Thinking Of Selling Your Amazon FBA Business? Here’s What You Need To Know
Tips, Tools And Insights For Potential Sellers
Amazon FBA businesses are booming. Last year alone, more than 70,000 new US sellers joined Amazon’s partnership model. Around the world, a higher percentage of sellers leverage the advantages of FBA (Fulfilment by Amazon) every year.
Thousands of sellers build successful FBA businesses that see them earning an enviable income as their own boss. And an increasing number are choosing to sell their FBA businesses, usually to an aggregator like Heroes who helps the business expand beyond its current potential.
Selling an Amazon FBA business can bring in a healthy payday. But buying and selling FBA businesses is inherently complex and a relatively new practice. As the popularity of FBA continues to rise, we want to help business owners prepare for the possibility that a buyer presents an offer.
Have a look at eCommerce aggregators' Definitive Guide for FBA Sellers in 2022.
In this blog, we’ve put together insights to help you assess your options, whether you’re ready to sell or starting to think about the future.
Why Would I Start An Amazon FBA Business Just To Sell It?
Starting an Amazon FBA business can be a pathway to financial independence, but it is a lot of work. At some point, your business might boom beyond your capabilities to manage it. Or there might be another reason why you feel you’re ready to sell:
You’ve hit a ceiling and can’t scale up
A major life change requires your focus elsewhere
Managing the growing operation is getting too complex
You’re ready to cash out
You have a new venture that needs seed funding
Private label sellers look to exit for a number of reasons, and it’s good to set the right expectations from the start. Who you sell to, how the deal goes down, and what happens after the sale – these are all within your sphere of influence.
What To Consider When Selling An Amazon FBA Business
Firstly: Are You Really Ready To Sell?
Before you get too deep into your exit strategy, make sure selling is the smart move for you. Consider your business from two perspectives:
1. Your Perspective – Is Now The Right Time??
Whether you’ve hit a ceiling or you’re ready to cash out, it pays to get your house in order before inviting potential buyers in. Preparing your business for sale can significantly boost the purchase price.
Start by cleaning your books. Deep-dive into your sales figures, fees, returns and refunds to understand the complete financial picture. Understanding your business from the inside out will help you to assess the valuation.
2. The Buyer’s Perspective – Are They Offering A Fair Valuation, And Are They Well-Equipped To Grow Your Business??
Step back now and look across your operations. Assess your supplier relationships, inventory, online traffic and marketing as though you were a buyer appraising your own business.
When sizing up an Amazon FBA business, buyers will look at its potential to expand into new markets or sell through new channels. Is your business poised for growth, or can you work on building new relationships that open doors to expansion opportunities?
Know your worth. Amazon’s nuances make FBA brand valuations inherently more complex than other online retail businesses. Profitability is a key consideration, but buyers will use several metrics to build an offer.
Valuations reflect both financial stability and future profit potential. Assets like stock on hand, supplier contracts and logistics partnerships factor in as well. Plus, increasingly the brand itself has tangible value; everything from the social media following to CRM database, customer retention figures and unique selling points contribute to an FBA business’ value.
Assessing The Offer
Valuing FBA businesses is complex, but the deal itself should present as straightforward. For example, adding a string of conditions to deferred payments is a potential red flag that signals the buyer’s motives might not be honest.
When you receive an offer, look for the signs your buyer is genuine, trustworthy and reliable:
Straightforward buyout structure
No complex conditions that might delay or prevent payment
Track record of building FBA brands like yours
A team of people ready to take the helm
Short deal timeline
Clear integration strategy
After all your hard work, you want to see your business flourish in the right hands.
Some buyers will try to buy a bargain then sell high, while others (like Heroes) look for businesses with a solid foundation for future growth. Our goal is to operate these businesses indefinitely.
Is your buyer interested in investing? Flipping? Building a portfolio? Make sure their motives align with yours. One way to understand a buyer’s true ambition is to look at other businesses in their portfolio.
Whether they flip fast or truly believe in expanding high-potential brands into new markets, the evidence will be there. Selling to an experienced buyer who believes in long-term growth rather than short-term gains, will always yield a better result. Provided, of course, you broke the right deal.
Cash-out or strap in for the ride; the choice is yours. We’ll go deeper into deal structures in a future post, but for now, it’s good to be aware of the two main ways an Amazon FBA business can sell:
1. Cash Upfront
You get one big payday and walk away happy.
2. Stake In Future Profits
Here’s where deals get creative. You can choose to delay the payday in favour of ongoing returns as your business continues to generate profits. So although you’re not involved in the FBA day-to-day anymore, you can still benefit from the brand’s success.
If you’re confident in the business you built, a stake in future profits can be significantly more lucrative in the long term.
It’s normal to be emotionally invested in the decision after the time and energy you poured into the brand.
That’s why the people you sell to matter. So forget the financials for a minute and focus on the humans taking the reins. You should have confidence that their motives, methods, and mindset match yours, so you know the business is in good hands when you hand it over.
Look for signs the potential buyer recognises and respects your work. If they are genuinely invested in expanding your business, it will show in their enthusiasm, communication and professionalism.
A Clear Pathway To Sale (And Beyond)
One clear sign that your buyer has done their homework is the pathway they present, not just to the sale but beyond it.
Happy to talk with you long before you’re ready to sell
Clearly outlined sale process
They deliver on promises and meet deadlines
Ambitious (but achievable) post-exit growth strategy
Transparent, fair valuation
Operational resources in place to grow the brand
Your exit strategy goes beyond signing the sale contract, especially if you choose to stake your buyout in future profits. Assess the potential buyer’s professionalism, organisation and vision to ensure they are earning your vote of confidence.
The Key To Feeling Fulfilled
After investing your time, money and energy into growing a brand in a competitive niche, selling your Amazon FBA business is a big decision. It can be a truly life-changing event, provided the deal structure and valuation reflects both past performance and potential profits.
Check back in the future for more insights and guides on structuring, growing and - eventually - selling successful FBA businesses.
Already Considering Your Exit Strategy?
Here at Heroes, we buy exciting eCommerce brands focusing on FBA businesses that lead their niche but need an operational boost.