Online shopping has revolutionized how we purchase goods; it has now become more accessible and easier than ever for buyers and sellers to connect. Although the process is usually a lot more laborious for the seller to ship and deliver the product to the customer, Fulfillment by Amazon or “FBA” has made it much easier to sell on Amazon. Even Amazon is acquiring FBA businesses that can add value to their existing e-commerce portfolio. Buying FBA businesses is considered a good investment opportunity for investors and potentially an excellent profitable exit for FBA business owners.
Are you looking for a payout? If you want to start something new, selling your Amazon FBA business is one of the fastest steps to help you be able to retire sooner than you expect. Selling your established business from scratch is difficult for any business owner.
Many business owners look to develop and grow a business to one day be able to pass it along to future generations. Still, some establish online businesses for the sole purpose of selling them in the future. If you’ve been looking towards selling your business, or it has never crossed your mind but you still want to consider it because of an offer currently on your table, it all boils down to how you view your future in your business.
Amazon has four business models for your FBA business: (retail arbitrage) buying items from retail stores and reselling them, (wholesale) buying in bulk, (private label) purchasing products from manufacturers and using your brand, and lastly creating your product. When you’ve decided what business model is right for you, establishing a virtual assistant comes next making it easier to manage inventory and handle customer service. Now all that’s left for you to do is to send it to the nearest Amazon warehouse.
Amazon will do the rest, giving you more time to increase your product listing and grow your business. This simple yet easy-to-manage online business has attracted many business owners and huge investors looking to become an Amazon seller and gain a piece of Amazon’s multibillion-dollar market. Investors look to acquire FBA businesses to skip the timeline of establishing one from scratch.
Many people see themselves continuing their professional selling career for years to come, having the sole purpose of generating more and more revenue. Still, many people also want to try or invest in something new. The problem is that many usually forget that you can enjoy your life now by retiring and selling your business. Although there are still a lot of steps you need to take to sell your business to ensure the most amount of profit possible, selling too soon might not get you the value you want, and selling too late could affect your sale price due to market volatility, potentially decreasing your business’s value.
It is crucial to sell an Amazon company only after preparations are done to maximize your profit potential. Not preparing your business for a sale might cause you to lose an increase in your business valuations or might not make you meet the amount you are expecting to continue your business exit.
Here are the steps you need to take that will serve as your exit strategy for a business exit with no regrets:
A buyer’s decision will be influenced by the number of products you sell in your business. Having only a single product is risky for buyers due to changes in market trends. Still, it does too many products, being that it will be too much work to manage and be able to focus on growing your business at the same time. Buyers prefer the sweet spot where you only sell several products, and no one product generates most of your revenue.
It always boils down to how much revenue your business generates, especially your monthly income. Your business value will be based on how much you earn; the more revenue you make, the higher your valuation will be. If you already have a number in mind, this will help you figure out the steps you need to take and the numbers you need to reach for you to be able to meet the valuation you want for your business.
Buyers don’t just look at how much net profit, revenue, or traffic you generate but also how stable those numbers are – whether they have been increasing or decreasing in these areas in the past years. Having stable numbers is what is most attractive to buyers.
Many business owners use a cash basis instead of accrual basis in financial statements reporting. Accrual basis records the revenue and expenses when they are incurred even without the receipt of disbursement of cash, whereas cash basis only records revenue when cash is received and expense when cash is paid.
Doing this will significantly increase your business’s valuation. You are highly advised to hire a professional bookkeeper to perform this work.
Preparing your Cost of Goods Sold statement, Balance Sheets, Income Statements, Cash Flow Statements, and Equity Statements is essential for any buyer to see your company’s financial health. Ensuring that the valuations are correct helps finalize a deal that both the buyer and seller can agree on. Again, hiring an accountant will make this tiresome task more straightforward and accessible.
FBA businesses are in demand, making it a competition for sellers to operate the most profitable business to achieve a successful exit. Focusing on all of these will enable you to maximize the valuation of your company for a sale.
Now comes the most crucial question: “How much can you get for your business?”. Whether you are looking at how you’ll be able to sell to private investors or how to sell the company to Amazon directly, FBA businesses range from a couple of thousand dollars to a couple of million dollars.
