This Issue's TLDR...

• How to turn your unsellable FBA inventory into $$
• Have you heard of Strategic 1P
• A simple explanation of working capital

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PROGRAMMING NOTE: Best@Amazon issues are going to be shorter and more sporadic over the next 4-5 weeks. Blame it on a deal that I'm closing on, and summer vacation for the kiddos. We'll be back to longer form newsletters soon!

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The last ~3 years in my largest Amazon business has consisted of a series of "bobs" and "weaves."

My business hit $10mm in revenue in 2022, and was spitting off healthy net margins (~19%, in a market where sub 10% is common).

But, market competition and Uncle Andy weren't going to let this sweet situation persist.

Today, the business is much smaller, and less profitable (~4% net margin).

I've been able to sustain it by, literally, finding money "under couch cushions" and through smart financing.

It's been a lot of small measures that have compounded (very much in line with the James Clear idea of getting 1% better every day).

I'll share a few here today.

1) Value Recovery on Unsellable FBA Inventory

You know those units that sit in FBA and you need to decide: Do I dispose (and pay a fee), or have Amazon send the units back to me (and also pay a fee)?

Well, in most cases (i.e., unless you have a grade-and-resell operation of your own or a 3PL that will do this), you're losing money on these units and/or stockpiling garbage inventory in your garage.

But I'm not.

In fact, I'm recovering ~5% of the retail value of those products.

Here's a snapshot of my recoveries over the last 7 days:

The absolute dollar amounts aren't staggering here, but:

• This is entirely "set-it-and-forget-it" found money; and
• My business doesn't have a huge amount of unsellable units.

I'm doing this through a liquidations partner that I found through my network.

They're recovering between 2-8% retail value on unsellable FBA inventory for sellers, and nearly ~10% retail value in certain categories like Tools and Home & Kitchen (basically, categories where product durability and perceived value remain high even after some wear or returns).

If you'd like an intro to this partner, just reply to this email.

2) Wholesale Closeouts for End-Of-Life Products

I've been pruning my catalog aggressively over the past 2 years.

This is part of the reason that my top-line is down so much (I haven't introduced new products to replace the ones that I've sunset).

But, I haven't been taking a bath on these EOL products because I've been flipping lots (typically 500-5k units) to a closeout/liquidation partner.

It costs me $100 upfront to "list" the closeout, and then I pay 10% commission on the ultimate liquidation value.

Again, this is sort of "found money" since these products would otherwise be destroyed or accrue stupid amounts of storage fees at FBA.

If you'd like an intro to this partner, just reply to this email.

3) Asset-Backed Line of Credit

A couple years ago, I secured an asset-backed, revolving line of credit for my business. At one point, this credit line was in the neighborhood of $700k. Today...it is lower.

But, the point is that this credit line made it substantially easier to manage working capital and the cash conversion cycles in my business (more on that below).

Here's the thing...

Many Amazon/eCommerce businesses can secure asset-backed lines of credit (if they know where to look).

In fact, I'm currently advising a major financial institution that is building an asset-backed credit product that is based on your Amazon FBA/AWD inventory.

I'll be able to share more about it in about a month, and the good news for all of you is that I'll be able to enroll a small number of select businesses into the beta.

4) Pivot from 3P to Strategic 1P (in progress)

All of you know about the 1P and 3P models (duh).

Many of you know about 2P model (aka the Pattern model).

But, have you heard of "Strategic 1P"?

Maybe not, because that's just the name that I use for it.

But, in short, this model involves selling your products, wholesale, to a 1P vendor that has a special account mandate from Amazon to offer a broad assortment of products.

Right now, I'm exploring this for my business because 1) my margins are sh!t, 2) this strategic 1P vendor can offer me great pricing AND keep the retail prices of my products low (I'm in a super price competitive category), and 3) I've grown weary of all of the Amazon headaches and I'd much rather just sell truckloads to a strategic 1P vendor.

I haven't made a decision on this yet, but I'll write about it when I do.

In the mean time, if this is something that you want to explore for your business, just reply to this email.

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BEST from X

Speaking of lines of credit and working capital...

This is probably the most comprehensible and intuitive explanation of why working capital matters that you'll find.

The Secret CFO @SecretCFO Business growth lives or dies by working capital. Two business A & B: Both have the same P&L unit economics Base Sales = $500k per month Operating Profit Margin = 10% Both start with $1m cash in bank. Both hit a growth vein. Sales start growing at 15% per month. Assuming no 8:50 AM • Sep 10, 2023 220 Retweets 1637 Likes Read 70 replies

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Something that I read, that I can't stop thinking about:

"When you borrow from a small bank, you get a partner. When you borrow from a large bank, you get a policy."

When financing a deal, choose your lender (and equity partners!) wisely.

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