Welcome to the start of a new chapter of articles on my website which will be based on dropshipping. I’ll be writing a long list of articles from “how to start a dropshipping business” and “how to find the best dropship suppliers” to the “highs and lows of dropshipping” and “just how profitable is dropshipping?”. Honestly, forget any other articles you’ve read online and for now, don’t watch any YouTube videos promising you the world. I’m not saying that they are all full of false hope and promises but I have seen many false claims that I’ve just wanted to scream and shout at! Can you make money dropshipping? Yes! Can you make it rich by next week? Absolutely not!
Those of you that regularly read my blogs will know that I run a gardening and hard landscaping company which up until now, has been the foundation to most of my articles. However, there are a few things that I have been keeping to myself and one of those things is that I once had a very large dropshipping company which in the fourth and final year, grew to a turnover of just short of £1million which I ran alongside my gardening company. I still dropship, but on a much lower scale. I’ll explain in more detail below, but not too much detail, afterall I need to keep some information for my upcoming articles!
How did I get into dropshipping?
I actually got into dropshipping by complete accident. You see, back in 2011 when my oldest son was just a baby I decided to take a break from gardening and landscaping and get into an office role. I must have only been 20 years old at the time, but I had been gardening since I left school at 16 and felt as though I wanted to give something else a go. It was at this point I got myself a job as a telephone interviewer for a local market research company. In short, I would cold call businesses and ask for their feedback on their business banking. It was a 0 hour contract. If you managed to achieve your target of 2-3 interviews per day then you’d have a job for the next day. I must have been good as I worked there for 12 months!
After 12 months, my colleagues were moving on to bigger and better things so I decided to join the band wagon and managed to get a job as an account manager/sales person selling commercial coffee machines. The beauty of it was that there was no cold calling! I was the first inbound sales person hired for the job (they had recently set up a website and got the hang of Google adwords) and the company just took off.
These weren’t your standard coffee machines that you find in your home, but were large heavy duty machines for cafes, restaurants and coffee shops worth anything from £1000 to £20,000 depending on the machine needed. Potential customers call the company enquiring about a coffee machine and I would be there ready to answer.
Most of the time, and due to the costs involved, I would discuss lease options for the customer giving the option to pay over 2, 3 or 5 years. The process was simple. I would pass their details onto a bank or leasing company depending on their credit, the leasing company would accept them for credit, we would purchase and install the coffee machine, the customer would sign the paperwork, the leasing company or bank would pay us in full and the customer would pay them back with interest. Amazing! And the best bit was that I would earn 10% commission which averaged £100 per deal.
I quickly learned that if the customer was based an exceptionally long distance away that we would have the documents signed either electronically or have a hard copy sent in the post before having a coffee machine delivered via courier where we would pay a local self employed engineer to go and install it with the equipment already on site. This was an eye opener for me since I could do a deal and have everything installed without ever even seeing the machine or engineer.
As the company grew, there were times that the install date could be weeks away. I grew use to just using the above method in order to save deals and have machines installed by deadlines. After 2 years and at just 23 years of age, I was making in excess of £5000 per month after tax. At just 10% commission I was earning the company £50,000 per month so I knew it was time to start my own business. Which is actually where everything started to go downhill!
The plan was simple. Get an office. Get a warehouse. Build an amazing website. Get an 0800 number to look like a large company (atleast this was my thought process at 23 years old). And finally do everything I was doing before but by having all of the equipment delivered directly to the customer and sub contract a local engineer to go and install it all!
But! And it’s a big but! At the time, to be able to offer finance options you had to be regulated by (I think from memory) the CIS. It just so happened that just as I had everything set up and ready to start the process of getting regulated, everything changed and you had to be regulated by the FCA (financial conduct authority). Due to the recent change, I was advised that the application could take up to 6 months. So here I was, in my office, having left my £50,000+ per year job at just 23 years of age with a young family to support, to be told that I might have to wait 6 months to start making any money! I’ll never forget that month, that day, that phone call, that moment.
There was only one thing left to do, and that was to change my whole business plan at the last minute. I knew that not many people had the cash flow or want to spend thousands of pounds on commercial coffee machines so I decided to look for cheaper alternatives. Over the following week I had sourced a coffee bean supplier that would put my label(s) on the beans, a domestic coffee machine and kitchen appliance supplier as well as budget coffee machine suppliers for the commercial trade. There was one machine however, which at the time was the cheapest filter coffee machine on the market that I saw was sold everywhere but I just couldn’t find the supplier. So I bought one! And then looked at the instructions, found a contact number for customer service, called the number and was put through to their wholesale department.
This is actually where the world of dropshipping all began for me. After meeting an area sales manager and showing him my set up, he had me set up for their (never heard of before to me) website where I could log in and see all of their products. All of a sudden I had over 10,000 products at my finger tips and I had the option to buy in wholesale or pay £5 per item’s delivery and have them sent directly to the customer. I was blown away! At this point, I didn’t even know that it was called dropshipping. Neither did they! It was just a service they offered for their chosen re-sellers.
