to 12 weeks, which is why sales start in month 3 and not in month 1, and an air shipment covers a stock-out.
The stock
Opening purchase orders are $36,000 for six bundles at a 1,000-unit minimum, with a 30% deposit at signing and the balance before shipment, all before opening so that the containers clear in late February, with $18,000 for the second wave in month 5. The best-selling core bundles outrun their minimum, so a top-up of about 1,500 units is paid from the reserve in month 8 to arrive before the fourth quarter. Inventory at landed cost is $57,635 at the end of Year 1, $63,933 in Year 3 and $68,474 in Year 5. Stock turns, measured on landed product cost, are about 1.3, 3.2 and 4.4, and Year 1 is slow because of the minimum orders. Suppliers are paid 30% on order and 70% before shipment.
Tools and software
Listing and keyword software, an inventory-planning tool, an ad-management tool, email software for the brand site, a shipping and returns app and bookkeeping software. Together they cost $6,400 in Year 1 and $17,500 in Year 5.
Who does the work
Priya runs the business alone in the first nine months. A part-time associate joins in month 10. An advertising and catalog specialist joins in month 22 and a supply and quality coordinator in month 40.
Compliance and safeguards
- Food-contact and material test reports for every bundle, $7,500 in the start-up budget.
- Trademark filed and enrolled in Amazon's brand program before launch.
- Duty and freight exposure on goods made in China: landed cost is held at about 21% of revenue, and a 20% rise in it costs about $41,000 a year before tax at Year 3 revenue, most of that year's pre-tax profit.
- Product liability coverage, with insurance of $4,800 in Year 1, confirmed by a broker against Amazon's current requirement.
- A sales tax filing service for brand-site orders that ship out of state.
- A written quality standard and a pre-shipment inspection on every production run.
Advisers
An accountant who reviews the cash forecast monthly in Year 1, a part-time bookkeeper at $6,000 and an attorney for the trademark and supplier contracts.
Priya Raman and the Team
Priya Raman, founder
Priya has six years of category analysis for a housewares distributor, where she tracked margins and returns by product. She contributes $150,000, which is five years of savings, and takes a $60,000 salary.
Where the team is thin
Priya has not run an advertising account on her own budget, and she has not carried a loan against stock. The accountant's monthly review, the part-time associate in month 10 and the specialist in month 22 cover those gaps.
If Priya is out
Fulfillment and customer shipping continue through Amazon. The 3PL holds written prep instructions for each bundle, and the associate can reorder from preset quantities for up to a month.
Ownership, tax and the lender
Priya owns 100% of Summit Ridge LLC and stands behind the loan with a personal guarantee. The bank takes a lien on inventory and asks for quarterly accounts and a monthly stock report by listing. Because the LLC is taxed as a corporation, the model uses the 21% federal rate and a planning rate for Oregon. Dividends paid from a corporation are taxed again on the owner's return, and the accountant confirms whether an S corporation election would suit a single owner.
Financial Plan: Stock, Fees and Ad Spend
What follows is one five-year model. Year 1 is month by month and Years 2 to 5 are annual. It starts with what the $230,000 buys, then the unit economics behind each channel, sales by channel, payroll, profit and loss, cash, the balance sheet, break-even and a weak-sales year. Amazon fees sit in the direct-cost row and advertising sits in marketing.
