Hi, everybody. It's Lewis Smith again here. If you're currently in the process of either setting up a drop shipping business, or perhaps you've already started running a drop shipping business, and you're wondering to yourself, "Should I sell high-ticket or high price items or low price items or low-ticket items?" then this video was specifically designed for you.
So if you don't know me already, my name is Lewis Smith and I help people start drop shipping businesses, but not by selling products from China, Amazon, eBay, or anything like that. So before we get started with today's video, if you're interested in starting a drop shipping business too, and you want to learn exactly how to do the same, you can head over to DropshipUnlocked.com/FREE for an on demand training that we're running that we'll run you through exactly how to do it.
So the people that generally come to work with us do so because they want to build an e-commerce business. That's kind of the first thing. They want a long-term e-commerce business. They want it because usually, they want that time or location freedom. So they want to be able to step back from trading time for money, or they want to be able to run their business from anywhere in the world.
So that's a big motivation as to why a lot of people start these businesses and they usually don't want the hassle of having to sell products that make them a few pounds in profit per sale and it's a very, very slow, long play. And so even though they have money to invest, they have income or savings ready to invest in getting their business started. They've decided that drop shipping is the business model that suits them best primarily, usually because it's lower risk and it doesn't require huge amounts of capital to buy a load of stock that you then have to kind of sit on and hope that it's going to sell, and they're not just looking for the easy route.
They're not hoping that by some miracle, someone just hands them a business, that's going to make them a millionaire and they just sit back and watch the money come in. They know that that doesn't exist and anyone promising that, it's ridiculous. But the idea of them building this business is they know it's for a long-term play. They know it's not a get rich quick thing. And so they're committed to doing this for the next few years because they want it to be their source of income. So they're not just kind of dabbling with this stuff, but even so, even though they're not committed, they're not sure whether they're going to be able to sell products that are higher priced. So that's often the thing that puts people off because they're like, "Well, would people buy those products from me?"
And so they don't want to put themselves at risk. That's always another thing because people think with higher priced products, isn't it more risky? So we'll cover that in today's video. They aren't sure what the best way is for them to get started because they've often been bombarded with all of this conflicting information online. Now, I know exactly what it's like, where someone's saying, do one thing. Then there's this other shiny object where someone's saying, do something completely different.
There's so much irrelevant, conflicting information out there that they just feel kind of paralyzed by it they're like, "I don't know the first step to take, there's too many voices. There's too many people telling me different things to do." I get it, it makes them feel overwhelmed. That's the first feeling because there's so much information.
I think the second thing is frustrated that despite all of the effort that they're seemingly putting in, they might end up in a position where they're still only making a few pounds in profit per sale. And so it's frustrating putting all your time and effort into something that you then think, "Is even worth this effort?" So I get that.
Then it makes them nervous as well about taking the leap. Often this is the first time people have gone into entrepreneurship and have started a business for themselves. So taking that leap and thinking, "Well, am I going in the wrong or the right direction?" Of course, that's going to make people nervous. So that's understandable as well.
I understand that because if you're going to commit to something over the next, say six to 12 months, or even two years, you want to know that it's worth you committing that time to because the money comes back. Money replenishes itself, you earn an income every month, but time just goes away. So you have to make sure that if you're using time, you're doing it wisely. So that's what we're going to talk about in today's video.
So I always tell the people that are kind of feeling like that, try to step back from the emotion, try to step back from any preconceptions or biases that you might have, and just look at the maths, just look at the numbers. Take all emotion out of it. I say to them like, "Step back from it and look at the numbers," and I'll show you exactly what I mean in just a second.
By the way, if you are interested in kind of a real, in-depth training on how to do this, you can head over to DropshipUnlocked.com/FREE and get registered for an on demand training that we do there that goes into a lot more detail.
So imagine this then, let me see if I can share my screen with you right now. Here we go. So imagine you've got a target income of say £3,000 per month. That's your target income. Now, look at these two types of products here that you could sell. There's on the left, cat mugs. Now, that's just an example. That's kind of representative here of low price, low-ticket items.
Now, the reason it's a cat mug is because you might think, "Oh, I'll target cat lovers with a product that's specific to them." It could just as easily be any pet, anything like that. Now, if these products cost £10 per item and you're making £5 profit per sale, if we assume an average e-commerce 2% conversion rate, that means that 2% of people are going to purchase that come to your website are going to then lead to purchase. That means you are going to need 600 sales to hit your target income of £3,000 per month in profit. So we're talking about profit here, not sales.
Now, in order to do that, you're going to need 30,000 visitors to your site. So if you assume like a 50 pence cost per click or whatever it might be, you're looking at like 15 grand in ad cost just to make that 3K. But here's the thing we don't mention. So firstly, there's the ad cost, which is huge, but here's the thing a lot of people don't talk about in low-ticket, 600 customers, that is like good luck to business owners that are taking on that many customers in a month, especially if they're only making £5 profit per sale.
