How to Start a $50K/Month Dropshipping Business

by Brandon Boushy
How to Start a $50K/Month Dropshipping Business

Working will earn you an income, but if you want to make a great living, you’ll probably want to pursue some strategies that let you earn a passive income. We’ll show you how to start dropshipping.

Ryan Hogue started his dropshipping business while working two jobs. He’s since become a multi-millionaire through dropshipping on Amazon and other marketplaces. He’ll share his strategies to start a dropshipping business model and how to grow your drop shipping business ideas into passive income.

What is Drop Shipping?

Woman in a delivery courier outfit working on the table

People might also ask: what is dropshipping?

Either way you spell it, dropshipping is a logistics strategy that ships products from the manufacturer to the final consumer. This strategy allows both the manufacturer and the dropshipper to make more money by cutting out a distribution center.

Ryan told us: 

I hired a coach to help me launch my own FBA product. I realized I could do Amazon Merch on Demand and have another form of passive income.

Check out our interview with him about opening a dropshipping store below.

Then apply for Amazon Merch on Demand.

How Does Dropshipping Work?

Dropshipping follows a simple process:

  1. Customer orders a product from an online store.
  2. Online store takes their profit and sends the order and payment for product and shipping to the supplier.
  3. Supplier prepares the order and ships to customer.

Ryan told us:

There’s a learning curve, but soon you set it up and forget it.

Is Dropshipping Worth It?

The dropshipping business model can be extraordinarily profitable.

Just to give you an idea, Amazon spent $288 million paying out vendors for the online business earnings, according to page 35 of their annual report.

This accounts for about 20% of the dropshipping business in the U.S., which means dropshipping is making over a billion each year. Profits are typically around 6%, but when you start a dropshipping business on Amazon you can mostly add your products and they do all the work.

Ryan told us:

In July 2022, I made $32,000 revenue in a month just from Amazon Merch. $6,700 of that was profit. I spent $150 on ad spend, and the largest cost was currency conversions.

I’d say getting into the dropshipping business is worth it.

Is Dropshipping Legal?

Man holding a paper holder board with website screen in the background

Yes, you can legally dropship products. You’re required to follow local, national, and international laws about selling merchandise in both the place you live and the buyer’s location.

The business model is low risk as long as you pay sales tax and comply with the laws. You can start by checking your state laws then use software like Avalara to simplify compliance.

How to Start Dropshipping 

Dropshipping is a fairly easy process to start. Ryan told us there are basically 5 steps.

  1. Sign up on the platform
  2. Get a supplier
  3. Create designs
  4. Create website (if needed)
  5. Do marketing

Ryan’s advice is really beneficial if you want to know how to start a dropshipping business on Amazon. We’ll add a couple more steps to the process below so you’re prepared for other marketplaces as well. 

How Much Does It Cost to Start a Dropshipping Business?

A courier guy in a warehouse with a stack of box

You can get into the dropshipping business for almost free. Most blogs say you need less than $100, but I would say you need to have at least enough money to cover the first couple of purchases depending on how your own dropshipping business is set up. Ryan told us:

My initial startup cost was zero for Amazon Merch on Demand. It’s a simplified process of selling on Amazon.  Apply, Add your designs, then you get a royalty once a month.

He also let us in on how to start dropshipping for free.

How to Start Dropshipping with No Money

Ryan explained that dropshipping suppliers allow you to start for free. In addition to Amazon Merch, he had these ideas for where and what to sell:

  • Ebay: Anything you sell on Amazon Merch
  • Etsy: Design files sell well on Etsy
  • Amazon Central: Sell the same designs or your own dropshipping products
  • Amazon KDP: Apply the dropshipping business model to books
  • Red Bubble: This is an Australian dropshipping supplier that Ryan has had success with

Ryan emphasized:

Go to redbubble.com. It is the absolute easiest to get started.

Jump into the dropshipping business with Red Bubble!

How to Start a Dropshipping Business

Woman with a laptop and a whiteboard showing the structure of dropshipping

You can start a dropshipping business in just seven steps:

  1. Research Dropshipping Ideas
  2. Choose a Dropshipping Opportunity
  3. Write A Business Plan
  4. Choose A Business Structure
  5. Select a Dropshipping Supplier
  6. Open an Online Store
  7. Market Your Dropshipping Store

Next, we’ll show you how to dropship.

Step 1. Research Dropshipping Ideas

Screenshot mock-up of small business ideas from Upflip website

There are a ton of ways to drop ship depending on what dropshipping niche you want to get into. Ryan suggests:

T-shirts, mugs, or books through Amazon dropshipping are the easiest. Then you can sell the same design files through Etsy.