Purchase orders, launch costs and the loan
| Use of funds | Amount |
|---|---|
| First purchase orders: six core bundles at a 1,000-unit minimum each, 30% deposit at signing and the balance before shipment, all before opening | $36,000 |
| Second-wave purchase orders: four bundles, paid in month 5 for a September launch | $18,000 |
| Laptops, photo light box, label printer, scale and sample shelving | $6,500 |
| Oregon registration, Portland and Multnomah County business accounts, Amazon Brand Registry | $1,400 |
| Legal: LLC, trademark filing, supplier agreements, product liability review | $6,500 |
| Product testing: food-contact and material test reports for the bundles | $7,500 |
| Prototypes, packaging design, listing photography and video | $13,500 |
| Launch: coupons, Vine enrollment and the first two months of sponsored ads | $22,000 |
| Reserve: the slow first months and inventory reorders paid before sales arrive | $118,600 |
| Total uses | $230,000 |
| Source of funds | Amount |
|---|---|
| Priya Raman's savings | $150,000 |
| Inventory term loan, drawn at opening | $80,000 |
| Total sources | $230,000 |
Priya Raman puts in $150,000 of savings, 65% of the money raised, and a bank lends $80,000 over five years at 11%, interest-only for the first 24 months. The rate is a planning figure and not a quote. The lender takes a lien on inventory and a personal guarantee. Purchase orders take $54,000, $50,900 goes on start-up and launch costs that are expensed, $6,500 on equipment, and $118,600 stays as a reserve. The reserve is large because Year 1 sells for ten months, with no sales in January and February while the first containers cross the Pacific, because factories are paid weeks before Amazon pays out, and and because core sales pass the 6,000 units bought up front in the autumn, so a top-up order of about 1,500 units is paid from the reserve in month 8 to arrive before the fourth quarter. Later reorders, including the buy for early Year 2, are paid from sales receipts and the reserve and are not shown as separate uses. The loan stays in the plan because the 70% balances and the fourth-quarter stock buy land in August and September, ahead of the busiest sales, and the lender's lien sits on stock the company already needs.
Unit economics and operating figures
- The core bundle sells at $36.00 net of coupons, a planning figure toward the upper middle of the price range for kitchen sets, not a measured one. Of that, $7.52 (21%) is landed cost, covering factory price, ocean freight, duty and inspection. Amazon takes a $5.40 referral fee (15%) and about $5.44 (15%) for fulfillment and storage, which leaves $17.64 (49%) before ads. Fulfillment is set by size and weight, not price, so a higher price falls through to the seller at a better rate than a flat percentage suggests; the model keeps the direct-cost share at 51% and does not claim that gain. Second-wave bundles at $31 carry 52% direct costs because fees are a larger share of a smaller sale. Brand-site orders carry 44% because they pay no referral fee, and bulk orders 51%.
- Year 1 ships about 10,200 units: 7,000 core bundles, 1,800 second-wave bundles, 850 brand-site orders of about 1.3 units each and 55 bulk orders of about six units. Units reach about 26,900 in Year 3 and 36,800 in Year 5. Prices rise 3% a year from Year 2. Revenue is net of refunds and coupons, and the plan holds refunds inside the net price and does not model a separate refund rate.
- Timing follows the supply chain. The first purchase orders are 30% deposit at signing and the balance before shipment, all before opening and the containers clear in late February, so core bundles sell from month 3. The second-wave order is paid in month 5 and the bundles go live in month 9. The brand site opens in month 6 and bulk orders begin in month 7. Year 2 grows 94% because Year 1 holds only ten months of sales and the second wave sells for four of them. Growth then slows to 41%, 24% and 18%.
- Advertising is $50,000 in Year 1, 13.9% of revenue, on top of $22,000 of launch spend paid from the raise. It falls to 12.3% in Year 2, 10.7% in Year 3 and 9.9% in Year 5 as reviews and organic rank carry more of each listing. Year 1 advertising works out to about $4.89 a unit. If every new brand-site buyer cost the Year 1 figure of about $16.50, site traffic alone would take a large part of the Year 5 budget, so the plan counts on returning buyers to keep site traffic spend down. The ad line is the softest figure in the plan, and the weak-sales case cuts it by only 10% when sales fall 20%, so the ad share rises.
- Net margin before start-up costs rises from 2.5% in Year 2 to 5.0% in Year 5, and the plan does not reach the 8% a mature seller might aim for. What carries the gain is advertising, which falls about two and a half points of revenue, fixed costs such as rent, software and insurance spread over more sales, and loan interest running off. Three commercial choices sit behind it. Price: the core bundle is $36 and the second wave $31, a level the seller sets only after checking comparable sets on the marketplace. Mix: brand-site orders pay no referral fee and grow from 12% of Year 1 revenue to 25% of Year 5, and the tables hold the Year 1 cost blend, so they leave about $12,000 of Year 5 gross profit unclaimed. Repeat purchase: refill packs and replacement parts bring buyers back through the email list, and the plan counts about one in four Year 5 site orders as a repeat order. A lower repeat rate or a lower price takes some of this back.
