A simple formula for determining when your FBA inventory should sell, and when you’ll get your investment back.
In this article:
- Introducing “The 30/60 Rule”
You’re not alone
It’s normal. As Fulfillment by
- How quickly should I expect to get my inventory investment back?
- How quickly should my FBA inventory turn over?
- How do I know if I’m doing this FBA thing right?
What follows is a formula I use as a baseline to determine if I’m “doing this right.”
For newer sellers, the 30/60 Rule will help you answer questions like:
- Am I pricing properly?
- Am I shipping in the right mix of high demand and low demand FBA items?
- Are my profit margins big enough?
Even with some years of experience, I still use the 30/60 Rule to answer a couple of key things:
- When I’m spending an uncomfortable amount of money on Fulfillment by
Amazon inventory, I use the 30/60 Rule to know how long it will be until I get that money back. - After I’ve sent in an FBA shipment, I use the 30/60 Rule to measure my minimum expected
Amazon payout, based on total net profit (calculated by my FBA listing software).
The 30/60 Rule offers a huge peace of mind, because it relies on simple (and conservative) math to determine how much money you’ll see in your bank account in what amount of time.
Note: This applies primarily to books, and may not apply across all inventory types.
Here it is: The 30/60 Rule
The rule states that, on a shipment-by-shipment basis:
“You will at least double your investment in 30 days, and sell at least half your shipment in 60.”
That’s it.
You can build a whole Fulfillment by
The 30/60 Rule, explained
The reality is, I do much better than doubling my money in 30 days, and usually sell more than half in 60. But I use this as a baseline figure to predict my returns, and how quickly I’ll see that revenue.
If actual averages are much better, then why don’t I offer a rule that reflects something more accurate? Because you should always make estimations based on conservative figures. With the 30/60 Rule, it’s hard to go wrong.
And “30/60” just sounds cooler than “18/57.” (Supreme coolness is the most important reason for the name.)
How infallible is the 30/60 Rule?
I’ll put it this way: It’s not as immutable as death and taxes, but I hit these numbers even if I don’t reprice.
As in, if I do absolutely nothing after dropping off my FBA shipment at the UPS store, I’ll still (usually) double my money in 30 days, and (usually) sell half my inventory in 60.
Worth noting: It’s much more consistent to double your money in 30 days than sell half your inventory in 60 (but both are pretty consistent).
What if you aren’t hitting the 30/60 benchmark?
Let’s say you’re looking at your last few FBA shipments, and you’re not quite hitting these metrics. It doesn’t necessarily point to any fatal flaws in your
A few issues that might be responsible:
- Failure to reprice. Again, I’ll hit these figures (usually) even if I don’t reprice, but being more consistent about repricing will get your numbers up.
- The poorly-ranked items you’re selling don’t have high enough margins. I’ll ship a book ranked 500,000 in that I can sell for $7.50, no problem. But I won’t ship in a 4 million ranked book at that price. The higher the rank, the higher your expected
Amazon payout should be. You’re not going to hit the numbers of the 30/60 Rule if you’re shipping in poorly ranked items with low payouts (which you shouldn’t). - Margins that are too low. Another article altogether, but I won’t ship anything to
Amazon I don’t expect to get $3 back on for every $1 I invest.
Notice “selling poorly ranked items” is not on this list
Reason is, there’s nothing wrong with selling items via FBA that have a poor sales rank…. If they are high-value. That’s the part many
Will the 30/60 Rule apply to shipments containing really poorly ranked items?
It happens all the time: You create a shipment with an unusually large number of unusually poorly-ranked items. Does the 30/60 Rule still hold?
If the items are extremely low-demand, the “sell half your inventory in 60 days” part will not.
But the “double your investment in 30 days” part should.
Remember, the worse the sales rank, the higher the average payout you should need to see. So whereas with the average item you might have an $8 payout, with a low-demand item you should be looking for $15 or $20+ average
So with these FBA shipments, it will take fewer sales to double your investment. Make sense?
Does this mean the other 50% will sell in the next 60 days?
No.
The half of your FBA shipment that doesn’t sell will be the lower-demand items, that bide their time over many months (or years).
That’s the inventory that is like the FBA tip jar. The money that comes in slowly after you’ve already made a decent profit.
The 30/60 Rule: An example
Let’s offer a simple shipment sample to illustrate.
- Size: 100 books.
