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Many of those who are business-minded and first hear about dropshipping immediately fall in love with the idea of it. The more curious and enthusiastic ones, if you must know, tend to dig in a bit deeper and eventually would want to take a shot at it themselves. They do, however, the fact that venturing into a new business (or anything new for that matter) can be very discouraging. What adds to this negativity are thoughts of one's incompetence and inexperience.
Furthermore, potential dropshippers can feel intimidated by the existing competition and their continuously growing number of customers, as well as (and most notably) the increasing cost of goods and other expenses needed in order to successfully run a dropshipping store.
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But should those things hinder one from doing what the heart wants to do? Of course not! I personally believe that all it takes for one to actually go out and do something is a little nudge from someone who has been in the business for quite some time now. Lucky for you (not to brag, though), one of those people happens to be me!
And no, this is not a parody of that song. Here in this post, I want to answer one of the most frequently asked questions in the eCommerce business: "Is it too late for me to start dropshipping?"
When to Start a Dropshipping Business
I cannot stress this enough: if you want to start a dropshipping business, the best time to do so is now. It is important for you to launch that business as soon as possible, not primarily because the operating and advertising costs for any business size is only getting more and more expensive by the day.
Allow me to show you an example. Today we are going to talk about the increasing cost of Facebook Ads.
Advertising via Facebook Ads
I want to show you how my advertising costs on Facebook had risen back in 2017-2018, and how it affected my net profit, because at the end of the day, that is what really matters the most.
Quick lesson: when you advertise on Facebook, they charge you by what is called a CPM. Now, CPM means cost per mille, and it is the amount that an advertiser has to pay a platform for it to show an ad to a thousand individual audiences. This value varies according to many different factors, but in general, CPM costs are rising as more and more people choose to advertise on a certain platform, and in our case, Facebook.
Back in 2017, Facebook announced that the demand for advertisement spots have significantly increased that their supply can no longer keep up with it. Business, is business, after all, and they upped their game by increasing their CPM values in order to make up for this gap. In a way, the platform is sending a message to advertisers from all over the world: only those who are willing to pay more get to enjoy our services, and since it has established such a huge user base, of course we would want to utilize it!
So now you probably understand why I chose to use Facebook Ads as an example. With over a million active users across the globe, Facebook is definitely your number one option for an advertisement platform. And if you don't start using their services as soon as possible, you might just regret it. You might get outbid by businesses that are way far ahead than you, which will only force you to become more competitive and invest more on your ads.
Still don't believe me? Take a look at this simple computation based off of my own business below.
Overview: My Facebook Ads Account
On the left is my CPM for the first half of 2018; next to it is my CPM for the first half of 2017. In 2017, I paid, on average, Facebook $8.81 for it to show my ads a thousand times on their platform. Fast forward to a year and that amount increased to $13.49. That's a whopping 53.19% increase in advertising costs! And this is just for one ad; imagine if I have over 10 ads continuously running on Facebook. They would all add up and eventually, my whole business would be massively hit by this huge spending.
Moreover, Facebook is not charging me more because they're showing it to more people; they're doing it because of the huge demand for their services.
Let's go over a simple computation that I did so you can get a clearer idea of how all these go.
Shown above are Facebook Ads values from 2017 (Disclaimer: all values are situational, but realistic). Let's say my CPM is $10, my clickthrough rate (CTR) 5%, my conversion rate (CR) 3%, my cost of goods $10, and my selling price $30; if I want Facebook to show my ads to 10,000 people, that would cost me a hundred dollars, and that would mean 500 people would click that ad and go to my website to view the product that I am advertising. Out of those 500, only 15 people would actually check out and purchase the product. My cost per acquisition (CPA, calculated as the total campaign cost over the number of conversions) is about $7. I would then be making $450 in sales out of those 15 purchasers. And with the initial $100 spending on ads, and my total cost of goods being $150, that leaves me with only $200 profit.
Now let's look at a situation from 2018 with the same initial values, only the CPM has increased to $15.
The hundred dollars that would have made my ad reach 10,000 people can now only take me to an average of less than 7,000 people, which leaves me with about 300 website visitors and 10 conversions. So with that amount of spending, I can only make $300, and with the COG being $100 (and the initial spending of $100 on ads), that leaves me with a hundred-dollar profit.
Yep, waiting for a full year to fulfill your dropshipping dreams would actually cost you a hundred dollars more.
Let's Wrap It Up!
If you are still hesitant as to whether or not you should start your dropshipping business now, think no more. It's time for you to jump in and enjoy all it perks. Dropshipping is a simple but highly profitable business model, and everyone is welcome to come on board.
I hope you got a lot of value out of this post, and if you like what you see, please continue supporting WagePirate!
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- The Pirate Community; and loads more!
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If you have any more questions about Facebook Ads, dropshipping in Australia or anything regarding this video, feel free to personally contact me via the Contact Form HERE. You can also leave your comments and feedback below, and our team over at WagePirate will definitely get back to you with a response. For more reviews, news and updates, don't forget to subscribe to my YouTube channel!