> For the complete documentation index, see [llms.txt](https://sourcesheets.gitbook.io/sourcesheets-new-seller-blueprint/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://sourcesheets.gitbook.io/sourcesheets-new-seller-blueprint/part-4-sourcing-and-buying-your-first-products/7.5.2-phase-2-financial-reality-check.md).

# Phase 2: Financial Reality Check (Gates 1–2)

This is where analysis stops being theoretical and becomes practical. Before demand, before charts, before competition, there's only one question that matters: does the maths work, right now, without excuses? If the answer is no, the product doesn't move forward.

## Why Financial Gates Come First

Financial gates go first because they're objective, fast, save the most time, and prevent emotional attachment. A product that fails financially doesn't get the benefit of further analysis. We don't "see if it improves later" or "check demand just in case." Bad maths is a hard stop.

## Gate 1: Profit After Real Fees

The first gate: after all realistic fees, is the product actually profitable? This means Amazon referral fees, FBA fees, VAT assumptions based on your account setup, and any obvious costs already known.

It does not include hypothetical price increases, assumed Buy Box wins, future repricing strategies, or "once Amazon leaves" scenarios. As a beginner starting point, the Blueprint uses a floor of **£1 profit per unit** after all of that. Below £1, the product fails immediately, there's no margin left to absorb a fee change, a return, or a slower sale than expected.

A small positive number above that floor isn't automatically a pass either. At this stage we're not deciding to buy. We're deciding whether the product deserves further attention.

## Gate 2: ROI Before Optimism

If the product survives Gate 1, we move to ROI. Is the return acceptable without optimism? Assess it at the current Buy Box price, using today's fees, without assuming operational improvements. As a beginner starting point, the Blueprint uses a floor of **20% ROI**. Below that, the product fails here.

Common beginner mistakes here: accepting very low ROI "to build experience," assuming faster sales compensate for poor margins, believing volume fixes thin profit. It doesn't. Low ROI products are fragile, any price movement, fee change, or increase in competition turns them unprofitable. If the ROI only works when conditions are perfect, it doesn't work.

## Why Bad Maths Is Never Fixed Later

This is one of the most important lessons in this module. You can't fix thin margins, weak ROI, or a poor fee structure with better sourcing, better tools, or more effort. Every later phase assumes the maths already works. If you ignore this gate, everything that follows becomes justification instead of analysis.

## Outcome of Phase 2

Only two outcomes are possible: fail, and the product is rejected immediately, or proceed, and it earns the right to be analysed further. There's no soft pass here. Most products should fail at this stage, and that's expected.

These are Blueprint starting points, not fixed rules. Set your actual thresholds in Settings → Preferences (see 7.2), and tighten them once your own costs, storage, returns, time, are clearer.