- Cost: $100
- Average sales rank: 1 million
- Expected payout for entire shipment: $1,000
Even at this average sales rank (which isn’t bad but isn’t great), you should expect to get at least $200 back in under 30 days, sell 50 books in under 60 days, and get roughly $500 in 60 days.
Wait, $200 after 30 days, but $500 after 60? Why would you make more the second month than the first?
You won’t. These are rough numbers, and very round ones. They’re also conservative. Don’t get caught up on the specifics.
The actual numbers will vary wildly. But they should rarely fall below 30/60.
To recap
The “30/60 Rule” states that, on a shipment-by-shipment basis:
“You will at least double your investment in 30 days, and sell at least half your shipment in 60.”
Simple math. Conservative math. And the peace of mind that comes with it.
Triple-win.
-Peter Valley
Also, claim your free book:
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Thanks Peter. I absolutely wasn’t sure if I was “doing this right”. The is a huge stress reliever and makes it much easier to focus on my business goals now that I have a realistic way to measure my efforts.
You got it.
Not sure that these numbers will hold up with my current buying and selling plan. I’m purchasing almost exclusively textbooks to sell at maximum profit during the fall and winter selling frenzies and board games to sell during the 4th quarter rush. I’m not pricing to sell many of these before those buying periods. It just doesn’t make sense to me to make $2-4 on a book now that I’ll probably make 50-300% more on in August. I’m very satisfied with my returns once the rushes are over. I’ll have to run the 30/60 results as an average in October to see how I’m doing.
I see that I need to be sourcing more non-textbooks to generate a more steady income stream between the textbook seasons.
We are currently devoting more time to growing the eBay side of our business, which represents about $3500 in profit so far for 2016. We’re averaging just over 1 sale per day on eBay with 500 items listed.
All the while I’m buying at least 25 books a week through Zen Arbitrage. Got behind over the last 2 months and sent nearly 300 textbooks in over the last 2 weeks.
Allen
Results can vary by business model, though generally I suggest using this same rule of thumb even to Zen Arbitrage users who may be emphasizing textbooks (which can be seasonal, but not always as much as people think). But you’re right – if most of your inventory is not matching the lowest FBA offer, then this definitely won’t apply.
I just did some quick analysis of my last couple of shipments and I’m doing about 15/60, where I get a bunch of sales the first 10 days that double my money and about half my books sell in the first 60 days. Does this sound accurate or am I just really great at this FBA thing? 😉
I would say my true averages hit closer to yours than 30/60. So it does sound accurate, AND you’re really good at this.
Good info as always Peter. Looking forward to the webinar. I don’t really check these numbers but I know I don’t have much inventory in Stock for more than 1 year. I know my asp is $18.50 and my avg cost per book is 52 cents.
I just wanted to say thanks Peter. I bought ur first original ebook for $47 about 18 months ago. I only read 100 pages (sorry, still haven’t finished it) and started sourcing immediately. The more books in inventory the more money I made. I’ve always been good at finding deals and 7 months ago I quit my job and now am a full time book mogul (that’s what I tell everyone bc it sounds cooler than saying I sell books for a living.) I’m 100% solo and have around 4,000 books at Amazon and another 3,000 I need to send in. I’m finding them faster than I can process them due to business connections I’ve made. I’m on pace to almost triple what I did my first year. I’ve become an official business, hired a cpa (so worth the money btw.shes having me set aside money each month for my taxes next year which I think is smart.) I get to work from home and spend more time with my dog and fiance. Thanks Peter, your Amazon autopilot book changed my life for the better. Cheers. See you Thursday. Tj
Love this. That’s why I do what I do. Not having a job is the highest and most noble of pursuits.
Hi Peter,
Unfortunately, I missed your Outsourcing webinar (that I really wanted to watch). I know you don’t do replays, but you have on occasion done a repeat live webinar. Any chance that will happen for the Outsourcing webinar?
Yes, I’m doing it again this Thursday: http://app.webinarjam.net/register/18043/ebbe880244
As always amazing content! Thanks brother.
I’m confused. So say I buy 100 books for $5,000. 30 days from the date those 100 books go active on my amazon account I should have $10,000 being paid to me or be in pending orders? The “60” part of the equation seems very realistic but not the “30” part, if I am understanding it correctly which I might not be.
Also saying that you get 3 dollars back for every dollar invested seems very far fetched. I don’t think it’s possible to average a 300% return consistently. Is that 300% return after amazon fees? Even before amazon fees this seems unlikely.