- Stock is bought in minimum orders of about 1,000 units a bundle. Inventory at landed cost is $57,635 at the end of Year 1 and $68,474 at the end of Year 5. Landed product cost is about 21% of revenue, so stock turns are about 1.3 in Year 1, 3.2 in Year 3 and 4.4 in Year 5. Year 1 is slow because every bundle starts with a minimum order. Suppliers are paid 30% on order and 70% before shipment, so the accrued balance on the sheet is freight, prep and unbilled supplier items, about 10 days of direct cost.
- Amazon pays out about every two weeks, and the model carries 10 days of receivables. Prep, labeling and inbound shipping at a Portland 3PL cost about $0.95 a unit. Unsellable returns, removals and long-term storage fees are 2.8% of sales, because housewares sets come back damaged more often than the average listing and slow stock draws storage surcharges. Amazon's inbound placement fees are treated as part of the fulfillment share. Brand-site orders pay card fees of 2.9% plus $0.30 an order.
- Payroll carries 27% on-costs for full-time staff and 15% for the part-time associate. Priya takes $60,000, below what she earned before, and no wage in the plan is trimmed to reach a profit. Wages are launch rates, and a separate line adds 3% a year from Year 2. Hires follow listings and orders: a part-time associate in month 10, an advertising and catalog specialist at $58,000 in month 22 and a supply and quality coordinator at $62,000 in month 40.
- The unit is 600 square feet of flex space in Portland for samples, photography and quality checks at about $1.65 a square foot a month, rising to about $2.10 by Year 3. In Year 4, when the coordinator joins, the company moves to a 900-square-foot unit at about $2.00. No inventory is held on site. Insurance of $4,800 includes product liability, which Amazon asks sellers to carry once sales pass a threshold, and the broker confirms the current requirement.
- Tax is the federal corporate rate of 21% plus a state rate of 6.6%, used as a planning figure for Oregon corporate excise tax, with the Year 1 loss carried forward, so Year 2 pays no income tax. Start-up costs are treated as non-deductible in the model, which overstates tax slightly, and the accountant confirms their treatment. Oregon is generally understood to have no general sales tax, and Amazon is generally understood to collect sales tax on marketplace orders; the accountant confirms both as of the plan date. The accountant also confirms Portland and Multnomah County business taxes, the Oregon Corporate Activity Tax once Oregon-sourced sales pass its threshold, the sales tax position on brand-site orders and whether an S corporation election would suit a single owner. Rates and thresholds can change.
- Years 4 and 5 grow 24% and 18% from the second wave, two further bundles in Year 3, the brand site's repeat buyers and 3% price rises, with the samples and listing budget rising from $9,000 to $13,000 to pay for them. Owner payouts of $25,000 in Year 4 and $50,000 in Year 5 come only from surplus cash after loan repayments, and the plan has no extra hire in Years 4 and 5, so a support hire there would cost about four points of Year 5 margin. The loan runs to term with no early payoff.
- Sensitivity: a 20% rise in landed cost, from tariffs or freight, is worth about 4 points of revenue, roughly $41,000 before tax at the Year 3 revenue, which is most of Year 3 pre-tax profit of $50,202. A 25% rise in landed cost costs about $52,000 and wipes that profit out, so the plan depends on duty and freight staying near today's levels or on the seller passing some of a rise on in price.
Revenue by sales channel
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Core bundles on Amazon US (six listings, from month 3) | $252,000 | $363,384 | $443,032 | $503,529 | $567,256 |
| Second-wave bundles on Amazon US (four listings from month 9, two more from Year 3) | $55,800 | $185,194 | $289,414 | $365,845 | $418,689 |
| Brand website orders fulfilled by Amazon (from month 6) | $41,650 | $121,128 | $202,738 | $278,427 | $363,990 |
| Amazon Business and bulk orders (from month 7) | $11,550 | $30,282 | $51,241 | $71,137 | $87,452 |
| Total revenue | $361,000 | $699,988 | $986,425 | $1,218,938 | $1,437,387 |
| Growth on prior year | – | 94% | 41% | 24% | 18% |
Core bundles are 70% of Year 1 revenue and 39% of Year 5. Second-wave bundles grow from 15% to 29% as the catalog adds listings. The brand site grows from 12% to 25% and is the channel where Summit Ridge owns the customer email address and pays no referral fee, though it still pays for the traffic. Year 2 growth of 94% reflects ten months of selling in Year 1, then growth is 41%, 24% and 18%. Amazon sets the ranking rules, fee schedule and account standing, so dependence on one marketplace is the plan's largest single exposure, with Amazon channels at about 88% of Year 1 revenue and 75% of Year 5.
