As with any other enterprise, developing a good dropshipping business requires tremendous effort and a long-term outlook. Unless you’re looking for a six-figure salary from six part-time work weeks, you’ll be sadly disappointed. When approaching your company with reasonable expectations of the necessary investment and your productivity, you aren’t going to be as frustrated and leave as a result.
You’ll need to spend heavily when starting a dropshipping company using one of the following two currencies: time or money.
The best approach is to invest time in your dropshipping company. Bootstrapping and invest sweat equity to develop your company, particularly for first time shopify dropshipping entrepreneurs.
We support this method by spending a significant amount of money for several reasons:
- You will understand how the company works within and outside, which will be key to managing others as the company expands and scales • You will know the clients and competition closely, allowing you to make better choices
- You will be less likely to spend large amounts on vanity projects that are not vital to success
- It might be a little more difficult, but it’s certainly not an impossible endeavour, even if you’realready working a 9-to-5 job assuming you’re setting the correct customer satisfaction standards and delivery times for your clients.
As you begin to expand you will then transition into full-time work on your company as cash flow and profitability helps.
All companies and entrepreneurs are special, but a $1,000–$2,000 monthly income stream can be created within 12 months of working roughly 10 to 15 hours per week to develop your company.
If you have the option to work full time on your company, it’s the best choice to increase your profit potential and dropshipping chances of success. Focusing all your marketing efforts is particularly helpful in the early days when it is vital to create momentum. Based on our experience, to replace an average full-time income of $50,000 you need 1 year of full-time work with a focus on marketing. For a fairly small reward, it may seem like a lot of work but keep these two points in mind:
- When the dropshipping company is up and running, it is likely to take a significantly less time to sustain it than a 40-hour job per week. Given the flexibility and scalability provided by the dropshipping model, much of your investment pays off.
- Dropshipping isn’t just a stream of income – when you develop a company-you’re also building an asset you can sell in the future. You need to really comprehend the equity you are acquiring, as well as the cash flow produced when looking at your true return.
Investing money in your dropshipping company
It is possible by investing a bunch of money to build and expand an aliexpress dropshipping company but we advise against it. We tried all approaches to growing a company (doing it ourselves versus outsourcing the process) and had the most success when we were doing most of the work in the trenches.
It’s important in the early stages to have someone actively involved in the progress of building the company from ground up. By knowing how your company works at all levels, you will be at the mercy of expensive programmers, developers and advertisers who will easily eat up any profits you produce.
There is no need to carry out all of the tasks by yourself, but at the start of your venture we strongly recommend that you be the primary driving force.
However, to get your company going and running, you’ll need a tiny cash buffer in the $1,000 range, primarily for marketing. You will need this and to pay any incorporation fees, which we will address below.
Deciding on a business framework
You would want to set up a legal business company if you’re serious about your venture. I am not a lawyer and do not seek to provide legal advice, however I can give you an overview of three widely used business structures:
Sole proprietorship
This is the easiest business structure to incorporate but often provides little security for personal liability. And if your company is sued, your personal assets may also be at risk. The criteria for filing are limited, and you simply disclose the profits from your company on your personal tax. No other federal or state enterprise filings are required.
Limited Liability Company (LLC)
An LLC provides expanded security for your personal assets by creating a separate legal entity for your corporation. While the defence of liability is not foolproof, it provides more defence than a single ownership. You can need to meet additional filing conditions and may pay both incorporation fees and continuing fees.
C Corporation
Many major corporations are formed as C corporations which provide the highest level of liability protection when done properly. These are likely to be more costly to incorporate and are subject to double taxes, since revenue does not transfer directly to shareholders.
But what structure to pick? Again, we are not lawyers and will encourage you to speak with one before making any decisions about incorporation. Many small companies prefer to go either with a sole proprietorship or with an LLC.
For all our dropshipping businesses we have personally used an LLC because we believe it provides the best trade-off in terms of liability security, personal finance flexibility and costs.