So how exactly can you know your business valuation? There are two easy steps you can do to be able to understand how much you can sell your business for:
Professionals value a business by comparing it to similar companies, estimating cash flows, assessing assets, and conducting formal appraisals. They can give you a clear valuation of your business based on data-driven information.
You can conduct your research to see your business’s FMV. Fair market value (FMV) is based on how much a buyer is willing to pay for a business or how much a company similar to yours has sold previously in the market.
However, getting an exact valuation for your business does not generally mean you will get what your business is worth. There is always no guarantee that it will be a cash upfront transaction. It will always depend on what you, as the seller and the buyer, will agree on.
Business owners want to get the best possible amount for their business. Buyers have different preferences and valuations regarding how much they want to spend to buy your business. Here are ways you can find the right buyer for FBA business:
How do you sell a company to Amazon? Amazon only looks to acquire businesses that can add value to their existing e-commerce platform. If you think your business fits those criteria, you can contact Amazon’s corporate development or mergers and acquisitions (M&A) team to submit a proposal.
Brokers look to get you the best deal possible. They’ll do all the work, including valuing your business and finding the right buyer that meets your demands. Buyers look to get the best deal possible because the better the deal they get, the better their commission will be.
You can use many websites to list your Amazon FBA business for sale. You can use Empire Flippers, Flippa, or Quiet Light Brokerage to help buyers see that your business is for sale.
Finding a buyer who will agree to all the terms and conditions you want for your business is challenging. Hiring a professional will always make things easier, granted that there will be extra costs. Still, this way, you won’t be alone when you’ve found a potential buyer and begun to start the sales process.
The sales process goes through many phases before the deal or the sale is completed. The seller and buyer must agree on everything written on a contract, whether it is a cash sale or an installment sale with terms and conditions that the remaining amount will be based on the company’s performance during the sales process. Here are the vital steps of a sales process:
Parties rarely accept the first offer on the table, numerous buyers present different offers, be ready to negotiate terms, including the sale price and payment structure, until you as the seller and the buyer agree to an acceptable deal for both.
Once both parties have agreed to the contract terms, you will need to prepare all the necessary documents, as the buyer will look to verify all the information about your business while conducting due diligence.
Once everything is in place and the agreement has been finalized, the transfer of ownership will begin, ensuring that the business and all of the company’s related assets are now in the buyer’s name.
The sales process can take months to a couple of years, depending on the agreed-upon payment terms. Even the price negotiations alone could take months before both parties agree to accept the deal. Sellers usually have to go through numerous buyers to find a fair and profitable deal for them to let go of their business. As you finalize your agreement, you need to be aware of the legal considerations that can impact whether the transaction will go through.
Many legal considerations need to be considered before the deal can be finalized. Hiring an attorney for this process is highly advisable to keep things in order and to comply with all the relevant laws. These are the legal considerations that need to be taken into account:
The seller must disclose all the material facts about the business that could influence the buyer’s decision.
Ensuring that the sale does not break any of Amazon’s policies regarding the transfer of accounts.
Any transaction that involves you selling your capital assets generally comes with taxes; consult a professional on the taxes you are liable to pay.
Addressing all the necessary legal considerations will mitigate the risk for a smooth sale and a smooth ownership transition.
Buyers can’t just show up after the sale and be able to handle all of the responsibilities that come with being an owner from day one. They need the guidance and knowledge required to run the business, and the seller needs to be involved for some time to ensure that the company will be managed well and will run smoothly even after the business has changed ownership.
The most important thing that will be needed to ensure that the business will continue to operate smoothly is ensuring that the supplier and customer relationship don’t change and that the public’s trust in the business remains.
One of the biggest mistakes sellers make is “The Off-Market Fallacy”, where sellers think they can make the most money without the help of bookers or professionals to handle the sale. While it might cut expenses due to not needing to pay for any commission, there will be the risk of selling your Amazon FBA business much lower than it could go for. Or the possibility of the sale not going through due to inaccurate data, neglecting legal considerations, or having inadequate documentation that won’t sit well with potential buyers.
Selling your FBA business may be one of the best paydays you’ll ever get, from funding your retirement to maybe starting a new venture. The process is long and could get tedious. Still, with a clear goal in mind, you’ll be able to grow your business to get the maximum amount you can get for your business. Buyers can be found through brokers, the internet, or maybe even Amazon itself, looking to acquire your FBA business. The most important thing to ensure is that you are ready to let go of your business.
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