Month by month through 2027
| Month | Core bundles on Amazon US (six listings, from month 3) | Second-wave bundles on Amazon US (four listings from month 9, two more from Year 3) | Brand website orders fulfilled by Amazon (from month 6) | Amazon Business and bulk orders (from month 7) | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | ($16,829) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | ($16,829) |
| Mar 2027 | $8,784 | $0 | $0 | $0 | $8,784 | ($12,468) |
| Apr 2027 | $11,700 | $0 | $0 | $0 | $11,700 | ($11,020) |
| May 2027 | $15,588 | $0 | $0 | $0 | $15,588 | ($9,089) |
| Jun 2027 | $18,720 | $0 | $2,058 | $0 | $20,778 | ($6,512) |
| Jul 2027 | $24,588 | $0 | $3,822 | $840 | $29,250 | ($2,306) |
| Aug 2027 | $23,400 | $0 | $4,165 | $1,050 | $28,615 | ($2,621) |
| Sep 2027 | $26,316 | $5,797 | $5,096 | $1,470 | $38,679 | $2,376 |
| Oct 2027 | $35,100 | $10,416 | $7,301 | $2,310 | $55,127 | $10,543 |
| Nov 2027 | $50,760 | $21,266 | $11,123 | $3,570 | $86,719 | $26,230 |
| Dec 2027 | $37,044 | $18,321 | $8,085 | $2,310 | $65,760 | $15,823 |
January and February have no sales, and EBITDA is a loss of $16,829 in each. Revenue starts in March at $8,784, climbs through the summer as reviews arrive, steps up in September with the second-wave launch and peaks in November at $86,719. EBITDA is negative from January to August and positive from September to December. The September low is before the fourth-quarter stock buy settles, and the page shows no separate figure for that dip. The monthly view's lowest month-end cash is Sep, at about $24,000. That view leaves out the timing of stock buying and supplier deposits, so the real low is lower, and the $118,600 reserve is sized to cover that gap. Years 2 to 5 are annual, so later seasons are not shown.
Who is paid, and from which month
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and head of sourcing | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Customer service and listings associate (part time, about 24 hours a week) | $26,000 | Month 10 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Advertising and catalog specialist | $58,000 | Month 22 | – | 1 | 1 | 1 | 1 |
| Supply and quality coordinator | $62,000 | Month 40 | – | – | – | 1 | 1 |
| Total payroll incl. on-costs | $83,675 | $124,515 | $179,760 | $238,815 | $258,500 |
Priya runs sourcing, listings and advertising alone for the first nine months, with a 3PL doing prep and Amazon doing fulfillment and customer shipping. A part-time associate joins in month 10 for customer messages, reviews and listing upkeep. The advertising and catalog specialist joins in month 22, when ad spend passes $7,000 a month and listings need weekly refreshes. The supply and quality coordinator joins in month 40, when the plan runs about 33,000 units a year through several factories. Payroll is $83,675 in Year 1, $124,515 in Year 2 and $179,760 in Year 3. Priya's $60,000 sits inside those figures, so profit is after her pay.