Now imagine if those products are coming from China, how many angry customers are going to be hassling you and asking where their product is and why it hasn't arrived yet and can they have a refund whilst it's on a boat coming over from China. That is not the kind of business that I would wish on anyone. So think very carefully before going down that route.
So now if you look to the right, this is just an example, again, I'm not saying this is a good or a bad niche necessarily, but it's kind of representative of high-ticket. So I'm talking about a set of alloy car wheels here, so high-end products. We're looking at a £1,000 cost per item. So at a £1,000, if you were making, say a 30% profit margin, so 30% of that £1,000 is profit, you're looking at about £300 profit per sale. So we're just keeping the math simple here.
Now, in order to hit your £3,000 target income, how many sales are you going to need? 10. 10 sales in a month. That's one sale every three days. So then the question becomes, well, firstly, it's a lot easier to deal with 10 customers in a month, especially if those products are coming from UK suppliers and are with the customer the next day because the chances of anything going wrong are minimal because when the product arrives to them the very next day, that's it. They've got their product. Job done. Transaction done. Your part is delivered. You don't have to have a whole customer service team trying to keep them happy.
The other thing is that those customers generally are less hassle anyway because they knew what they wanted. They made an informed decision. They already needed these items anyway. You've just been the outlet for them to purchase them from. So once they've got them, it makes your life so much easier, but then look at the numbers behind it as well.
So the amount of visitors that you'd need to that website to generate 10 sales, 500. Remember this is assuming a 2% conversion rate again. Now at the same 50p cost per click, and again, these are just average numbers, but you're talking £250 in ad spend versus what was it? 15 grand for these to hit the same 3K.
So my point is, what do you think takes longer to upload of those two? Which of those two products do you think it's easier to upload? Think about that to yourself ... made me bigger. There we go. Yeah. If you think about that to yourself now, like which of those two do you think it's going to be easier for you to sell?
Trick question. It's exactly the same. Both products are going to require images, possibly a video, maybe not, description, price size. That's about it. Now think about that. If you're going to put in that time, what would you rather be investing that time? Remember the resource of time we talked about? What would you rather be investing that into?
I always say to clients, "Think ahead, think ahead by about six to 12 months from now and think to yourself, what type of business would you prefer to be running at that point?" Because you can design it. If I bring myself up to full screen, again, there we go. If you want to design that business, you can do so from the outset, you just need to know what you're aiming at and work backwards towards it because you're going to put in the time anyway. That's the thing.
If you're going to put in the time and the work and the effort and the blood, sweat, and tears to make this business a success, then make sure you're doing it towards a business that gives you back out of it, what you want. Don't do it for the 600 angry customers that are going to be hassling you and know that you're hardly making any profit on every sale you make.
Because if you skip forward six to 12 months from now. Imagine we skip forward six to 12 months from today, there's going to be some people out there that are still going to be trying to sell those shiny widgets, the new gadgets that's going to make them a few pounds in profit per sale, but they never looked at the maths and they're going to have created themselves a business that they hate by that point because there's so much hassle associated with it.
Now, it's different, if you want to have like a customer service team and a warehouse and all of that, that's fine. That's not what I'm talking about. I'm talking about a lifestyle business here that you can create to run from a laptop with minimal stress, minimal hassle.
I guess at that point, you've got to think if you're in six to 12 months down the line, you're going to have put the same work in as that other person as well. But if you play to the numbers, if you play to that advantage, you can have much more of an enjoyable experience getting there, you're not going to hate your business.
And so, if this stuff makes sense to you, if this is kind of like the moment that it's clicked, when we've gone through the numbers here, and you're serious about starting one of these businesses for yourself and figuring out how you can do this, then head over to DropshipUnlocked.com/FREE for an on demand, free training that you can access there where we go into exactly how you can do this.
So hopefully you guys have found this video helpful today. Thank you very much for joining me. If you do have any questions, then feel free to leave them in the comments. I'd be really grateful if you could give the video a little like or a comment or any kind, just to let me know that you found it helpful. If you've got any topics, suggestions as well that you'd like me to cover in the future, then feel free to let me know.
Likewise, as always, if there's anyone else that you think would find this helpful, if there's somebody that has been talking about like a friend or a colleague or a family member that has been talking about launching one of these businesses and maybe is making the noises of getting products from China, maybe share this with them so that they can see it before they jump into that. Don't let them be the person that in six to 12 months from now has not looked at the numbers and not looked at how they can use this to their advantage.
And so I think that's pretty much it for today's video. Don't forget if you want a dive into this and on demand training, you can get that a DropshipUnlocked.com/FREE. So that's probably it for today's video, I think. I hope you guys found it useful. I'm Lewis Smith, and I'm sure we'll talk again soon.