Editor’s note: This is a guest post by Thomas Smale, Co-Founder of FE International
The market for Fulfilment by Amazon (FBA) businesses is growing steadily and it’s important to make your business stand out from the crowd. In this guide, we will run through several key considerations, as well as how to get your FBA business to market.
How Will My FBA Business Be Valued
An FBA business tends to be valued at around 2x – 3x its annual profit. Key factors that determine if it is at the higher or lower end of this range are the age of the business, the amount of owner involvement, the market trend, and the concentration of revenue from a particular product or supplier.
Other factors include:
- The Best Sellers Rank (BSR)
- The inclusion of a dedicated brand website
- Amazon associates status
- Profitable advertising campaigns
- Level of competition
How can you increase the value of your business?
It is beneficial to try and tie in suppliers with contracts so the business is as stable as possible. There should also be Standard Operating Procedures drawn up for each supplier so any new owner understands how to coordinate with each supplier.
Ensure that all relevant products are registered on Amazon’s Brand Registry. This can prevent other sellers from selling products on your listing.
Having good terms of credit with your suppliers can be attractive to buyers as it will allow a new owner to fill out their inventory when financial reserves are lacking.
Frustration Free Packaging
This is only going to get more popular over time. It requires some effort to get into the program but it can be a nice selling point.
Having products with good reviews will only help your prospects of selling your business. Social proof is an important aspect of the buyer conversion process, so it can be worth offering an incentive for first-time purchasers to leave reviews.
Check your FBA seller account health status. You should aim to be at around these levels:
- Order defect rate: < 1%
- Pre-fulfillment cancel rate: < 2.5%
- Late shipment rate < 4%
How can you increase your business’ “salability”?
Your business could be valuable, but not yet primed to sell. These are the main things to consider when preparing your business for market:
Have a clear financial history prepared, as well as relevant analytics data. Buyers shouldn’t have to piece together what has happened over the months and years your business has operated. Analytics data will often just need to be made available with appropriate logins etc.
It is worth documenting your daily, weekly, and monthly tasks so that a buyer can take over as easily as possible. This will reduce the amount of work you might have to do during the post-sale transition period.
Most new business owners won’t be looking for a full-time job after the sale. The number of tasks that can be outsourced at a reasonable price, reducing the number of hours that a new owner will need to work, can make the business more enticing.
Immediate Future Upside
Having some new products lined up and well prepared, but not out for sale, can make the business seem primed for profits. The extra value buyers might put on a business that looks set up for immediate profits will outweigh the loss of some short-term sales.
How To Bring Your Amazon FBA Business To Market
You have four main options:
Marketplace. You can sell your site on a marketplace like BizBuySell. This takes the form of a low-cost listing which can often generate a quick sale. You will need to do your own admin and screening of buyers.
Auction. Listing on an auction site is similar to the Marketplace option, but your listing will only be active for a set amount of time. This creates more competition between buyers, which can put you at an advantage. Most businesses tend to be sold for $5000 or less.
Broker. This is the highest-reward option for businesses worth $20,000 or more. A good brokerage or advisory firm can help to value your business and get it in front of the right kinds of buyers. They will also do most of the admin.
Direct. You could always approach potential buyers and organize the sale yourself. You will need to be confident in your ability to navigate the whole sales process.
Hopefully, this article has given you an overview of some of the preparation needed before you make a sale, and some of the ways you might be able to find a suitable buyer. If you are interested in finding out what your Amazon FBA Business might be worth, please try out FE International’s free valuation.
Thomas Smale co-founded FE International in 2010, growing the business with zero funds from scratch to a seven-figure-a-year business. Specializing in advising and brokering the sale of established websites and online businesses, FE International has completed over 500 transactions. Smale has been interviewed on podcasts, blogs and also spoken at a number of industry events on online businesses, exit strategy and selling businesses.