How much money can you really make with Dropshipping?

Hey, I'm Spencer here. I just wanted to make a brief introduction to this guest post by Joseph Brusca.Joseph is someone I recently had on the Niche Pursuits podcast (along with his brother Mike).  

These guys have been involved in dropshipping for a long time and have shared a lot of their tips to get started in this podcast interview.  

Today, Joseph dives into dropshipping high tickets and low tickets and how much money you can make pursuing these options.If you're interested in getting even more tips from Joseph, you can check out his instant ecommerce course right here.

Anyway, enjoy the article!

If you've read about different online business models to get you started, then there's no doubt you've come across dropshipping.For over a decade, there has been a vibe around this seemingly simple ecommerce strategy.

However, there are very few resources on the subject that don't look like sales pages or "advertised" videos that try to throw you on something.

If you've ever been to YouTube, you've surely seen some of the video ads that show how "easy" it is to start a dropshipping business with Shopify.

But as you can imagine, the truth is much less flashy and rooted in reality: Dropshipping if done the right way is probably the easiest and fastest way to start generating revenue online and create a web-based asset that you can sell.

But if done wrong, dropshipping can cause you to lose countless hours and thousands of dollars.

In this article, we'll explore how much money you can actually do dropshipping in the most realistic sense possible.

Start…

WHAT IS DROPSHIPPING?

Dropshipping is nothing more than a method of realization.

Seriously, that's all.

The term refers to when the business that makes the sale to the consumer (or business) does not actually ship the purchased goods.

Instead, the goods are shipped directly from the manufacturer or brand.

The obvious advantage for the seller is that you don't need to buy inventory.

For the freight forwarder, it allows them not to focus on marketing and sales.Instead, they can place more emphasis on the supply chain and inventory management.

For some products that are heavy and/or expensive to ship it is beneficial for both parties.

It is practiced that it is used by companies of all sizes.Even large retailers, like Amazon, use dropshipping as part of their retail business (more on that later).

DIFFERENT TYPES OF DROPSHIPPING

I like to group dropshipping into two different categories: low ticket and high ticket.If you read the definition carefully, you may already have a guess for which one I prefer.

Let's analyze them …

LOW TICKET DROPSHIPPING

Low ticket dropshipping is probably the business model you've seen pushed a lot in the online listings I mentioned earlier.The business model breaks down so …

• You create a Shopify store and upload products from AliExpress to the site.The number of products and site size can vary greatly from a store focused on selling a single product to a "general" store that sells a wide variety of different products.
• Then, advertise on a social media platform to try to drive traffic to your store.
• Alternatively, you can reach out to social media influencers to advertise your stuff for a commission or for a fee.

While this may seem easy to do on the surface, I absolutely hate this business model.So much so that, when I see others claiming success, I find it hard to believe them.

Side note: I'm certainly not saying that you can NOT make money dropshipping with low tickets.This is simply my personal experience and what I observed when I saw other people trying to make it work.

That's why I think it's a terrible business model:

• You usually need to spend a lot of money to test advertising on Facebook beforehand.This is a huge investment in terms of time/money.You could spend thousands of dollars before creating a campaign that makes a profit.
• Once a campaign makes money, it probably won't last long.The audience or ad will become stale, and you'll need to edit your ad or change your audience.This requires a lot of work, money and time.
• Since you're using AliExpress, you're not dealing with real business partners or suppliers in your home country.They are shipping directly from China.You're prone to customs issues, long shipping times, and anything else you don't want to deal with.
• I've never seen one of these companies for sale on a higher-tier marketplace like EmpireFlippers.Sure, I've seen a few on Flippa, but that market is much less regulated and it's hard to believe the numbers all the time.
• You are interrupting people's day on social media, these ARE NOT HOT DISHES.
• Finally, the amount of money you earn per sale is MUCH less than dropshipping high tickets.We're talking $10 per sale versus $1000 per sale.To be truly profitable, you'll need to have some very successful campaigns that are the exception rather than the rule.

HIGH TICKET DROPSHIPPING

High ticket dropshipping is by far the best way to do things if you want to build something that's sustainable.Here's what the business model looks like on paper…

• Create a Shopify store and partner with established brands or distributors who sell expensive and/or heavy products that favor dropshipping.
• Add their products to your store and start advertising with Google Ads.
• Understand the keywords and phrases that get the most conversions at the lowest cost.
• Once your ads run profitably, you can leave them as they are, experiment with how to increase your budget.
• These campaigns should be mostly "evergreen" because they target people who are ACTIVELY looking for.
• Then, go out and find other products and/or suppliers and repeat the process.
• This allows you to create more and more evergreen campaigns and scale your business in a sustainable way.