He also suggests looking through whatever site you are on to figure out what is trending. Ryan told us:

If you can sell a couple shirts immediately and then another 1-2 per year, it will start to add up.

Check out our blogs on business ideas to get more great online business ideas.

Step 2. Choose a Dropshipping Opportunity

In this step, you’ll want to choose a dropshipping business idea and dig deeper into what it requires to set up. Remember, Ryan told us he’d suggest starting on Amazon Merch. He told us you might want to overstate your credentials.

I wasn’t accepted on my first attempt. You might have to create a new email and lie a little saying you’re an experienced graphic designer with a successful online business—but a human isn’t checking it. It’s just a machine.

He also told us that Amazon can take a while to approve your dropshipping business ideas.

Learn how to evaluate business opportunities.

Step 3. Write A Business Plan

It’s always helpful to write a dropshipping business plan.

When starting a dropshipping business, it might be as simple as stating what your target revenue and profits are, the channels and countries you’ll sell in, and the products you’ll sell. If you want to expand like Ryan has, you might want to plan for additional costs like development, design, and creating YouTube videos.

For those who want to dig deep into a dropshipping business plan, check out our blog about business plans or watch the video below.

Next, let’s look at forming your dropshipping business.

Step 4. Choose A Business Structure

Dropshipping businesses will need to comply with local laws. Every state has different requirements, but most states require every online retailer that makes over $600 in their state to pay sales tax. That means the ecommerce store will need:

  • Limited Liability Company: Offers personal liability protection and protects personal assets under most scenarios if you keep your personal and business finances separate. Apply with your state’s Secretary of State
  • Business License: These are required in many states to operate a business. You may also need local or county licenses.
  • Sales Tax Permit: To collect sales tax, you will need a tax permit, which may also be called a tax ID. You’ll also need to pay the sales tax office after you collect the taxes. Each state handles these differently so just search “Sales Tax Permit” in Google.

You may also need a tax exemption document to avoid paying sales tax on every purchase from your dropshipping supplier, or some states will allow a dropshipping store to count that as your taxes. Consult an attorney before your dropshipping business counts the taxes from the dropshipper as satisfying the online stores taxes.

Step 5. Select a Dropshipping Supplier

When you start a dropshipping business, there are a ton of dropshipping suppliers to choose from. We’ll discuss some of the more popular drop shipping companies and wholesale suppliers. 

You should always check the dropshipping website’s reviews and note where they are located. Drop shipping companies in the U.S.A dropship much faster to U.S. addresses than dropshipping companies in Asia or other countries.

Wholesale Central

A guy courier with a package box on his shoulder

This site offers third party tools to help store owners find companies selling products. The two most relevant categories for a successful dropshipping store are:

Any companies listed as wholesale dropshipping accounts should be capable of meeting the dropshipping prices, but make sure to understand how their wholesale price and dropshipping process works.

Amazon Drop Shipping

You have a ton of options for a dropshipping store on Amazon. Your dropshipping business can use:

  • Fulfillment By Amazon: Have Amazon fulfill orders for your ecommerce store. Find out how to sell products using this business model.
  • Amazon Merch: Make between $1.93 and $9.32 royalty per t-shirt sold with Amazon Merch online store.
  • Amazon Kindle Direct Publishing (KDP): Start a dropshipping business selling books on Amazon KDP.

In addition, you can use most print-on-demand or external dropshipping ecommerce businesses in conjunction with Amazon, but your dropshipping business won’t qualify for Amazon Prime shipping.

Alibaba Dropshipping

If a dropshipping business wants products that are sourced in China without a minimum order quantity, you can order from Alibaba. Dropshipping from China takes a while longer to reach the customer after you sell products, but you’ll have higher profit margins on all your customer purchases. 

If you use this method, make sure your ecommerce website explains that using this dropshipping business model reduces waste and prices, but takes 10 to 14 business days for products to arrive. People appreciate knowing what to expect.

AliExpress Dropshipping Center

Screenshot of dropshipping center from aliexpress website

AliExpress sells products in wholesale quantities. This makes it easy to start a successful dropshipping business if you order products from their ecommerce platform, then ship to a fulfillment center. This makes selling on online stores like Amazon and Shopify more efficient.

Shopify Dropshipping

The dropshipping model thrives on Shopify. There are a ton of dropshipping suppliers with plug-ins for selling products on the Shopify website. The following are some of the best ones to consider when starting a drop shipping website.

