So, you’ve already had substantial success with your Amazon FBA business and are now looking towards a future for what you hope to accomplish. Maybe your Amazon FBA business is no longer on your radar then because you’re hoping to move on and accomplish something different. Suppose you’ve done the necessary legwork, structure thinking, and strategy. In that case, you should be able to find a buyer for your Amazon FBA business especially if you have partnered with the right brokerage to help you sell it.
A lot of work goes into running an Amazon FBA business and it’s certainly a natural occurrence that you might decide that you no longer want to run your business because you have other priorities that are front and center for you. This doesn’t mean, however, that you have to walk away from the business completely. An experienced professional interested in capitalizing on all the hard work you did might be interested in purchasing the company. As you might already know, however, not all buyers are created equal.
If you are a seller, the question that might stand out the most is “Where can I sell my Amazon FBA Business?” If you have a vast network of potential buyers, that is well and good. However, if you have a limited reach of buyers, it would be wiser to reach out to platforms that can help you sell such as the following:
If you choose to do the sale through the help of brokers, make sure that you understand the terms and conditions of the brokerage, especially the financial aspect of it.
So many people ask about the process of how to sell an Amazon FBA business. First of all, you need to be prepared for the entirety of the buying process. Having an experienced business broker at your side can make a big difference in how you approach listing your company and finding the perfect buyer.
As busy Amazon FBA business owners, you probably already have plenty of things to do and you would not want to add finding a buyer to that list, going through the due diligence process, arguing overvaluation, and negotiating the final sale. This is one of the biggest reasons why you might choose to partner with a business broker to help you. You’ll need a business broker who is especially savvy about selling Amazon FBA business.
There are many reasons why you should venture into Amazon FBA Business. Among them are the following:
To get the right multiple for your company, you’ve got to do a deep dive into the current financial structure of the business. This means preparing the financial statements and other financial reports that might be needed (Profit & Loss Statement, Balance Sheet, Statement of Cash Flows, etc.)
Having a broker to assist you with the entire process gives you an objective perspective from a person who doesn’t have direct ties to the business, such as making improvement recommendations to the management.
Once you know where you’re at financially, don’t stop there. Knowing the numbers is stage one, but you need to be able to show how those numbers can be used to help enhance your multiple values.
After you’ve looked at the financials, it’s time to think about other things that a potential buyer would care about, such as your relationships with suppliers. Having strong financials and even stronger relationships with stakeholders make the sale attractive to buyers.
To be successful in selling your company, it’s important to partner with a broker who has extensive knowledge of the FBA Market. In case you’re wondering, “How to sell my Amazon FBA business?”, well you can work with your broker to find the right buyer.
There are specific factors associated with starting and running an Amazon company. If you’re lucky enough to get a savvy buyer, they already know the ins and outs. But more likely, the buyer wants to step into the business and build off of the existing structure that you have. This means they might not have the same background knowledge about selling on Amazon.
Regardless, there are certain criteria that you need to consider when screening potential buyers. The most important of which are the following:
Being hands-on in the sales process and selecting the right buyer give Amazon sellers a sense of comfort knowing that they have entrusted the business they have worked hard to build to the right people.
Many different kinds of valuation drivers can affect the selling price of the business. Knowing how to sell your Amazon FBA business means understanding how these drivers work and they include business profitability, supply chain & diversity of products, customer value, the efficiency of operations, market strength, compliance, growth opportunities, transition, and exit strategy.
When talking about profitability, emphasis must be placed on the net profit and profit margins. Businesses with consistent revenue growth, high profit margins, and multiple revenue streams drive the valuation.
However, if the sales fluctuate, the best thing to do before doing a valuation is to increase sales consistently.
Amazon businesses that do not rely on a single product are more likely to increase their valuation. Supply chain management and effective inventory management – making sure that you have just the right amount of inventory to avoid expensive carrying costs drive the valuation up as well.
If customer service is one area that you need to improve on, work on it right away. The areas that affect the valuation are repeat orders from customers (preferably subscriptions-based), low Customer Acquisition Cost (CAC), and high social media following.
Businesses that run on optimum efficiency will have a good business valuation result. This means having a fully automated process, low overhead costs due to effective outsourcing, and scalability.
An Amazon store with a unique product has less competition and when it belongs to a growing industry, the more it increases the business value.
Risk reduction is the main objective of companies that have a risk management strategy. One way to lessen risks is to make sure that the business is compliant with business regulations. For online businesses, this can include making sure that trademarks are registered, that important software has a license, etc.
Any potential to scale a business is a positive in the valuation process. An Amazon business that still has the potential to enter new markets or diversify its product listing is highly attractive to buyers.
