Building your Amazon business will probably require all your time and money - at least for me it did. To put it bluntly:
When you grow, you're busy and broke.
Now, there are ways to create a stable lifestyle-business and make a living without stressing out, but the big break-through regarding time- and money-freedom will most likely happen when you sell your Amazon business.
'Begin With The End In Mind'
- Stephen Covey
To achieve this goal, you have to avoid mistakes before and during the process, and that's what I'm going to enable you to do with this article.
Keep reading and learn everything you need to know to sell your Amazon business with minimum headache and maximum profit.
Watch the Webinar recording on the topic:
My Amazon Journey
I started my Amazon business in 2014 when I discovered the possibility of selling products on Amazon. This was a turning point in my life. I took all the courses I could find to start my business and learn fast.
There was a lot to learn...
When I was in the product scouting phase in 2014, Apple launching the Apple Watch. I really liked the idea of selling Apple Watch accessories. So I went on Alibaba and started digging. This is the product that caught my attention:
So my first product was an Apple Watch Stand, which could hold an Apple Watch charger and was a very useful accessory.
One year later, I travelled to Shenzhen to visit the manufacturer. We started exchanging ideas. He showed me some design layouts of products that had not yet been produced. One of them looked very promising. So we made some adjustments, created a prototype, and eventually, my second product, the XStand, was born.
Visiting your manufacturer can seem like a lot of effort, but creating a personal connection is priceless and can open opportunities you will never find elsewhere.
Moving forward, I added wireless chargers to my product portfolio and built a brand around wireless charging stands for mobile phones.
Fast forward in 2019, after growing my brand to a reasonable size, I decided to sell it. The process took about six months, and by September 2019, it was done.
Why Would You Consider Selling Your Amazon Business?
Selling a profitable business can seem like a bad idea. But more often than not, it's a very smart move. Here are some of the reasons:
What Are The Minimum Requirements To Sell Your Amazon Business?
Brokers have very specific criteria your business has to comply with before they even consider listing it on their platform. Here are some guidelines:
Some brokers will not even consider your business unless:
It's never too early to talk to a broker. But be aware that you have to 'tick their boxes' - see above - before they will be willing to list your business on their platform.
Aggregators - The 'New Kids On The Block'
Aggregators have large funds and are aggressively consolidating brands under one umbrella, which means that they keep buying Amazon businesses and optimize them in every possible way.
Instead of having only one or a few people behind an Amazon business, they have entire teams of professionals to improve every aspect of it like PPC, listings, rankings, storage fees, shipping costs ... Thus, they buy, make improvements and boost the business to increase profitability.
Due to this movement of many aggregators arising, Amazon businesses are in high demand. As a consequence, you don't rely on brokers anymore to sell your business. You can contact aggregators who might be interested to take over your business without asking for broker fees.
These are three of the big players:
What are buyers looking for in a business opportunity?
So, looking from the buyers' perspective, you have to consider what they would search for in a business, that is, what would make your Amazon business attractive to them.
There are three factors that buyers will look for in a business opportunity, they are:
1. High profit
Buyers are looking for businesses that have a high profit, this is a fact. Therefore, the most important metric of your business is your monthly net profit, which will define your initial listing price.
This equation is formed by:
Initial listing price = 12-month average monthly profit x Multiple
The multiple is a multiplier the broker will assign to your business depending on their discretionary valuation.
The multiple depends on a few factors, such as your profit progression. Brokers want to see your growth ideally over the last three years, without monthly losses or profit curves declining. For example, if you have a sum of $120k profit over the last 12 months, and the multiple is 40, then your initial listing price would be: 120/12 x 40 = $400,000.
Another important factor to have high profit is to do some things to reduce your costs, like:
2. Low risk
The second factor that matters to buyers who are evaluating a business opportunity is the level of risk the business presents.
They want to know that they will have a low risk by buying your Amazon business, that’s why they don't want to invest in businesses that depend on only one sales channel, have only one product, or have a low entry barrier for competitors.
Thereby, some things you can do to lower these risks are:
3. Low Maintenance
The third factor that matters the most for buyers is to have low maintenance in the business.
They want the business ready to be taken over and run. If you do all the work and daily operations, it will be very hard for the new owner to replace you. Especially when the new owner has no plans to work in the business but rather wants it as an asset that runs on its own.
So, you can prepare yourself for this by doing some of the things below:
Thus, the buyer will know that he can take over the business and run it without you, without having many problems to deal with.
Selling Your Amazon Business - The Process
Now that you know everything you need to make your Amazon business attractive to potential buyers, it’s time to look at the steps you need to take to sell your Amazon business effectively.
1. Find a broker
Unless you deal with an aggregator - his is the first step.
To find a broker who sells Amazon businesses you just need to google “amazon fba business broker”. Some options will appear, but the most popular ones are:
Reach out to them, have a chat, get an offer and move forward with the one that suits you best.
2. Get listed on the marketplace
You have found a broker who agrees to work with you (and vice versa). Now they will ask you to submit your financial statement and fill in a questionnaire about your business so they can set up your listing.
You will have to work exclusively with this broker and can not sell with anyone else for the time of the agreement.
3. Get on group calls with potential buyers
This is an important step. These calls include the potential buyer and the broker, and take around 30-60 minutes. Be prepared to answer all kinds of questions.
In these calls, it’s common to find questions like "Why are you selling your business?" because they want to understand in detail why you’re making this decision. Be prepared to answer these questions.
4. Signing the LOI (letter of intent)
This is a big step. You’re entering the documentation phase, and you have an 80% probability that you found a buyer. After signing the LOI, you have agreed on the price, and the listing is now closed for other buyers.
5. Give access to Seller Central
In this step, the potential buyer gets limited access to your seller account, so he can verify if the business is what you said it was. And proceed to the next step, if everything is ok.
6. Negotiate and sign the PA (Purchase Agreement)
If the buyer wants to move forward after checking your account, it's time to set up the PA. This is a very detailed document covering everything that is included in the deal, like:
7. Buyer sends money to Escrow
In this step, the buyer sends the money to an Escrow account, which is a third party that holds the money until all questions are answered and the deal is closed. They release the funds to you when both parties agree and the process is complete.
8. Handover of the business, due diligence time
In this stage, the business is now practically owned by the buyer.
He gets unlimited access to your account and can now check all assets.
Make sure to check on the due diligence time and negotiate it down as much as possible. Otherwise, you might get stuck in this for months, waiting for the buyer to release the funds.
9. The buyer releases the funds in Escrow
The final step. When the buyer checks everything and sees it’s all ok, he will release the funds and you receive it. Time to celebrate!
Now you have all the information you need to prepare for selling your Amazon business. Let us know if you need help in the process!