fbpx

How Much Money Do You Need to Start a Dropshipping Business?

Blog, eCommerce Insights | April 14, 2020

So you may have been doing some research about your next entrepreneurial adventure, craving the freedoms that come with a ‘laptop’ lifestyle.

 

When starting any new business venture one of the crucial things to consider is cost. However great that business opportunity looks, if you’re simply paying out thousands of dollars before you see a return, then it may not be the best idea you ever had.

 

One of the great things about dropshipping is the fact you hold no inventory, no warehouse requirements and you can run your business from anywhere with an internet connection. So in this article, we are going to take a look at some of the cost implications involved with dropshipping including start-up costs and ongoing advertising such as Facebook ads.

 

Before we get down to the real nuts and bolts, let’s take a look at the quick answer as to how much money you’ll need to start your own dropshipping business.

 

How much money will I need to start a dropshipping business?? How much money you need to start a dropshipping business largely depends on the kind of product you choose to sell. However, it’s possible to begin a dropshipping business for as little as $500. It’s recommended to start by selling cheaper products rather than luxury items, to begin with.

 

Now we’ve seen the short answer as to how much investment your likely to need to get established as a dropshipper, let’s drill down a little further and explore the answer to one of the most important questions you have, as to whether your latest venture is suitably low risk. Let’s find out.

Is dropshipping low risk?

As you’ve probably discovered by now, dropshipping is a business model that gives the opportunity for those wishing to start an online business to sell products to their buyers without actually stocking the items.

How does it work?

In a nutshell, the way it works is for e-commerce store owners to sell to their customer’s items they have bought from another seller who will ship directly to that store owner’s customers.

 

So you might be wondering are there are any huge initial investment costs or any barriers to entry in terms of setting up costs. Let’s find out.

No expensive setup costs

Immediately it’s fairly obvious where the eCommerce store owner stands to gain, in terms of the outlay of very little overheads, such as stock. This has a knock-on effect due to the fact the online store owner will not require huge upfront costs such as large warehouse, staff, and the expensive utilities and other business costs commonly associated.

 

No initial large investments such as stock or warehousing are one of the reasons the sky is the limit with dropshipping scalability.

 

Often, entrepreneurs who aren’t following a dropshipping method have to spend a significant sum of their money on inventory before they can start selling. It’s no surprise therefore that these costs can feel really restrictive and could price many store owners out of the market.

No risky investments required

Without the need for large risky investments, dropshipping store owners are able to begin their dropshipping journey running their own business empire with minimal risk. while having the opportunity to sell huge numbers of products without the usual scaling costs associated with growing a business.

Low-risk approach

One of the best things about dropshipping is that it provides a lower-risk approach for independent businesses to test a product or a niche before they commit to purchasing a large stock upfront.

 

It’s the perfect business model to give your entrepreneurial spirit free reign without a huge upfront financial commitment.

 

“Without the need for large risky investments, dropshipping store owners are able to begin their E-commerce journey running their own business empire with minimal risk.”

 

So now we’ve got the bottom of how dropshipping is the perfect low-risk strategy start-up enterprise for all would-be entrepreneurs, let’s drill down a little more into exactly how much it’s likely to cost in terms of getting started.

 

So how much does it actually cost to start your new dropshipping business? Let’s take a look and find out.

Is 1K enough to start a dropshipping business?

For 1k or less, you could be looking at your own dropshipping business. It could even be that $500 would be enough dependant on the products you choose to sell. Obviously the higher your ticket price items, the more you’ll need to invest.

 

When you are starting out in your journey, we do recommend that sellers start with lower-priced items and try to avoid luxury niches and items. This will help you for cash flow purposes and make sure you aren’t running out of cash too quickly.

How do I budget for my dropshipping store?

Ok, so you’ve freed up some cash and itching to get started. Let’s take a look at the best places for your dropshipping budget. You might be wondering which portion of your budget will go on Facebook ads for instance. These Facebook ads and other types of online ad services will begin the process to get your store seen. It’s important to remember your store is unlikely to pick any real revenue unless you promote it.

 

If you think about splitting your budget three ways, that will give you a good starting point.

 

  • Operation budget This will include your store subscriptions, designs, domains, extensions, virtual assistance, and any other miscellaneous expenditure, be sure to provide a higher budget than anticipated for miscellaneous expenditures
  • Ads budget This portion is the major part you will spend, and will include any online traffic and pay per action. Mostly, dropshippers are looking at Facebook ads
  • Product budget This will include purchasing of your chosen products and will include shipping costs, once after you receive orders from customers

 

One of the major plus points of dropshipping is that you’ll only begin to payout once you’ve received the first order from your first customer.

 

Another thing to bear in mind is that the payment of your choice will affect your cash flow. This is because some of them will take a larger percentage out of the sale price of your goods to customers. So let’s have a look below as to how you can manage it.

 

“For 1K or less you could be looking at your own dropshipping business. It could

even be that $500 would be enough depending on the products you choose to sell.”

How does the payment method affect the budget?

PayPal is the most common payment gateway and is perhaps the best known. However, they do tend to keep a larger percentage of the sale price.

 

There are other payment gateway services you can choose such as Stripe and Adyen. If you do choose these alternative methods, make sure you start as you mean to go on – set up and verify a new account with your payment gateway as soon as you open your store or otherwise you may lose customers.

 

“PayPal is the most common payment gateway and is perhaps the best known.”

To finish on…

We hope this article has given you lots of information on why it’s a great strategy to start your own dropshipping store and have given you some welcome advice on why dropshipping is a low-risk investment with possibilities for some great returns.

 

As the experts in dropshipping, HyperSKU is in direct connection with manufacturers in China, which means access to best price and best quality.HyperSKU also provides express shipping and automated system, so that dropshippers can provide best customer experience while handling everything efficiently.