The cooperation between a buyer and seller is important once a sale is done. A seller who is motivated to make the sale has a clear plan of action for the transition to make sure that everything runs smoothly for the new business owner.
There are three primary types of Amazon FBA sellers: a reseller, a proprietary product seller, and a private label seller.
A reseller involves finding products in person or online that can be sold on Amazon for a profit. This is essentially a form of trading because you’re buying wholesale and selling retail. This is the simplest kind of Amazon FBA business to build but there’s unlimited competition that might outweigh your low barriers to entry.
Pros:
Cons:
A seller who sells a product that they have either manufactured or had someone else manufacture exclusively for them is called a proprietary product seller. A key characteristic of this type of seller is the exclusivity of selling a particular product.
There are no specific types of business models under this type of FBA seller, however, certain industries fall under this category such as those in technology, beauty and wellness, fashion, and consumer goods.
Pros:
Cons:
A private label business on Amazon involves taking existing products and applying your brand to them. Plenty of manufacturers offer this form of white-label products where you can rebrand their product to your requirements.
There’s potential competition, increased trust from branding, and convenience all to consider. The high level of reliance on Amazon is one major disadvantage of going this particular route. Having your own brand and proprietary product on Amazon FBA business is one of the most profitable to list for sale. It is much harder to succeed in this marketplace compared to a private label or reseller business but it does generate lasting value, which means your company is especially appealing to prospective buyers.
Pros:
Cons:
You need to have good reviews and consistent customer feedback to get a high chance for someone to be interested in buying your company. Recognized and established brands can significantly add more value than other types of Amazon FBA businesses. This is because they attract loyal customers and have much better staying power in the market.
When it comes to a potential buyer, this is the perfect situation because this can allow you to demand a significant premium or have multiple buyers interested in the company.
Valuation is a key component of listing your business for sale, and making sure that you will walk away with the maximum profit you can get from the sale. How to sell a new Amazon FBA business is just the same as selling an Amazon store that has been in business for quite some time.
Amazon FBA businesses are typically valued on a multiple of gross earnings before tax, in addition to the cost of inventory inside your Amazon warehouses at the time. The expenses usually taken into account are the Cost of Goods Sold (COGS) and the expenses that you rely upon to run the business (operational expenses).
An important term you should become familiar with when selling your Amazon FBA business is the Seller Discretionary Earnings (SDE). Valuation multiples are typically calculated based on this SDE number. For businesses in high growth periods, however, or those that have been declining over the past several months, it can be better to use the multiple of a monthly SDE.
Annual SDE, on the other hand, is typically preferred because it takes more data into account. Make sure that you record all justifiable expenses in your business that reduce profit when you are completing your bookkeeping. This is helpful not just for keeping clean books now but for making the case for selling your company in the future.
Buyers of FBA businesses face different circumstances and might or might not need all of the expenses that you have been using to run the company. Costs like office rent or lease, employee salaries, vehicle maintenance expenses, and insurance costs should not be included in your SDE calculation.
When you are valuing your FBA business, you can use information from the company’s existing financial statements and account for any expenses that are not required or could potentially be adjusted by a different buyer.
SDE is calculated as follows:
SDE = Revenue – Cost of Goods Sold – Operating Expenses + Add-backs
To determine whether or not an expense in your business qualifies as an add-back, ask yourself the question, “Do I need to spend money on this expense to continue operating the business?”
Some examples that are typically classified as add-backs when determining your Amazon FBA business value include the following:
Determining the worth of your business is crucial when selling your Amazon FBA. Having the help of experts such as brokers will help you nail down the true worth of your company and as such, you must make sure that your business has accurate financial records to back you up during the negotiation process.
If you think that the work is finished when the contract is signed and the payment is received, you are wrong. Selling your Amazon business is just half the step, the next one is to carefully navigate through the transition process alongside the new owner.
Don’t worry, your professional broker will still be working with you post-sale.
After the sale of the business, some considerations need to be addressed such as the following:
Businesses aren’t just commodities that can be sold and then forgotten. Collaboration is important between the old and new owners to ensure the success of the transition.
Need help deciding if now is the right time to sell your Amazon FBA business? Our business brokerage has a long track record of helping people with similar decisions. We’ll walk you through the typical process on a call together so you can get a sense of what’s best for you and decide the best option for listing your company for sale.
Even if you decide not to move forward just yet, you’ll know that you’ve done some of the initial legwork to accomplish your overall goals and that you have a trusted partner should you choose to come back and work with us again in the future.
Don’t rely on our word – consider the many positive reviews and testimonials we’ve received for our work as business brokers! Once you see why others have been so thrilled working with us, you might be ready to take your next step.
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