How Much Does It Cost to Start a Dropshipping Business

Realistic Startup Budget for 2019

Illustration by Spocket

In this article, I’ll share a realistic budget for starting a dropshipping store. I got these numbers from successful dropshippers who shared their startup costs with me. These dropshippers didn’t have identical budgets, but that’s why I interviewed them. I wanted to know what new dropshippers could do with a lot or just a little money. By the end of the article, you’ll have an itemized list of startup costs, and insights into how much you should spend to reach your e-commerce goals.

Let’s be clear: There’s no right answer. Every dropshipper has different goals, and those goals require different budgets. If you want to quit your job and live off dropshipping, be prepared to budget big. If you just want to make $100 extra a month, your budget can be much more modest.

You’ve all got different goals and different plans for achieving them. Today we’ll focus on the more modest budget. That is, we’ll discuss the bare minimum budget for getting started with dropshipping. I recommend using a budget if you want a shot at making sales, but don’t want to break the bank.

What’s in the Bare Minimum Dropshipping Budget?

We’ll cover the costs line by line.

1. Shopify

Shopify is an e-commerce platform. With Shopify, you can build the website for your online store and take payments from customers around the world. It’s the most popular e-commerce platform around, and you can start using Shopify with a 14-day free trial.

But let’s be realistic, you’re not going to make your dropshipping fortune in two weeks, so the real cost here will be the Shopify monthly charge once your two-week trial ends. That cost is $29.99 a month. All right. That’s the store covered. How about the dropshipping part of the equation?

2. Oberlo

This is where Oberlo comes in. Oberlo is a platform that helps you find great products to sell online, import them to your Shopify store, and set your own prices. When a customer buys your products, the supplier ships the products directly to your customer. You never have to worry about carrying inventory, making this a low-risk business model for new entrepreneurs.

If you’re just starting out, the good news is: Oberlo is free! Oberlo’s forever free plan is ideal for first-time dropshippers. It gives you all the functionality of Oberlo, plus first-class customer service. You only have to pay for Oberlo once you make over 50 sales per month. Until then, you don’t pay a dime.

So Oberlo is free, which keeps our bare bones dropshipping business budget at 29.99 a month for now.

Now if you want to make sales, you need to earn your customer’s trust. To do that, you need to look like other trustworthy online businesses. And there’s one thing they all have in common: They all have their own domain name.

When you get started on Shopify, you get a free domain that ends with “.my-shopify.com.” But I recommend getting your own dot com domain name as it strengthens your brand and legitimises your business in the eyes of your customers. You can purchase a custom domain through Shopify. It will only cost you $14 per year. What do we spend our money on, next?

Pro dropshipper Tim Vangness has this to say:

You don’t need to spend your money on custom photos, logos, and website design.

Besides, Shopify can take care of all of that for you! 
With Burst, you can find and use beautiful stock photos for free. 
With Hatchful, you can create a custom logo in minutes.

3. Sample Products

Illustration by Jasmijn Solange Evans

Once you have a custom domain, the next line item on your budget is the cost of sample products. This line item is extremely important. Here’s why: Dropshipping is great because you don’t have to stock an inventory of products. But that also means you don’t control the quality of the products you sell, nor the delivery times, or the packaging. It gives you the chance to investigate suppliers and go on the customer journey yourself.

If you’re happy with the shipping times, the packaging, and the quality of the product, then chances are your customers will be too. If you’re not, you can use Oberlo to contact the supplier with your concerns, or you can sell other products.

How much you budget for this depends on the cost of your products. But, let’s say your products costs around $15 each, and you order samples for five products. Then you’re looking at around $75 for this stage of setting up a dropshipping business.

Let’s get back to our tally, which now looks like this:

  • Shopify online store: $29.99/month
  • Oberlo forever free plan: $0
  • Domain name: $14/year
  • Sample products: $75
  • Total: $118.99

All right. We’re looking at a startup bill of under $120. Where do you think dropshippers spend their startup money next? The next line item on our budget: Apps.

4. Apps

Think of apps like bells, whistles, and turbo-boosters for your store. Apps can help you drive sales and run your store more efficiently. The Shopify app store is brimming with apps, and you can install them with the click of a button. Some apps are free, while others charge a monthly fee.

4.1. Cross-selling and Upselling

Cross Sell
($19.99/month)

Cart Convert
($19/month)

Boost Sales
($30/month)

4.2. Bulk Pricing

Discount Pricing
($19.99 to $89.99/month)

Quantity Breaks
($20/month)

Bulk Discounts & Sales Scheduled
($18.95/month)

4.3. Exit Intent

Wheelio
($14.92/month)

Spin-a-Sale
($9.99/month)

Exit Intent & Messenger Popups
($29.00/month)

None of these apps are must-haves. But they are definitely nice to have. Like product samples, the amount of money you spend here will depend on your store and your goals. However, for the sake of this budget, we’ll put aside $19 to spend on various apps.

Now our budget looks like this:

  • Shopify online store: $29.99/month
  • Oberlo forever free plan: $0
  • Domain name: $14/year
  • Sample products: $75
  • Apps: $19
  • Total: $137.99

Our next expense is where you can splash the cash, and make a more substantial investment in your dropshipping business.

5. Marketing

Here are some marketing words of wisdom from Artsy Wall founder Matiss Ozerskis. Matiss suggests dedicating the lion’s share of your startup budget into marketing.

Marketing doesn’t have a specific price tag. However, there are some assumptions that we can use to get a better idea of what you’ll need to spend. In e-commerce, the average global conversion rate is somewhere between 2–3%. For the sake of this calculation, let’s put it at 2.5%. This conversion rate means that if you get 200 people to your store, you can expect 5 of them to purchase something.

How do you get 200 people to your store? 
-Marketing.

One of the biggest marketing channels for dropshippers is Facebook. So Let’s look at the cost of driving 200 visitors to your store from Facebook. On average, the click-through rate for Facebook ads is 0.9%. Let’s round that up to 1% to make the math easier. That means, to get 200 people to your store, you’ll need your ad to reach 20,000 eyeballs.

According to marketing software provider AdStage, the average cost per thousand impressions is $12.45. Let’s round up to $12.50.

Now we have an equation we can work with. The price for reaching 20,000 people on Facebook in the USA looks like this:

First, we divide the total impressions we want — 20,000 eyeballs — by 1,000. That’s because the cost per thousand impressions is the industry norm. That leaves us with 20. Then we multiply 20 by the average cost per impression, which is $12.50. The result: we arrive at a total cost of $250 for Facebook advertising if we want to reach 20,000 people, drive 200 people to our store, and make 5 sales.

Let’s add that figure to our ongoing tally.

Now, I know what you’re thinking: If you spend $250 to make 5 sales, you won’t break even. And you’re right. But most six-figure dropshippers don’t even expect to make 5 sales the first time they invest in marketing. They expect to learn what their customers want. They expect to analyze the data to decide which products to promote, which audiences to promote them to, and which ads to use. Armed with that knowledge, marketing costs go down and conversions go up.

So if you want to start drop-shipping, the question to ask yourself is: Are you ready to become a constant learner? If you’re able to invest these startup costs, and you’re enthusiastic about investing your time in learning how to dropship, then dropshipping could quite literally change your life.

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