  • DSers: Connect AliExpress to your website and pull in the information from the AliExpress website with this dropshipping Shopify app. There are free and paid plans as low as $19.90 per month.
  • Spocket: Find dropshipping suppliers. USA, Canada, Europe, Australia, Brazil, and China are all places you can connect your ecommerce business to with a free plan. A small business can upgrade for $24.99/month.
  • Modalyst: Sync AliExpress to your own site on Shopify. Starting a dropshipping business is easier with this app because it provides branded dropshipping lists to make your marketing easier. It isn’t free, though. You’ll be paying $35 per month.
  • Print-on-Demand: Companies like Printful and Gelato are great for branded dropshipping. A customer makes a purchase, then the company prints the product and then mails it directly to them.

Find more great apps on the Shopify App store.

Step 6. Open an Online Store (Optional)

When you start a dropshipping business, you may want to open your own online store. A dropshipping business store will normally have lower transaction fees than selling on other ecommerce platforms once you reach enough volume to cover the monthly fees.

The online store also makes the customer data yours instead of it belonging to the ecommerce platforms.

Popular ecommerce platforms where you get to keep the customer data include WordPress and Shopify. Learn about building a website.

Step 7. Market Your Online Business

Notebook and laptop on the table

After you’ve narrowed down your business ideas, chosen reliable suppliers, and have an online site, it’s time to turn your dropshipping store into a profitable business model. That means you’ll need to start a marketing strategy to sell products. 

There are a lot of ways to market your business concept when you start a dropshipping business. You’ll want to:

  1. Create a Marketing Strategy
  2. Register with Search Engines
  3. Create Content
  4. Collect Data
  5. Automate Email Marketing

Let’s look at how to create your own brand for a dropshipping business.

Define Your Marketing Strategies

The dropshipping business is a low-risk business model, but you’ll still need to get your dropshipping business ideas in front of people to sell products. How are you going to get your dropshipping business ideas to be seen by your niche market?

  • Define what online tools you’ll use.
  • Choose how you’ll communicate with your target market.
  • Specify the kind of content you’ll post.
  • Be consistent with how often you post. 

These next sections will focus on essential aspects of a successful marketing strategy.

Register with Search Engines

Man working on a laptop

Every small business needs to be paying attention to Search Engine Optimization (SEO). SEO is focused on using the keywords that people use to find the products you sell. You’ll want to make sure you show up in Google search and other search engines (Amazon and YouTube are search engines too).

When you want to start a dropshipping business, you’ll want to make sure to add your business info to sites like Amazon, Google Search Console, and other major search engines. Check out this list of 120 online business directories.

Ryan told us:

Gradually increase your setup. Occupy as much online real estate as possible.

Create Content

You’ll want to create new content for your own brand as often as possible. You can use a free tool like Google Trends to find trending keywords, then add designs that match them. This helps get your small business seen on Google search results easier. 

You can also use SEO tools like ahrefs and SurferSEO. We use both of these for our content on UpFlip.

Every platform has different algorithms, so the content you  create will need to be based on best practices for that platform. Ryan told us he prefers to create dropshipping business content for the following platforms:

I use Facebook Communities and YouTube. I post daily content on YT. I also respond to my audience. On Facebook, I create different groups and interact with people on there.

Collect Customer Data

Young man working on a tablet

While a dropshipping business has low startup costs, a business owner will find that they can improve their profit margins if they collect customer data.

Information like customers’ names, email addresses, phone numbers, and products purchased can make it easier for you to personalize marketing for your own dropshipping business. Hubspot has some useful courses on how and where to personalize customer interactions on an ecommerce platform.

Automate SMS and Email Marketing

Another way that a dropshipping business markets is by sending customers SMS and email marketing updates when new items have been added to their ecommerce platform.

Many dropshipping business ideas will not make a profit on the first sale to a customer because the cost of customer acquisition in 2023 is nearly $22 for consumer goods—and even higher for some types of companies. 

One of the key things you will have to learn for your own dropshipping business is how to increase the lifetime customer value. As you sell each customer more products, you will reach a break-even point and eventually a profit margin.

A legitimate business entity will find that the best way to get customers to return to their own site is through SMS and email marketing. The more you drop ship to each customer, the more profit you’ll make. 

Example

Let’s say you sell a product on an ecommerce platform for $50, and it costs you $22 in marketing to get a sale. Your dropshipping company would have a scenario that looks like the one below.

