The idea of starting a new business comes to everybody I know.
Usually, it happens after a long day at work and an unpleasant conversation with a boss or a customer. Everyone wants to run their own show, and I believe that there is no better time to get going than now. Today.
Before I get started with the low-investment business ideas, let me first mention that I am not suggesting to quit everything and magically start making money, kicking back on your sofa chair with a laptop and a cup of coffee.
Instead, what I am going to suggest is to start small while keeping your full-time job. Why?
Beyond the obvious reason, which is to maintain a steady income in the beginning, you could also fund your own business without borrowing money to invest.
My general rule of thumb is to invest as little as possible to test your product or service to understand the feasibility of the business. If you find the demand for your product or services, it is then time to double down.
A natural question comes to your mind (rightfully so) – what kind of a business idea is out there that doesn’t require high investment. Glad you asked. Let’s get started.
Business Idea #1: Dropshipping
What is dropshipping? It is a way for you to sell products to your customers without carrying an inventory. Once a customer places an order, your manufacturer or a distributor then sends the product to your customer directly.
Dropshipping is a great way to start a business as you do not need to invest in your inventory. There are thousands of manufacturers that would gladly fulfill your orders (maybe with a small fee).
What’s even more important – customers will see that the order came from you, as the distributors and manufacturers generally use your brand name on the packaging (not always).
Returns? Yes. Great question. Manufacturers will also accept the returns on your behalf. The return address on the package will be the manufacturer’s address, so your customers would send the returned products back to the manufacturer. However, you would have to cover the shipping fees.
Overall, I would consider this to be a very low-investment business idea you could start with today.
Let’s dive into the pros and cons.
Dropshipping is a great way to start a business with a low investment. You never have to order a minimum quantity from a supplier and then store it in a warehouse.
Moreover, you do not have to fulfill the orders. You simply place an order with a manufacturer or a distributor that agreed to dropship their products.
This is also a great way to sell items that are not small and carry a high price tag.
Shopify points out that Dropshipping is a great way to offer a large selection of products. And for those that are not familiar with Shopify – it is an eCommerce platform that allows you to set up a store in a matter of minutes. In fact, I would probably guess that majority of Shopify stores use the Dropshipping model.
One of the biggest disadvantages of Dropshipping model is the inability to control inventory. Wait, what?
Let me clarify – when you dropship from a distributor or a manufacturer, you always depend on their inventory levels. That is, if you are offering a product and somebody buys it, you still have to make sure that your supplier has that product in stock.
Modalyst, a dropshipping platform that automates the relationship between a supplier and eCommerce stores, has done a great job integrating into Shopify stores and keeping your inventory information up to date.
However, the system is still not perfect. In one of my dropshipping businesses, a supplier sold half of its inventory to a wholesaler overnight, and as a result, about 20% of my products went out of stock.
Another disadvantage of Dropshipping is the returns. Oftentimes, your supplier will accept the returns, but that is not always the case.
For example, if you are using a Made-To-Order Dropshipper like Printful, and you are creating customized products, the returns are basically going to be part of the cost of doing business.
How To Get Started?
Step 1: Find a Niche
The first step you have to do is find the niche you want to sell in. There are a couple of suggestions that I would provide when trying to find what to sell.
First, find products that you often buy online. Ask other people what they buy online. Make sure it is not a mainstream category like jewelry, men’s shoes, or swimsuits. It has to be narrow enough so that you don’t compete with Walmarts or Targets of the world.
A good example of a niche would be something like paddle boards or home gym equipment.
Make sure that it is not something you could just walk into a big box retailer and buy without even looking.
Also, a general rule of thumb is that the product should be priced around $100-$150. I will go over why in the subsequent sections.
Second, do some research on the competition. A simple Google search should yield top competitors in that niche. If you see other eCommerce stores selling similar products, that’s great. If the search results only show Amazon, Walmart, and Jet, move on.
Lastly, go to Google Trends and see if the interest for that niche is there. If you don’t see people looking for this category, it’s probably not a good fit.
You could also use Google Adwords Keyword Planner (just register with your email address), to find how many people search for your particular search terms. Here is an article on how to navigate the Google Keyword Planner.
Step 2: Find a Supplier
There are a number of supplier aggregators out there that you could use, including InventorySource, Doba, and Modalyst. However, I would caution you if you would like to go that route, which I believe is one of the easiest ways to get started.
If you go through supplier aggregators like the ones I mentioned, you will not only find that the price of a product is already close to its retail price, but you will also see that most of the products could be found on Amazon with the same or even cheaper price.
An alternative is to find a supplier and work with the supplier directly (without an aggregator). The best resource I found to do is called Worldwide Brands. There is a one-time fee that you have to pay to get access, but I believe it is worth it.
By finding a supplier and contacting the supplier directly, you should be able to get a good price and find products that are not already being sold by many other sellers.
Step 3: Set-up an Online Store
As I mentioned before, the easiest way to set up a store is through Shopify. You could get going in minutes and find a Free design theme in their catalog of Free and Paid store themes.
