In this article, we’ll share a realistic budget for starting a dropshipping store. We got these numbers from successful drop-shippers who shared their startup costs with us. These drop-shippers didn’t have identical budgets, but that’s why we interviewed them. We wanted to know what new drop shippers could do with a lot or just a little bit of money. By the end of today’s video, you’ll have an itemized list of startup costs and insights into how much you should spend to reach your e-commerce goals. Ready?
Let’s start budgeting
Today we’re talking about dropshipping budgets. Before we crunch the numbers, consider hitting subscribed. The overload youtube channel has helped a lot of drop shippers get up and running. Subscribe, and you’ll never miss a video from us in the future. Now back to the question at hand. How much does it cost to start a drop shipping business? Let’s be clear. There is no right answer. Every drop shipper has different goals and those goals require different budgets. If you want to quit your job and live off drop shipping, be prepared to budget big. If you just want to make 100 extra dollars a month, your budget can be much more modest. You’ve all got different goals and different plans for achieving them. Today we’ll focus on the more modest budget that is, we’ll discuss the bare minimum budget for getting started with dropshipping,
We recommend using this budget if you want a shot at making sales, but you don’t want to break the bank, so what’s in a bare minimum drop shipping budget will cover the costs line by line. The first line item, a Shopify store, Shopify is an eCommerce platform. With Shopify, you can build the website for your online store and take payments from customers all around the world. It’s the most popular eCommerce platform around, and you can start using Shopify with a 14-day free trial. But let’s be realistic. You’re not going to make your dropshipping fortune in two weeks, so the real cost here will be the Shopify monthly charge. Once your two-week trial ends, that cost is $29 99 a month. That’s the store covered. How about the drop shipping part of the equation? This is where Oberlo comes in. Overload is a platform that helps you find great products to sell online, import them to your Shopify store and set your own prices
When a customer buys your products, the supplier ships the products directly to your customer. You never have to worry about carrying inventory. Making this a low-risk business model for new entrepreneurs. If you’re just starting out, the good news is overload is free. Overloads forever. Free plan is ideal for first time drop shippers. It gives you all the functionality of Oberlo plus first class customer service. You only have to pay for Oberlo once you make over 50 sales per month. Until then you don’t pay a dime. So overload is free, which keeps our bare bones drop. Shipping Business Budget at $29 99 a month for now. Now if you want to make sales, you need to earn your customers trust. To do that, you need to look like other trustworthy online businesses and there’s one thing they all have in common. They all have their own domain name,
When you get started on Shopify, Shopify gives you a free my Shopify domain name, but we recommend getting your own.com domain name as it strengthens your brand and legitimizes your business in the eyes of customers. You can purchase a custom domain through Shopify and it will only cost you $14 per year. So let’s add that to our budget. We have a slick online store, thanks to Shopify, we have the means to find and sell products for free with Oberlo and we have a professional domain name. So now we’re almost at 50 bucks. Not Bad. What do we spend our money on next? Pro drop ship or Tim Vangness has this to say you don’t need to spend your money on custom photos, logos and website design. Tim’s right, you don’t need to spend your money on festival photos, logos and website design besides Shopify can take care of all of that for you.