Over the coming months, I would spend 16 hours a day listing these items to my website, eBay and Amazon which lead to hiring data input staff listing the items across the platforms as well as hiring warehouse staff. If your wondering why I needed warehouse staff for a dropshipping company that never held stock it’s because they actually saved me money on my VAT taxes. Before brexit (I’m unsure on the post Brexit rules) if you purchased a product in the UK then you could claim back the VAT. When you sell the item then you have to pay VAT. Meaning that as long as you make a profit, every month or quarter, you will have to pay VAT. If however you sell an item across Europe other than the UK then you don’t have to charge or pay the VAT – You only have to claim it back from the purchases made in the UK. So in short, I listed and sold products across Germany, Italy, Spain and France. My dropship supplier would deliver to my warehouse, where we’d simply remove the shipping label and replace it with a new one, ready for the courier company to come and take it back the same day. Sometimes I still amaze myself!
What was it like running a dropshipping business?
The idea of dropshipping sounds amazing. To have thousands of products listed for sale without stocking anything with today’s dropship suppliers promising to make millions over night, but the reality is very different. I’m not saying it’s all bad, but it’s certainly not easy either. I will be writing an article soon titled ‘what is dropshipping?’ Which will include ‘the pros and cons of dropshipping’ so I’ll have to keep this fairly short and to the point!
The day to day running of a dropshipping business, to me, was amazing. The biggest reason was freedom and that goes for me and my wife. All of a sudden I was there to help with getting the children ready for school and even started to take it in turns with taking them and picking them up. We’d go out for a meal atleast once per week and used the other days to just do…well anything really. In fact, we ended up so busy between school hours that up until I hired staff to work in the office, I developed a habit of not working in the daytime at all and just working in the evenings.
The problem with speaking highly of the day to day running of a dropshipping business is that it doesn’t highlight the profits for the sales that are made and how much work is involved with making those sales. I started off dropshipping by listing items on eBay, which sounds easy. But let me be the first to tell you that listing item after item for hours on end was absolutely soul crushing. On average, it would take 5 minutes to list each item which equates to 12 products listed for sale per hour. In an 8 hour day with no breaks that’s no more than 100 items per day. 100 items might sound like alot but really it’s not! To give you an idea, per 10,000 items listed for sale, I would sell an average of 30-50 items per day.
The reason I only had a 0.5% conversion rate was due to being unable to compete with the prices other sellers were able to sell the products for. Put it this way, when it comes to dropshipping there is typically a manufacturer that sells the items to a wholesaler who then sells it on themselves with profit, or offer a dropshipping service but since they still need to make a profit, they can’t possibly offer the re-sellers (dropshippers) the same price that they are purchasing the items for. This means that the wholesalers will be able to sell the items themselves cheaper than what you can, since you will be paying a higher price than they did buying in bulk. In fact, the only way around this was to add keywords to the products for sale which meant that potential customers will find you instead of them. I’ll be writing a more in depth article about this soon.
On average, I made a net profit of just 13%. That’s £130 per £1000 of products sold or £1300 per £10,000 worth of products sold. In my final year with just short of £1000,000 turnover, the company made a net profit of £130,000 after all seller fees that you get from selling on eBay and Amazon but ofcourse I had staff and other expenses to pay.
Why I stopped dropshipping
I still dabble with dropshopping on a small scale as I am busy with my landscaping business as well as this website taking up pretty much any spare time I have, so when I talk about the reasons to why I stopped dropshipping I’m speaking about the £1000,000 turnover company above which I had no choice but to unfortunately, shut down.
OK. Here it goes. The reason to why I had to shut down my large dropshipping business was because…it grew so fast that it crashed. Seriously, it grew too fast! It was so successful that it failed. Don’t believe me? I’ll explain.
Depending on the set up of your business, if your company grows too fast then you will suffer from bad cashflow. For example, let’s say that I had £10,000 in the bank and in a single day I sold £15,000 worth of products. That’s great right? But we are a dropshipping business so this means that we have to purchase our products in order to get them sent out to the customer. So in this example, I have spent every penny of my £10,000 to purchase £15,000 worth of items which is amazing since I’m now owed £15,000. But eBay and Amazon take 3-5 working days to pay you so you will have no money for 3-5 working days. What happens when the next day comes and you sell another £15,000 worth of products? That’s right, you don’t have the money to purchase the products! And this is exactly what killed my dropshipping business. I had the absolute perfect set up with the best suppliers that only few know about, but ultimately the company grew so quickly that it collapsed.
In hein site, I think I was too young to run a company of this size. There were simple ways available to help stop any cash flow problems from arrising such as pausing your online stores when you run out of money and set everything live again when you get paid in 3-5 days time. The problem I had was that I had commitments. Staff to pay. Commercial rent to pay. I was in too deep to go without sales for 3-5 working days as I needed the profits to keep the business running, but equally I didn’t have the cashflow to keep buying the products I was selling. Looking back, there were many things I could have done differently. The main one would be to be more patient and grow slowly. Grow with your capital. If I had the capital to support my dropshipping business then I’m sure it would be a huge success story right now!
Why I’ll be writing articles based on my experience of dropshipping
There is so much information I’ve missed out from this article because I’m saving lots of reading material for my upcoming articles. The main reason for this post in particular is really to gain your trust. I’ve been there. I’ve lived the life of dropshipping. I still do on a small scale. You can make a living from dropshipping, but it takes time to get there. I’m fed up of seeing videos and reading articles full of false claims. If you have any questions then please do comment below, I’ll give you real free advice and I’ll be posting regularly to try and cover everything!