  • Sales Price: $50
  • Tax: $4.25
  • Ecommerce Fees: $7.50
  • Processing Fee: $1
  • Cost of Product: $34.25
  • COGS: $47
  • Gross Profit: $3
  • Ads: $22
  • Net Loss: -$19

In fact, in that scenario, you’d need to sell another seven items before you’d make a profit. (This demonstrates a lot of the reason that many people are turning away from paid advertisements. Most people focus on creating helpful content for social media instead.)

Now that you know the basics of how to start a dropshipping business, let’s look more specifically at one method. A lot of the information that Ryan provided is about how to dropship on Amazon, so check out the next section.

Never Make These Dropshipping Mistakes

A frustrated man standing beside the packaging boxes

There are a lot of mistakes you’ll want to avoid while learning how to start a dropshipping business. Some of the biggest mistakes people make include:

Choosing The Wrong Target Market

If you choose a target market that’s saturated, you’ll have a difficult time breaking into the market. Use Google Trends to find new opportunities.

Underestimating the Importance of SEO

As we stated above, SEO is critical for customers to find your products. If you’re building your own site, you need to make it easy to use.

That takes a lot of time, but running a shop on Amazon just means adding the new products, titles, and descriptions—and the format is already conducive to be SEO-friendly.

Not Automating Processes

Man having problem on a laptop

Painstakingly typing each variant of a print-on-demand product could take hours. There are faster methods.

Ryan told us:

I’ve completely automated my system because I’m familiar with development.

The system Ryan uses is called Automate POD. Check it out below.

Negative Customer Experience

One mistake the print-on-demand and dropshippers make is forgetting to disclose the lead time. Most people expect Amazon-like quickness and will not be happy if they pay extra for shipping costs and the product doesn’t arrive before an important date. Solve this problem by disclosing how products are handled. 

Relying Too Much On A Single Supplier

When considering how to start a dropshipping business, you may be tempted to make a deal with a supplier and just work with them. This can be a dangerous mistake because they might run out of products or raise their prices to where you aren’t competitive. 

You should always have a backup plan for if something goes wrong. In addition, you’ll want to always have contracts in place. 

Poor Customer Support

Angry woman on mobile phone infront of a laptop

Customers like to know the status of their products. Automate emails to send these notifications:

  1. Thank you email after they purchase.
  2. Shipping email once the order has a tracking number.
  3. Delivery email (or text) once the product arrives.
  4. Satisfaction questionnaire after they’ve had time to test the product.
  5. New product updates they might like periodically.

On top of that, if there’s a problem with a product, don’t argue with the customer. Just solve it. You don’t gain anything from ticking off a customer.

Failing to Build a Brand

There is plenty of competition in dropshipping, meaning you have to provide customers a reason to keep coming back. Everyone has something that makes their business unique. You just have to share it. 

You might have low prices, quick shipping, higher quality, a sense of humor, or better customer support. Build your brand, and you’ll build loyal customers.

Accepting Payments for Undeliverable Products

Before accepting a purchase, you need to be sure that the products are available. No customer likes paying for something they expect to get in a few days and finding it is on backorder for months. This will lead to cancellations, and those customers aren’t likely to return.

Marketing Something That’s Then Hard to Find

Sad woman with whiteboard background

Have you ever clicked on an ad because you liked something and when you opened it, you couldn’t find it? That’s annoying, right!?!?!

Don’t do that. Send the customer directly to the right landing page. Make it easy for them to buy and for you to make money.

Make The Dropshipping Business Model Work For You!

Now you know the basics of how to start dropshipping on Amazon and other platforms. Join the ranks of store owners who spend less time fulfilling orders and more time growing their businesses.

What dropshipping websites have you found that make your business easier to run?


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Author

Brandon Boushy

Our lead writer, Brandon Boushy, has been a business consultant, business owner, and marketer since 2017. Brandon is committed to the pursuit of knowledge and continuous improvement. He measures his success based on how many business owners he helps succeed. Brandon started Raising Daisy Photography in 2017 with Stephanie MacIver. His role was focused on marketing, estimating, and managing customer interactions. He is also a freelance business researcher and has provided over 3,800 hours of business research for more than 50 clients. His blogs are read by over 2 million people every year. Brandon told us: "My motto is never quit learning. I bring this motto to everything I do, and find writing the best way to help share the data I obtain to assist business professionals pursue their dreams." He empowers companies to improve their communication and brand awareness through creative content strategies and blog writing.

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Comments

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V R Kulkarni@ 2023-09-10 18:57:34

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