Many Amazon salespeople have the energy and creativity to develop a new product and then launch it and bring it to market.
But as their business grows, they often find that they need a completely different skill set to take sales and profits to the next level.
Replenishment and logistics cause headaches, advertising costs don’t cut it, and trying to outsource creates more problems than it solves. How to sell my Amazon business, we’ll discuss in this article.
Because Amazon is very risky, and because earnings before interest, taxes, depreciation and amortization are often very low, we often get asked questions like “how much is my Amazon business worth?”.
If you’ve been running an Amazon FBA business but are thinking about how to exit it, you’ll be happy to know that not only is it perfectly legal to sell Amazon business, said WebSite Closers, but if you’re having a hard time growing and scaling your business, and realizing that it’s promising enough to be worth something to someone, it may well be the best thing you’ve ever done!
There is no optimal time other than when you are ready to sell, as businesses are bought and sold all year round. Timing the market is tricky, so we recommend that if you’re a first-time seller, you make your decision based on when it’s right for you.
If you’ve never sold a business before, as you might expect, this is quite a lot.
To attract a serious buyer, you’ll need an attractive offer. Of course, what is “attractive” to one may not be “attractive” to another.
But there are some basic metrics that most anyone looking to buy a business on Amazon will look for.
Basic requirements for the business for sale:
- It’s doing well. This either means stable or growing.
- It is at least a year old, ideally three or more.
- It has a unique offering with limited competition.
- It has a good base of existing customers and decent reviews.
- It is in consistent compliance with Amazon’s rules.
- The books and accounting are in good order.
- Its processes are thoroughly documented.
- Relationships with suppliers are productive and positive.
The calculation of the value of your Amazon FBA business depends on several variables, including net profit and the average multiplier applied to net profit.
The buyer will use a multiplier of your annual net profit (also called EBITDA). This multiplier is usually based on the buyer’s risk tolerance and the perceived value of your Amazon FBA business.
The multiplier depends on various factors, but in general, it is usually between 24 and 48 times your average net profit for the last twelve months.
That is, two to four times your annual net profit. So, if you make an annual net profit of, for example, USD 400,000, then your valuation is likely to be something between USD 800,000 and USD 1,600,000.
Aside from the numbers above, here are some other factors you need to consider to determine how much your Amazon FBA business is worth:
1. Sales history
An Amazon FBA business with many years of practice and a stable sales history is likely to have a higher value compared to a business that has been in operation for one or two years.
Buyers prefer companies that have been in business for many years because they can assess their track record and growth trends and future project revenues.
New business is quite unpredictable because there are no indicators to help you determine future profits.
2. Seasonality of your products
Your niche is another key factor that will determine the value of your Amazon FBA business. Generally, some niches are more profitable than others.
For example, off-season and fast-moving items are more profitable because they sell quickly, unlike seasonal items like snow gear, swimwear, and beach tents. Competition can be somewhat fierce in lucrative niches, so selling products with a proprietary competitive advantage is definitely a big plus.
3. Mass products vs. individual products
Having your own individual branded products gives you a competitive advantage over imitators who supply goods from other markets.
Therefore, by offering your own manufactured and branded products, your brand becomes more valuable in the eyes of the buyer.
As we mentioned above, you have to think about the potential of your business to be acquired from the first day you launch it on Amazon.
This means you need to come up with a business idea that is valuable or scarce in the market and likely to be in demand in the future.
One way to ensure that all of your financial records are prepared for a possible Amazon business sale is to prepare them on an accrual basis.
Take careful care of your company’s business analytics and get well-organized and accessible data to make any decisions at the appropriate time.
It will be important for you to demonstrate that you can provide favorable transfer terms to your suppliers while maintaining good lead times. It is recommended that you take a closer look at these aspects of your business.
You can sell your business to Amazon at a higher price if the business is well-documented. Therefore, make sure you have documented all your working procedures.
Amazon seller accounts that have more positive reviews are in high demand because potential buyers look for those that are growing in their rankings. So have all the necessary information at your fingertips.
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