The Amazon sales platform has become increasingly popular over the last decade and therefore increasingly competitive. It is becoming harder and harder to have success as a new seller on Amazon. Therefore, established Amazon businesses with increasing revenues and excellent product reviews are in increased demand from buyers.
The buyers of these businesses range from individuals and small companies that are already selling on Amazon, career changers, investment companies and more. The Graziadio Business School at Pepperdine University sponsors a capital markets project which shows the number of Amazon businesses that have been sold has more than doubled in the past three years.
While there may never be as many Amazon businesses in the marketplace as there are restaurants, they will certainly have a better chance of being run successfully by their new owners.
What is Your Amazon FBA Business Worth
The value of your business is primarily determined by how profitable it is. Generally speaking, this means that your revenue – all expenses + owner salary = Profit. The majority of Amazon businesses sell for between 2 – 3 times profit. However, larger, well organized businesses routinely sell for more money.
Other factors that affect valuation are:
- How passive your business is (the less hours it takes to run the business effectively, the better)
- How organized your books and records are (this is where having the help of an accountant and seller software like SellerBoard really comes in handy)
- How repeatable the businesses success is. If you have run the business for 5 years and it has grown every year, that is much more desirable than a business decreasing in revenue or a brand new business.
To get an accurate picture of what your business is worth, have a look at the free Amazon Business Valuation Calculator.
How to Make Your Amazon Business More Valuable
- Suppliers – Having great relationships with suppliers than can continually produce high quality products on a reasonable lead time is paramount in having a successful, sellable business. Speaking of high quality products…
- Reviews – Your product reviews and price points will be one of the deciding factors for many buyers on whether to make you an offer or not. The Amazon review system is getting better and better at weeding out trash. As it improves, business buyers rely on the product reviews as a barometer of business success and longevity more and more.
- Team – Fortunately for Amazon business sellers and buyers, there just isn’t that much to do in order to have a successful business. However, if you do have a team, they should either be able to transfer over to the new owner, OR, what they do should be documented so that a new owner can take over where they leave off.
- Amazon SEO – Just like reviews, It is becoming more and more important to have great product rankings. If you continually get organic sales, win buy boxes and “best seller” badges, your business is significantly more sellable than irrelevant products that are stuck paying through the roof PPC fees to churn out 10% net margin.
- Brand Recognition – The highest honor any business can receive is to be recognized as a great brand that people are searching for by name. If you have a history of great product reviews and marketing on and off Amazon, this is seen as the holy grail by cashed up buyers.
How Do I Go About Selling My Amazon Business
Once you have decided that it is time to sell, your next step should be to contact a business broker that has proven success with Amazon businesses, we recommend Upward Exits.
Unlike with real estate, the best offers aren’t typically received in a week’s time. It takes a couple weeks for your broker to consolidate all your business materials and create a sales packet. Once your business is ready to be put on the market, experienced brokers like Upward Exits will use a three-tiered approach to presenting the business to buyers.
First, they will present a teaser to their buyer list and contact whom they know purchase Amazon businesses. Second, they’ll promote the business on their website and third party listing sites. Third, they’ll advertise the business to other parties they may think are interested.
It may take several months, but you can be sure that no stone was left unturned during the process. Once you receive a suitable offer and gone through negotiation, you’ll be ready to transfer the business to their new owner, train them on how to run the business and receive your payoff.
Most brokers utilize some type of escrow service to transfer the money from the buyer to you and take their cut. You may also want to have your attorney look over the business purchase documents to make sure the language is fair. In the US or Europe, you can expect to spend $2K – $5K for this type of service.
For more information on valuation, process and how to get started in selling your business, have a look at the Guide to Selling Your Amazon Business on their blog.