Profit and loss after Amazon fees and ads
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $361,000 | $699,988 | $986,425 | $1,218,938 | $1,437,387 |
| Landed product cost and Amazon fees (referral, fulfillment, storage) | ($181,752) | ($352,423) | ($496,635) | ($613,698) | ($723,681) |
| Gross profit | $179,248 | $347,565 | $489,790 | $605,240 | $713,706 |
| Payroll incl. on-costs | ($83,675) | ($124,515) | ($179,760) | ($238,815) | ($258,500) |
| Rent | ($12,000) | ($14,800) | ($15,200) | ($21,600) | ($22,200) |
| Utilities | ($1,800) | ($1,900) | ($2,000) | ($2,400) | ($2,500) |
| Marketing | ($50,000) | ($86,000) | ($106,000) | ($124,000) | ($142,000) |
| Insurance | ($4,800) | ($5,600) | ($6,600) | ($7,600) | ($8,400) |
| Professional fees | ($5,500) | ($6,000) | ($6,500) | ($7,000) | ($7,500) |
| Software subscriptions | ($6,400) | ($11,000) | ($14,000) | ($16,000) | ($17,500) |
| Prep, labeling and inbound shipment to Amazon centers (3PL, about $0.95 a unit) | ($9,723) | ($18,582) | ($25,508) | ($30,609) | ($34,960) |
| Unsellable returns, removals and long-term storage fees (2.8% of sales) | ($10,108) | ($19,600) | ($27,620) | ($34,130) | ($40,247) |
| Card fees on brand-site orders (2.9% of site sales plus $0.30 an order) | ($1,463) | ($4,233) | ($7,049) | ($9,634) | ($12,536) |
| Amazon professional selling plan | ($480) | ($480) | ($480) | ($480) | ($480) |
| Sales tax filing service for brand-site orders | ($900) | ($2,400) | ($3,000) | ($3,300) | ($3,600) |
| Part-time bookkeeper | ($6,000) | ($6,500) | ($7,000) | ($7,500) | ($8,000) |
| New-bundle samples, prototypes and listing refreshes | ($6,000) | ($9,000) | ($11,000) | ($12,000) | ($13,000) |
| Inspections of production runs and sourcing travel | ($2,500) | ($3,500) | ($4,500) | ($5,000) | ($5,500) |
| Trademark upkeep, licenses and dues | ($600) | ($900) | ($1,000) | ($1,100) | ($1,200) |
| Equipment replacement | $0 | ($1,500) | ($2,500) | ($5,000) | ($2,500) |
| Annual pay raises (3% a year) | $0 | ($3,735) | ($10,947) | ($22,145) | ($32,444) |
| EBITDA | ($22,701) | $27,320 | $59,126 | $56,927 | $100,639 |
| Depreciation | ($1,300) | ($1,300) | ($1,300) | ($1,300) | ($1,300) |
| Interest | ($8,800) | ($8,800) | ($7,624) | ($4,869) | ($1,795) |
| Income tax | $0 | $0 | ($9,076) | ($13,306) | ($25,570) |
| Net income before start-up costs | ($32,801) | $17,220 | $41,127 | $37,452 | $71,974 |
| Start-up costs expensed at launch (legal, testing, design, listing content, launch ads) | ($50,900) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($83,701) | $17,220 | $41,127 | $37,452 | $71,974 |
Year 1 loses $32,801 before start-up costs and $83,701 after them, with no sales in two of its twelve months. Net income is $17,220 in Year 2, $41,127 in Year 3, $37,452 in Year 4 and $71,974 in Year 5. Gross margin holds at 49.7% every year because the model keeps the Year 1 fee and cost blend fixed, so improvement comes from advertising, which falls from 13.9% to 9.9% of revenue, from payroll spread over more units and from the loan interest running off. Net margin before start-up costs is 2.5% in Year 2, 4.2% in Year 3, 3.1% in Year 4 and 5.0% in Year 5. Year 4 falls on Year 3 because the coordinator for nine months, a larger unit with rent up $6,400 and pay raises up $11,198 land together. Income tax is $0 in Year 2 while the Year 1 loss carries forward, then $9,076 in Year 3. The plan does not reach an 8% net margin: getting there would take advertising near 7% of revenue or landed cost near 17%, and neither is a safe planning figure for a crowded category.
Cash through five years
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($144,947) | $10,496 | $35,646 | $33,248 | $68,103 |
| Computers, photo and prep equipment | ($6,500) | $0 | $0 | $0 | $0 |
| Funding received | $230,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | $0 | ($23,806) | ($26,560) | ($29,634) |
| Owner distributions | $0 | $0 | $0 | ($25,000) | ($50,000) |
| Net change in cash | $78,553 | $10,496 | $11,840 | ($18,312) | ($11,531) |
| Closing cash | $78,553 | $89,048 | $100,889 | $82,576 | $71,045 |
Operations use $144,947 in Year 1, mostly stock, the loss and working capital, and the raise covers it. Cash ends Year 1 at $78,553 and rises to $89,048 in Year 2 because the loan is interest-only. Principal repayments of $23,806, $26,560 and $29,634 begin in Year 3, and payouts of $25,000 and $50,000 follow in Years 4 and 5. Cash ends Year 5 at $71,045, down from $100,889 in Year 3, so the payouts are the first thing to stop if a fourth quarter goes badly.
