Are you one of the thousands of entrepreneurs to have created a successful Amazon business, such as a FBA or FBM brand?
Plenty of Amazon sellers get to a stage of recurring income and are happy to reap the benefits in continuous, monthly sales. However, there are many advantages to selling a business, including mitigating risk, and leveraging your success to make bigger profits and free up cash flow.
In 2021, Amazon’s marketplace in the US hit six million sellers (according to marketpulse.com). That’s a lot of businesses operating at least partially on the platform.
While Amazon initially sourced all of the products that they sold, over time they have become more of a marketplace. The world’s biggest marketplace, at that.
By 2018, the business had more items sold by third-party sellers than items they carried themselves. Popular schemes such as the “FBA” scheme mean that sellers can even take advantage of the incredible warehousing and fulfilment strategies this global brand has in place.
Plenty of people have proven that you can make a fortune on the platform, whether you sell your brand or not.
The first step is deciding that it is ultimately time to sell up. There are so many reasons why people choose to sell their online businesses. Popular reasons include:
When you are evaluating whether or not to sell the Amazon business, you need to know, at least roughly, how much money you can expect to receive in exchange for your business.
FE International, one of the leading sellers of online businesses, simply and easily explains a way to calculate the value of your FBA or other online business. It uses a metric called SDE, or “seller discretionary cash flow”.
In the words of FE International: “SDE is the profit left to the business owner once all costs of goods sold and critical (i.e., non-discretionary) operating expenses have been deducted from gross revenue.”
You can use other methods to estimate how much your business might raise. Other popular methods include a simpler calculation of a multiple of earnings for each year. Amazon FBA business can be expected to fetch 2.5 to 5 times EBITDA (earnings before interest, taxes, depreciation, and amortization).
Of course, these are some very simplistic methods of valuing the business. The true value is simply “whatever someone will pay for it”.
Besides the profit that is being made, you should evaluate any patents or trademarks held by the business, scope for future growth, seasonality, and more. There is a reason why there are specific companies dedicated to helping people sell their Amazon businesses. It’s a nuanced process.
Another of the big players in the world of selling an online business, Empire Flippers, has created a free tool that anyone can use to value their Amazon business. It’s not perfect, and there are some variables in there that you may not quite be able to pin down to exact numbers, but it gives a strong indication.
Once you’ve actually made the decision to sell your business, the hard work can begin. Finding a buyer is not necessarily a quick and simple task, even if your business is an attractive proposition on paper.
There are some very interesting companies out there who are putting all their eggs in the Amazon basket, so to speak. Thrasio is a company that sets out to acquire brands on the platform. With such a huge track-record of buying other brands it could be a good idea to approach businesses that you know acquire FBA brands. Be cautious with what details you divulge about the brand, as some companies could potentially take this information and use it to fuel a competition brand.
A broker is the most popular method for people who haven’t been approached by a buyer already. In fact, even if you have been approached and you know that you have a buyer, a broker could take a lot of the hassle out of the admin side of things and help with the security of Escrow.
One of the largest brokers out there is Empire Flippers, mentioned by brands including Forbes and HuffPost as being one of the best brokers for buying and selling online businesses.
The benefits of using a broker if you don’t already have a buyer lined up are clear. Every Monday, Empire Flippers send out an email to their large list of potentially-interested subscribers, explaining what businesses are currently available for sale.
A lot of brokers will list your business for sale free of charge and only require payment if it sells, so it is worth approaching the trusted brands such as FE International and Empire Flippers to discuss your needs.
For the sake of security, you should include third-parties in any sale. You may need a lawyer, and the money should be placed in Escrow to ensure a secure trade of the business and no fraud or other scams are taking place.
Of course, brokers and lawyers all take a cut or a fee, but that could be a small price to pay for the protection they can provide.
Amazon FBA is incredibly popular as a traded business. In America, by 2018, Amazon’s FBA program had become by far the most popular method for sellers to get their products to buyers.
This post has undeniably focused on Amazon sellers, but there are a few different types of Amazon business that people have built, and these are all tradeable. Some of these don’t even hold stock. You may be looking to sell a different form of Amazon business.
As you can see, the opportunities on Amazon span far beyond just selling physical items.
There are dozens of potential reasons for sales, whether you want to work on other parts of your business empire, or you have just decided it is time to cash in and enjoy the profits. Be prepared for a fairly exhaustive process, and to get the help of brokers and professionals as you sell up.
Done right, a business sale can be a shrewd and profitable decision. Done wrong, you might be regretting it for years to come.