Now there are some of the main reasons why this makes a business much better…

• You're not interrupting people on social media who aren't in shopping mode.You're targeting people while they're researching products or are already trying to buy.This is referred to as "high purchase intent."
• You are partnering with real companies and brands in your country and do not have to deal with shipping from abroad.
• The search campaigns you're creating are evergreen and can last for years to come.There is a much shorter testing phase than social media ads, and winners don't become obsolete because there's always an influx of users.
• These companies actually sell on high-quality marketplaces like Empire Flippers.My brother and I have sold two to date – one for $80,000 and one for $133,000.We are planning that our upcoming releases will also be substantially bigger.

WHY WE PREFER THE HIGH TICKET MODEL

Making sales, commissions or any kind of online revenue is a continent about one thing: getting traffic.

Simple and clear if you can't make traffic, you can't make sales.

But the fact is that getting traffic costs money.No matter how you cut it, there is some form of investment you need to make to convince people to visit your website.All of the following are different ways to get traffic that costs money in one way or another.

• Creating content that you hope to rank in Google over time.
• Pay for social media ads to drive traffic to your website from places like Facebook.
• Showing Google ads that appear when people search for certain queries.

In business, you're essentially spending time and money now in hopes of getting a bigger return later.

But the fact is that only a small percentage of the traffic that comes to your website will result in any kind of return.

This is true no matter how good your copy is or how awesome the products you're selling are.

Selling high-priced items, a single sale can be worth a lot of money.All sales we make on a daily basis can profit from $50 – $5000 or sometimes even more.

Compare this to selling a T-shirt or making an affiliate commission from something like a juicer.At best, you'll earn $5 – $15 or something.

Now I understand that these are two different business models and it is difficult to compare them in this way.

But considering that the traffic acquisition methods for a low ticket and a high ticket business model don't change much, I'm of the opinion that selling things that can have huge returns gives you the biggest bang for your investment of money and time.

SETTING INCOME EXPECTATIONS

No matter how good a business model is, it's important to understand that it's never really "easy" or a direct path.

You need to set reasonable expectations, work consistently, and adapt to all the curveballs that are thrown at you.

But with dropshipping high tickets, it's not unreasonable to say that you can make anywhere from $200 – $3000 in the first month or two of making your own store if you get to work and happen to get a little lucky along the way.

Sidenote: Yes, there is an element of luck in EVERY activity, but the impact of luck becomes less and less if you work on it.When you start getting your hands dirty, you'll develop your own little methods of doing things that work for you, and you'll make small changes over time to your specific business model that makes luck a lot less important.

The amount of revenue you earn depends on one important factor: how many good providers you can secure and develop relationships with.

There are other important factors involved, but this is the thing that makes it all possible.

Realistically, all you need is to take off a supplier's products and you can start earning 5 figures per month.

And there is also a middle ground.Not every supplier will be a big win, but you can also have a lot of smaller suppliers add up.

Your revenue will have a direct relationship with the suppliers you are insuring.The more attempts you make to protect suppliers, the more successful you will be.Whether this happens in a period of 1 month, a period of 6 months or a period of one year is up to you.The faster you move, the easier it is to find and scale winners.

BREAKDOWN OF COSTS

Probably the biggest advantage of dropshipping high tickets is that the fees are extremely low.The biggest cost to your business will be Google ads, but if done correctly, there's a very small chance they'll not be profitable.

This is simply because you have so much room for error.Making a sale for a profit of $500 can erase many mistakes from your advertising campaigns that you can correct going forward to become even more profitable.

So here's a breakdown of expenses you should expect…

• We currently recommend a premium theme that costs once $167.You don't need to use a premium theme, but it simplifies setup and I prefer to have technical support so I don't get bogged down in technical stuff.But it won't make or break your business, whether you use it or not.
• Signing up for Shopify costs $29 per month after receiving a 14-day free trial.If you're short on money, you can really hustle and bustle during your 14-day free trial to get everything set up right.
• We like to get a 1-800 number to keep things professional and this costs around $29 per month after a free trial or free minutes you can use.However, you can use Google Voice as a cheap alternative, or if you're feeling bold, use your personal mobile number or get a low-cost phone plan only.
• You can launch Google ads from $20-$30 per day and scale them profitably.After spending $50, Google is kind enough to offer you a free $100 coupon that you can use to make your business profitable.