Balance sheet: stock, loan and equity
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $78,553 | $89,048 | $100,889 | $82,576 | $71,045 |
| Accounts receivable | $9,890 | $19,178 | $27,025 | $33,396 | $39,380 |
| Inventory at landed cost (in Amazon centers and in transit) | $57,635 | $61,048 | $63,933 | $66,274 | $68,474 |
| Computers, photo and prep equipment (net) | $5,200 | $3,900 | $2,600 | $1,300 | $0 |
| Total assets | $151,278 | $173,174 | $194,447 | $183,546 | $178,899 |
| Accrued freight, prep and supplier balances | $4,980 | $9,655 | $13,606 | $16,814 | $19,827 |
| Inventory term loan | $80,000 | $80,000 | $56,194 | $29,634 | $0 |
| Paid-in capital | $150,000 | $150,000 | $150,000 | $150,000 | $150,000 |
| Retained earnings | ($83,701) | ($66,481) | ($25,354) | ($12,902) | $9,072 |
| Total liabilities and equity | $151,278 | $173,174 | $194,447 | $183,546 | $178,899 |
Break-even, stock turns and debt cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -6.3% | 3.9% | 6.0% | 4.7% | 7.0% |
| Net margin (before start-up costs) | -9.1% | 2.5% | 4.2% | 3.1% | 5.0% |
| Payroll incl. pay raises as share of revenue | 23% | 18% | 19% | 21% | 20% |
| Revenue per full-time equivalent at year end | $240,667 | $279,995 | $394,570 | $348,268 | $410,682 |
| Average monthly revenue | $30,083 | $58,332 | $82,202 | $101,578 | $119,782 |
| Monthly revenue needed to cover operating costs | $33,893 | $53,747 | $72,279 | $92,024 | $102,892 |
| Debt service cover (EBITDA / interest + principal) | -2.6x | 3.1x | 1.9x | 1.8x | 3.2x |
Year 1 averages $30,083 a month against $33,893 needed to cover running costs, so it loses money. Year 2 averages $58,332 against $53,747 and Year 3 $82,202 against $72,279, so Year 2 clears the line by about $4,600 a month. Debt cover (EBITDA over interest and principal) is negative in Year 1, 3.1x in Year 2 and 1.8x or better after that. Stock turns on landed cost are about 1.3 in Year 1 and 3.2 in Year 3.
If sales run 20% under plan
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $288,800 | $559,990 | $789,140 | $975,150 | $1,149,910 |
| Net income before start-up costs | ($42,026) | $4,079 | $16,960 | $29,005 | $12,472 |
| Net income after start-up costs | ($92,926) | $4,079 | $16,960 | $29,005 | $12,472 |
| Closing cash | $70,310 | $68,587 | $57,039 | $55,912 | $35,473 |
Here every revenue line runs 20% lower in all five years. Management responds in this order: hires from month 13 start six months late, advertising falls only 10%, Priya takes a 20% pay cut, purchase quantities hold and unsold stock builds, prep, return and card costs move with volume, samples and sourcing travel fall 25%, no equipment is replaced, no larger unit is taken and no payouts are made. On those terms the business loses $92,926 in Year 1 after start-up costs, earns $4,079 in Year 2, $16,960 in Year 3, $29,005 in Year 4 and $12,472 in Year 5, which is below the base case in every year, and closes every year with at least $35,473. Year 5 is lower than Year 4 because the delayed hires are on payroll for the full year and pay raises compound, and the net margin that year is 1.1% against 5.0% in the base case. Equity ends Year 1 at $57,074. Advertising is cut less than sales, so the ad share rises, which is the harder test. This is a survival case, and it holds minimum-order stock that sells slowly.
Sources
- Amazon Seller Central and sell.amazon.com, referral fee and fulfillment fee schedules. The pages could not be opened for this plan, so every fee rate in the plan is a planning figure and the seller reads the current rate card before each order.
- Oregon Department of Revenue, corporation excise tax and Corporate Activity Tax pages. The pages could not be opened for this plan, so the 6.6% state rate is a planning figure and the accountant confirms the rates and thresholds.
- Landed costs, factory minimums, 3PL rates, rent and product liability requirements are figures for planning or points for the broker and accountant to confirm.
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