Further, it is very easy to add products to your store. Most of the suppliers provide an Excel spreadsheet with the product information.
Make sure that you write good product descriptions as search engines will penalize you for using a generic description that could be found either on a manufacturer’s website or on your competitors’ websites.
The store generally provides other information such as your contact information, product reviews, your story, etc. Take some time to create a compelling web store that gives your visitors confidence to buy from you.
This post provides a good tutorial to get you started with your first Shopify store.
Step 4: Get Traffic
Getting traffic is the most important step in setting yourself up for success. There are a number of channels through which you will be able to get traffic. Social media, paid search ads, organic search, and display ads are among the channels that you should plan to use.
Remember when I mention the price tag that you should look for when looking for products to sell?
Well, the reason it is important is that the fastest way to get traffic to your new store when you begin selling online is through Google Product Listing Ads.
Not only do they provide solid traffic, but we also found that they also have the highest conversion rates.
What are the Product Listing Ads?
Product Listing Ads are product ads on top of search results that show the picture of the product, price, and your store name.
Why are they effective? Think about it – people see your product, and they see your price. When they click on the ad, they already have some intention to buy. Unlike search ads, people have more intention to buy through Product Listing Ads.
Product Listing Ads still cost money, but you do pay on a per click basis. Meaning that if the ad is shown 1,000 times, but there were only 100 clicks, you would end up paying just for 100 clicks.
Now, if you do get 100 clicks, I would say that, on average, you will get 1-2 people to buy your product (assuming your website is well designed and gives the confidence to buy).
Now, let’s assume that you are paying about 50 cents per click, you will end up paying $50 for 100 clicks. If your product is $150 and you have a 50-60% profit margin, you will end up getting $75-$90 of gross profits after one sale. After you subtract the cost of clicks, you will end up with $25-$90 profit. Not bad, right?
Yes, but you could clearly see how hard it would be to sell products under $100.
This is just one of the traffic sources. Other sources, like social media, should definitely be used in the future as you build your followers. These sources will allow you to bring more people to your store cheaper.
Lastly, the way that you could get people to see your store in search results organically (without ads) is by publishing useful content on your site. For example, if you are selling paddleboards, you could write articles about paddleboarding. This way, Google will pick up your content and start bringing people to your store.
Business Idea #2: Amazon FBA
Amazon Fulfillment By Amazon is another great way to start with a relatively low investment.
We don’t need to talk about how big Amazon is today and its current growth. What is interesting though is that over 50% of Amazon sales came from third-party sellers.
Many sellers use Amazon’s FBA program to let Amazon take care of shipping & handling, as well as customer service. In exchange, Amazon grabs a bigger share in the 3rd party sales.
The process is simple – you create a product listing on Amazon, acquire inventory, send it to Amazon, and everything else is taken care of by Amazon. Well… not everything, you still have to promote your product and get it to a good ranking, but you don’t have to worry about shipping, returns, and customer service.
What’s great about it? Amazon’s traffic. If you have a good product (with good demand) and you are able to get it to the first few pages of the search results, you could get a lot of sales. And with more reviews, you will get even more sales.
A great benefit to selling on Amazon is that you don’t really need a lot of products. You could start with just one product and get some good sales right from the start.
Unlike Dropshipping, the selling price on Amazon that I recommend is between $20-$30. Your typical margins on Amazon are 30-40%, so the selling price of $20-$30 would generate about $6-$12 of profits per sale. If you sell 10 items per day, that is $60-$120 in daily profitability.
Is selling 10-20 products per day possible? Yes – but picking the right product, launching it, and accumulating reviews is key to ranking on the first page of Amazon search results.
Further, you don’t have to fulfill the orders. Amazon will take care of that for you with lightning-fast Prime shipping. All you have to do is send the inventory to Amazon’s warehouse after properly labeling it. Amazon will also take care of customer service and returns.
Now, let’s talk about the elephant in the room.
You would be selling on Amazon! What’s the big deal? Well, it is currently the most popular online shopping destination with an incredible reputation that will help you drive sales right from the start.
Selling on Amazon has a lot of advantages, but there are also disadvantages that I would weigh in when you decide on starting your venture on Amazon.
First, it is getting more and more competitive every single day. The barriers to entry are getting eliminated with current technology, such as finding suppliers on Alibaba, importing your products, and sending them to Amazon.
As the time goes, people are accumulating more reviews, which serve as the main currency. The more reviews there are, the harder it is to penetrate the market.
Second, if you are selling on Amazon, you are giving away control over your business. Amazon could change their policies any day and that, ladies and gentlemen, is a huge risk if you have all the eggs in one basket.
Lastly, selling on Amazon does require you to make an initial investment in inventory. Generally, I recommend sourcing 500-1,000 products if you are buying your inventory from China (due to high shipping costs, it doesn’t make sense to go below 500 units) and about 100-150 products if you are sourcing the products in the US.
Why can’t you get away from just sending a few products to Amazon first? You can, but that won’t give you a good idea of the potential demand.