SCALE IN A FULL-TIME BUSINESS AND BEYOND

Assuming you are willing to comply with it and start the work, it should be relatively simple to make profits of $1000 to $5000 per month.

But then you have to start thinking about scaling it into a full-time business.

This is where you'll need to start developing those universally important business skills like outsourcing and building systems.

There are two main sets of tasks you'd like to outsource if you want to start actually scaling: product page creation/upload, and customer service.

PRODUCT UPLOADS

Once you have someone who is able to upload products for you, it removes much of the burden of acquiring the supplier.It's not a problem if it's your first group of suppliers.In fact, you'll want to do everything yourself at the beginning so you can learn and develop a process.

However, loading products can get tedious and before you know it, it can become a full-time position.

This is especially true if you're scaling and vendors at a rapid pace as we're currently doing.

CUSTOMER SUPPORT

When you start making more sales, it's natural to receive more inquiries from customers about their orders or placing an order.This doesn't take much time to first boot, but when you resize it can REALLY start to add up.

We recommend hiring people from the Philippines at around $3 an hour to handle most of the customer support work.This includes everything from managing live chats, phone calls, emails, or even closing sales over the phone.

It's important to understand that you're not going to open your first store and you need to worry about outsourcing all of this right away.You can get off the ground and get a basic income as a single person, but if you really want to scale down, you'll need help along the way.

FOCUS ON BUSINESS DEVELOPMENT

Once you have the tedious tasks of running your dropshipping business in the hands of your employees, it will allow you to focus on what brings the most growth to your business…

• Acquisition of new high-quality suppliers
• Focus and learn ads on a very deep level
• Drive intentional buyer traffic to your site with SEO

EXAMPLE OF HOW TO TAKE DROPSHIPPING TO THE HIGHEST LEVEL

Many people don't realize that dropshipping can be the start of a billion-dollar business.Are we at this level?No, of course not – and I'm not sure I ever wanted to be.

But I can always point to a case study of a large company that started with dropshipping and still has very strong roots in it today.

That company is Wayfair.com and seeing their story is as simple as looking on their Wikipedia page about their story of two boys, Niraj Shah and Steve Conine, who started in the modest domain of racksandstands.com.

If you use the WayBack machine to consult this website, it is very clear that it is a dropshipping site.

I know this because I took a look at the shipping and return policy.It states:

"Send your return using your preferred shipping method, to the address provided to you.Note: This could be our main office or a distribution center. "

In my humble opinion, this means that it will most likely be sent back to the manufacturer or brand from which it was originally abandoned.

We also know that Wayfair does a lot of dropshipping because we work with suppliers who also work with Wayfair.

The point is this…

If Wayfair can take a simple dropshipping store and turn it into a publicly traded company, that shows it's totally possible.

By developing systems, investing in teams, and doing everything that top-tier companies do, there's no reason you can't scale a work from home of dropshipping to a large company.

FREQUENTLY ASKED QUESTIONS

IS DROPSHIPPING REALLY WORTH IT?

In my opinion, high ticket dropshipping is the number one way to get started in online business simply because it allows you to generate profits quickly and reliably.

It is also not NEARLY capital intensive like other business models like FBA.Not by a long shot.

If you need to start generating positive cash flows quickly without investing a lot of capital, high ticket dropshipping is one of the few online business models that allows you to do that.

However, the downside of dropshipping is that it's not easy to scale it exponentially in the same way you would with an FBA business.

What do I mean by this?

When you start scaling a high ticket dropshipping business, the processes have many nuances.You'll be dealing with multiple vendors with different touchpointsThe good news is that outsourcing can alleviate a lot of headaches, but it's simply that scaling can start to add more layers of complexity to deal with, especially once you exceed the $10,000 per month profit.

With an FBA business, the way to scale is VERY simple:

• Discover a way to find winning products and send them to the Amazon warehouse.
• Create solid lists, get reviews, rank for the right keywords, and your stuff will be sold on autopilot.
• You place the same orders over and over again to your supplier once you've found the winners, and Amazon's bots handle the rest of the work.

Sidenote: Just because I said those two bullet points are simple, doesn't mean they're easy in any way.To have a successful FBA business you need a lot of time, research, testing and money to get right.You can also lose a lot of money along the way.It's just that once you get it right, it can scale down very quickly.

Therefore, our recommendation is this: use high ticket dropshipping to generate liquidity to fund capital-intensive business models such as FBA or a niche/authority.Rather than trying to decide on something like whether you're going to do Dropshipping vs FBA, understand how you can use one to combine the other and how both fit into a long-term business strategy.

