The Side Hustle 12: How to Make $50k a Month From Your Side Hustle

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Welcome to edition 12 of The Side Hustle, where today, I break down a little strategy I've used to for startup sole traders to bring their ecommerce sales to $50k a month in 9 months.

It's really simple, and effective.

First, find a product on Alibaba that's running a stock service - in other words, you can buy stock, and you don't have to go into production, effectively meaning there is no product lead time outside of the supplier packing and shipping it to you.

You have to pick a product category that's easy for you to add your own swing tag or label, as you're basically white-labeling your manufacturer's products (putting your brand name or logo on a supplier's products). One of my students at Learn Ecommerce did this with lingerie.

Here's the formula:

Find the product. Remember, you still need to give this serious consideration, you should still be following these two basic rules:

1) What problem is my product solving?

2) Your product doesn't have to change the world, it's good enough to help lots of people, in a little way, every day.

When you've found the product idea, you take it to Alibaba and start looking for your supplier. You filter your search by MOQs (minimum order quantities) of less than 50 units per style. You also want to be searching for manufacturers that are holding stock, ready to buy.

While you're browsing suppliers, you price your would-be product, ensuring you're hitting a 70% minimum profit margin on your products, and a competitive retail price - a reminder here on how to do that.

When it comes to your first order, you deliberately order the lowest amount you can, and because you're buying from 'stock' there's generally a very small MOQ, you could even get away with 20 units per product.

Again, because you're ordering from stock, there is no lengthy lead time to make the products. In the example of the lingerie brand, the product margins are over 80%, and the garments are extremely light, so air freighting is an option - which means that you don't have to hold much stock at all, 2-4 weeks is plenty.

In this strategy the initial cash outlay is very small, as you're holding 2 weeks worth of inventory cover (enough inventory to last for two weeks worth of sales). Compare this to having to go into production, and manufacture an order, then ship it, where you're usually holding around 3 months of inventory cover - which equates to 6 times as much cash spent on stock - for the same sales outcome. 

Now, if you sell out of a particular style, that's no problem - you put up the 'sold out' sign, put up your back in stock app, and build some hype for the couple of weeks you're out of stock. 

The beauty of this strategy is, because you're able to hold such small volumes of stock, and turn it around quickly, your cash can be spent on putting out a good product offering, of say 50-60 lingerie styles, which means you have a decent chance of lifting your conversion rate, upselling, driving repeat purchases, and generally increasing your chances of success, as per the 80/20 rule I talk about here. 

What also happens is, you start generating a lot of cash because it's not tied up in inventory. Each month, reinvest 25-30% of your monthly sales less tax, into product. So if you make $40k this month, you want to spend about $12k on stock. Follow that pattern each month.

When it comes to ordering, always start with replenishing your best sellers, or your Grade A product (check your Shopify ABC analysis for this - Grade A stock accounts for 80% of your total revenue). After you've done your replenishment, buy new styles. Try building out your menu with sub-categories before moving into totally new territory - extend your product catalogue before totally diversifying into something new.

There are pros and cons to buying stock and putting your logo on it, and it probably won't get you to a million dollars a month, but it's a great way to start a side hustle that can get you to $50k a month in 9 months.

Until next time,

Paul

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