With burst, you can find and use beautiful stock photos for free and with hatchable, you can create a custom logo in minutes. I left links to burst and Hatchell in the description below. Sample products. Once you have a domain name, the next line item on your budget is the cost of sample products. This line item is extremely important and here’s why. Dropshipping is great because you don’t have to stock any inventory of products, but that also means that you don’t control the quality of the products you sell nor the delivery times or the packaging. Ordering sample products is important because it gives you the chance to investigate suppliers and go on the customer journey yourself. If you’re happy with the shipping times, the packaging and the product quality and chances are your customers will be too. If you’re not, you can use Oberlo to contact the supplier with your concerns or you can find other products to sell from other suppliers,
How much you budget for ordering sample products depends on the cost of your products, but let’s say each of your products costs around $15 each and you order samples for five products. Then you’re looking at around $75 for this stage of setting up a dropshipping business. Let’s get back to our tally, which now looks like this. Shopify online store 29 99 a month. Oberlo forever free plan, free domain name, $14 a year. Sample products, $75 for a total of 118 and $99 so now we’re looking at a startup bill of just under $120 where do you think drop shippers spend their money next? The next line item on our budget apps, think of apps like bells, whistles and turbo boosters for your store apps can help you drive sales and run your store more efficiently. The Shopify app store is brimming with apps and you can install them with the click of a button,
Some apps are free while other apps charge a monthly fee. Take a look at the following three slides here. I’ve outlined for you a few of the more popular apps for drop shippers. There are links to all of these apps in the description below for cross selling and upselling. Consider installing cross sell cart to convert and boost sales for book pricing. Consider installing discount pricing, quantity breaks and book discounts and sales scheduled for exit intent apps. We recommend wheelies, spin a sale and exit intent and messenger popups. None of these apps are must haves, but they are definitely nice to have like product samples. The amount of money you spend here will depend on your store and your goals. However, for the sake of this budget, we’ll put aside $19 to spend on various apps. Now our budget looks like this. Shopify online store, 29 99 a month over low forever free.
A free domain name, $14 a year. Sample products, $75 and apps $19 for a total of 137 99 our next expense is where you can splash the cash and make a more substantial investment in your dropshipping business. It’s the biggie called marketing. Here’s some marketing words of wisdom from artsy wall founder Matisse, so mattise suggests dedicating the lion’s share of your startup budget into marketing. Marketing doesn’t have to have a specific price tag. However, there are some assumptions that we can use to get a better idea of what you’ll need to spend in e-commerce. The average global conversion rate is somewhere between two and 3% for the sake of our calculation, let’s put it at 2.5% this conversion rate means that if you get 200 people to your store, you can expect five of them to purchase something and how do you get 200 people to your store marketing ?
One of the biggest marketing channels for drop shippers is Facebook, so let’s look at the cost of driving 200 visitors to your store from Facebook. On average, the click through rate for Facebook ads is 0.9% let’s round that up to 1% just to make the math easier. That means to get 200 people to your store, you’ll need your ad to reach 20,000 eyeballs. According to marketing software provider ad stage, the average cost per thousand impressions is 1245 let’s round it up to 1250 now we have an equation we can work with the price for reaching 20,000 people on Facebook in the USA. Looks like this. First we divide the total impressions. We want 20,000 eyeballs to 1000 that’s because the cost per thousand impressions is the industry norm, so that leaves us with 20 then we multiply 20 by the average cost per impression, which is 1250 the result, we arrive at a total cost of $250 for Facebook advertising.
If we want to reach 20,000 people, drive 200 people to our store and make five sales, let’s add that figure to our ongoing tally. Shopify online store, 29 99 a month. Oberlo forever free plan, free domain name, $14 a year. Sample products, $75 apps, $19 marketing, $250 which brings our start up costs for a drop shipping business to $387 and 99 cents. Now I know what you’re thinking. If you spend $250 to make five sales, you won’t even break even and you’re right, but most six figure dropshippers don’t even expect to make five sales the first time they invest in marketing. They expect to learn what their customers want. They expect to analyze the data to decide which products to promote, which audiences to promote them to, and which ads to use. Armed with that knowledge, marketing costs go down and conversions go up. So if you want to start drop shipping, the question to ask yourself is, are you ready to become a constant learner?
If you’re able to invest these startup costs and you’re enthusiastic about investing your time and learning how to drop ship than drop shipping could quite literally change your life. Okay. I’ve introduced a lot of figures in this video and I’m happy to put them in context. So leave a comment and let me know what you think of this budget. Is it realistic, too low, too expensive? And by the way, if you want to share your startup budget, I’ll let you know what I think that’s offered today, learn often market better and sell more.