WHAT COMPANIES DO DROPSHIPPING?

For whatever reason, many people make the mistake of starting their dropshipping journey by searching "directories" or other places to find suppliers.There is absolutely no reason to do so.There are countless dropshipping companies that you can simply reach out to and join their reseller program.

All the best ones are not advertised on large platforms or directories.They are just regular companies and brands.You may even have some of their products lying around your house or apartment.

Just think if something is efficient for shipping multiple times.Otherwise, there's a good chance a business will dropship under its wholesale or reseller program.It simply makes logistical sense for them to do so.

IS DROPSHIPPING ILLEGAL IN ANY WAY?

As stated earlier, dropshipping itself is simply a method of accomplishment.There is nothing illegal about it.

The only reason people ask for "Is Dropshipping Legal" is because of the shady practices promoted by industry gurus, such as selling copyrighted images or trying to trick customers into thinking that you are not shipping directly from China.

This is the kind of thing you want to stay away from.Focus on building real relationships with real companies/brands dropshipping in your country and you have nothing to worry about.

DO YOU NEED A COMMERCIAL LICENSE FOR DROPSHIPPING?

To dropship high tickets in the way we recommend, the answer is that you need a business license.Suppliers will only want to talk to you if you're a business, so going out and registering one is a small step you need to take before working with you.

If this sounds overwhelming, consider the following…

• It's actually quite easy to do and configure.
• You can start building your store while someone else has set it up (like a CPA)
• It's a barrier to entry that prevents many people from getting started – that's good because it means less competition.
• If you're serious about starting a real business, you need to do things the right way everyone else needs to do.Although online marketing makes people think that there is a way to "hack" something or get around necessary, but boring, barriers.

HOW CAN I GET PAID BY DROPSHIPPING?

Many people often get confused when you actually get paid while you're dropshipping.I am usually asked if you need large sums of money to get started, a credit card, etc. With Shopify, you have the option to choose multiple payment gateways, but the main options Shopify Checkout (which is Stripe), PayPal, or Amazon Pay.

We mainly use the first two in combination with a separate service called Klarna that allows customers to finance their purchase.

However, as soon as the customer checks out on your website, the payment is deposited directly into the payment gateway.Shopify Payments pays every 2 business days or so, and PayPal usually pays pretty quickly as well.The problem with PayPal is that they sometimes put a percentage of your money on reserves when you're just starting out if it's a new account.I've also heard of Shopify, but I don't think it ever happened.

But either way, most of the time you receive that money from the customer within 2-3 business days.

When an order is placed, you obviously need to pay the supplier for shipping as soon as possible.Most providers will accept credit cards, but others may require direct bank transfer.

So, what you can take away from all this is that you get paid pretty quickly compared to most other business models.You don't need to wait 60 days for affiliate commission payments or even 90 days for some ad networks!

Quick tip: If you are using a credit card, make sure you get something with a good rewards program!

SO, HOW MUCH MONEY CAN YOU MAKE DROPSHIPPING?

Considering everything we've covered, I think you'll agree that there's really no simple answer.But if I absolutely had to make an educated assumption, here's how I would analyze how much a certain individual could make (profit) with high ticket dropshipping if they were to engage…

• $1000 per month – If you're willing to spend time building a nice website, securing some good providers, and learning about Google ads, this level isn't that hard to achieve.I believe most people can achieve this if they get to work.
• $5,000 per month – You can probably reach this level as a single person from 6 months to a year if you are persistent and work regularly to acquire new suppliers and test them.This can happen much more quickly if you get a really good supplier early.
• $10,000 per month – To reach this point, you'll need to develop the skills to build systems and outsource.At this point it would be useful to have 2-3 virtual assistants.It's still very achievable, but it's not as easy as the other two levels.
• $30,000 per month – At this point, you need solid systems in place to keep all things daily in order along with separate systems to keep growth at a steady pace.You should focus primarily on growing activities rather than on a daily basis.
• $100,000 per month and above – At this point, your business needs to be a well-oiled machine.Along with virtual employees, you'll most likely need others to manage them, and you'll also want people to focus on growing beyond day-to-day.

But there's one last thing to consider: selling your store.

If you're scared of going over the $10,000 per month limit, there's an alternative: selling your store.

Creating and launching dropshipping stores is a great way to substantially increase your revenue.You can sell stores for 20-30 times their monthly earnings on Empire Flippers, so focusing on building and launching is an alternative model to focus only on growth.

Choose a route, follow it and good luck!