Think about it this way. Imagine that Amazon.com is a giant warehouse and when you walk in as a seller, the products that are upfront are the ones Amazon knows are selling well.
Your products (being a new seller) are sent all the way to the back because Amazon doesn’t know yet whether it makes sense for them to put your product in front of the customers as there is no history of sales.
To demonstrate to Amazon that your products are worth putting in front of the customers, you have to first generate some sales either through product giveaways or Amazon Pay-Per-Click Advertising.
Alright, I will post more resources on the topic of getting ranked on Amazon. But for now, let’s get tactical and go into how to launch your business on Amazon.
How to Get Started?
Step 1: Find a Product to Sell
What is the best product you could sell? Million-dollar question.
Fortunately, there are tools that could help you find your first product. My advice is not to blindly sell what you are most passionate about (although it is important to be passionate about what you’re selling).
Being a numbers guy, I highly recommend doing some analysis that should tell you two things. First, what the demand is for a particular product. Second, what the competition is currently out there in the market.
There are obviously other things that definitely play a role in product selection; however, start with analyzing supply and demand.
Step 2: Find a Supplier
Once you are set with your first product idea, you have to now find a supplier to source your new product.
There are two routes here – source from China (or somewhere else overseas) or source in the U.S.
Which one should you choose? My recommendation is to source products from China as the most cost-effective way, and when you find the right supplier, you will be able to get the right quality.
Now, to practice and learn how to create an Amazon listing, ship products to Amazon, etc., you could find a product in the U.S., ordering lower quantity is going through the entire process end to end.
Step 3: Send Your Inventory to Amazon
You’ve chosen the right product, and you found a supplier that will make that product. Once the production is complete, it is time to get your shipment imported to the U.S. and then delivered to an Amazon warehouse.
While there are a few ways you could import your goods, I would recommend finding a good freight forwarder that could help you get your products from the factory all the way to the Amazon warehouse.
The freight forwarder that we use is called FBAForward.
Getting your goods to Amazon isn’t that difficult. Amazon will help you get the lowest shipping costs (thanks to its agreements with FedEx and UPS) on getting your inventory in.
Step 4: Generate Your First Sales
Once you have created a new listing on Amazon, it is time to generate sales and start ranking on the first page of search results.
One thing I would bring up is that ranking for long-tail keywords is much easier than going after common search phrases.
Start with either Amazon Pay-Per-Click or give away some product with a discount to generate your first sales.
You could also ask your friends and family to buy and try your product. Remember, do not give the product away for reviews as it is against Amazon’s policies.
More on this topic could be learned here.
Business Idea #3: Freelancing Using Fiverr and Upwork Platforms
Do you have a hobby and you are good at it? That’s great because the world needs more people like you and you could get paid well.
Freelancing is a way to do ad-hoc projects and get paid for either a fixed fee or hourly rate. What’s more important is that you do not have to ask everyone you know if you could provide your services. There are platforms for helping you with getting work.
How does it work? It is a marketplace to connect people that are looking to outsource services and those that provide them.
You might now be wondering what kind of services you could offer. While there is definitely competition with quite a few freelancers, there are still opportunities out there. For example, when we needed product photography services for our eCommerce stores, there was a lack of photographers that could do lifestyle photos and photos with the models.
Are you a photographer? Something to think about.
Freelancing is a lifestyle business. What this means is that you could work for an extended period of time, make money, and then take as much time off as possible. You are your own boss.
Next, you could build long-term relationships with your clients and get a consistent stream of work coming your way. What’s also great is that all of this work is remote. Who said traveling while working is a bad idea? Freelancing gives you that option.
In this article, Jake Jorgovan explains how his friend, Danny, makes $100k per year doing freelancing work on Upwork. While starting off, generating this salary is probably tough, but as you build your reputation (through reviews) and your portfolio, the sky is the limit.
No insurance, 401(k), paid vacation, and stable income. Yes, freelancing does have its downsides. However, starting your freelancing career on the side initially is a great way to test the waters.
Further, increasing competition from overseas certainly lowers your chances to charge the amounts that your work is worth on platforms such as Fiverr and Upwork.
Lastly, being a freelancer, you have to handle everything yourself. Yes, there will be unsatisfied clients that will not approve your work after you’d spend days, if not weeks, of your time on the deliverable.
How To Get Started?
While the list of freelancing platforms keeps growing every year, below is the list of the most popular ones at the time of writing this article.
Each platform has a set of instructions on how to complete your profile and find work. Some (like Upwork) actually help you compete with the old timers, but giving you a “Rising Star” badge.
Don’t wait, start now. This is the advice I would give to anyone trying to figure out what kind of business he or she could get into with a low investment.
Whether it is a retail business like dropshipping and Amazon, or providing services as a freelancer, I believe there is a fit for everyone. What you need is massive action and learn as you go. Again, I am not suggesting quitting your job tomorrow. Instead, start on the side and grow your new venture.
Running your own business gives personal satisfaction and gives you the ability to take ownership of your time and money. Don’t pursue happiness, create it.