You are using an outdated browser. Please upgrade your browser to improve your experience and security.

[Case Study] How We Sold a $1,942,500 Amazon FBA business in 55 days

Branden Schmidt Updated on March 16, 2020

[Case Study] How We Sold a $1,942,500 Amazon FBA business in 55 days

How does a $1.9 million dollar offer for your Amazon FBA business sound?

Now we know what you may be thinking: there’s no possible way you could ever make that kind of money from selling products with Amazon FBA, especially after only running your business for three years.

Well, that is exactly what happened for the seller of this Amazon FBA / eCommerce business in the sports niche.

Here’s the interesting part: all of their products were only being sold in the European, Australian, and Middle Eastern marketplaces.

That’s right, not only was the seller able to grow this asset to generate an average monthly net profit of $62,839, but they did so without ever selling in the US marketplace.

If you are new to the Amazon FBA and eCommerce space or a seasoned business owner when it comes to selling products, you may have already been exposed to others who praise the US market as a gold mine of opportunity within this business model. However, what many online FBA and eCommerce gurus often fail to discuss in their courses and infoproducts are the endless possibilities within other marketplaces around the world, offering less competition compared to those you’d be up against in the US market.

This seller, having built this business in 2016, was able to capitalize on a 7-figure offer for this asset once the deal was completed. That’s a huge deal considering the seller had only owned the asset for three years and that all of his products accounted for 35 SKUs, making the management of the business simple enough for one person to handle.

So how did this seller gain a 7-figure profit just 55 days after listing their business for sale?

Let’s dive into this fascinating Amazon FBA case study to find out more…

Preparing the Listing for our Marketplace

The business itself was not a typical Amazon FBA / eCommerce business that you will often see within our marketplace when performing your due diligence.

Rather, something that made this asset stand out from the pack was the fact they were also a thought leader from content found on their website as well. Providing a blog and useful content related to health & fitness, along with tips and guides for using products the business sells gave their traffic a reason to return to the site for more than just a simple product purchase.

This differs from a majority of other businesses within the same model, as they were able to retarget their traffic with promotions and up-sells while the reader was digging into their blog content.

Having a site with blog content and a newsletter opt-in form is a great opportunity compared to having an Amazon FBA storefront alone, since gaining your customer email information is against Amazon’s terms of service (TOS). Coupled with the fact that you lose your traffic to Amazon’s platform once it’s redirected to your seller central storefront, implementing the above features gives you the opportunity to promote future products and promotions with less effort.

The majority of the revenue generated for this business came from their product sales on FBA after their traffic was redirected from the site to make a purchase. At the same time, they implemented a Shopify storefront on the branded domain site that was generating an average of $4K per month in net profits, giving the business every opportunity to gain a product sale.

Another interesting fact about this business is that the seller didn’t have any employees.

A majority of their workload consisted of product sourcing and development, managing the off-Amazon marketing campaigns, inventory management, building the listings and managing the copy, overseeing the operations of outsourced freelancers used to produce new content for the blog, handle customer service, and manage the social media accounts.

The seller utilized these freelancers to produce content that consisted of publishing one or two new articles for the blog per month, all related to health & fitness trends within the niche. With the help of these freelance workers, the seller was able to keep their hours to about 15 per week in terms of maintaining the business.

Quite impressive when you consider the net profits this asset was generating while a majority of the work was being performed by the seller and a few freelance VAs.

The freelancers also managed the growth of the social media account assets (which included a Facebook account with around 3K followers, an Instagram account with 5K followers, just over one thousand Twitter followers, and a YouTube channel) contributed to a good portion of site traffic numbers. The business had gained its very own social circle “group” within these platforms, which added even more to the customer brand loyalty assets.

Inventory was held at Amazon’s warehouses, a 3PL service provider, and a small amount with the supplier.

This is important to note when performing due diligence on any Amazon or eCommerce business model, as diversifying risks (such as inventory loss or issues that inevitably arise within the logistics of these types of businesses) spreads the risk across multiple fulfillment centers.

When you diversify your logistics provider with services, such as a 3PL, you also gain the opportunity to cut storage costs that are much higher than storing all of your inventory with Amazon which you can read more about here.

In addition to owning multiple registered trademarks in different countries, and being a part of Amazon’s brand registry 2.0, the seller saw an opportunity to gain even more search engine optimization (SEO) juice by purchasing 10 additional domains that were included with the sale. These additional domains were all exact match domains (EMDs) for the brand, which included variations to the primary UK domain URL for various EU marketplaces the business was selling in.

As these additional domains were used as 301 redirects, nothing would harm the SEO for the primary domain and the redirects would actually help gain ranking in these marketplaces within their individual search engine result pages (SERPs).

Another interesting aspect the seller augmented their business with was their passion for helping endangered animals. With every purchase a customer made, a small percentage of each sales profit would go towards charity to help a specific endangered species. That was not only great for those wanting to help our planet, but also gave the brand a stronger reputation.

Ultimately, the owner decided that now was the best time to sell this asset, as they had a newborn child and wanted to use some of the capital for an addition on their home. While the seller was extremely passionate about the business they’d built from the ground up, they knew by handing over the business to a buyer that could focus 100% of their time on growing it to its full potential would give this business attention it deserved.

However, one issue that surfaced while vetting this business was tracking their profit and loss (P&L) statement properly.

Since the site earns its revenue in multiple different currencies around the EU, AU, and ME marketplaces, our vetting team had to help the seller compile everything into a single P&L statement that would make sense to a prospective buyer.

This is actually quite a common thing we see with business owners selling in multiple markets: messy P&Ls. Most online entrepreneurs are not bookkeepers, acting as one-person teams, which was the case for this business. That highlights one of the big advantages of going with a broker: We can spot red flags like this and work with you to fix these issues before you reach the end of the sales cycle.

One of the worst things for a seller to experience is a buyer who performs their due diligence and negotiations, only to back out due to some small error on the P&L before the deal is complete.

After sorting out these issues, the business was listed on our marketplace with a listing price of $2,384,487 and a listing multiple of 38x. With plenty of opportunity to expand into other markets, a well-established social brand following, and multiple trademarks and design registrations, consideration for this asset began coming in the form of deposits right away.

The Listing Goes Live on Our Marketplace and Buyers are Interested

When you’ve got an asset this size with a large social media following and hundreds of five-star ratings that can be managed by the owner and a few freelance VAs, you’re bound to create a sense of excitement for potential investors. Within the first two days of going live on our marketplace, 15 deposits were received from potential buyers wanting to start their due diligence on this amazing opportunity.

During this time, one particular buyer performed their due diligence and saw a great opportunity to not only grow within the asset’s existing product line, but also focus efforts on growing the product line and content within a specific brand sub-niche as well.

One week after going live on our marketplace, the seller was offered a deal that included a few caveats, as most assets of this size usually entail such as the inclusion of inventory or negotiating an earn-out period.

The 7-figure Offer that Seals the Deal

As buyers began their due diligence on this asset, one thing that came up during these first few days of going live on our marketplace from the seller’s side was his concern with not receiving any full listing price offers despite the number of deposits that had come in. With lots of nibbles and no actual bites, It’s understandable that the seller grew skittish.

The opportunity to perform a fast sale was something the seller started to consider as deposits starting rolling in without many upfront full list price offers being made. This is something that sometimes comes up with businesses of this size being sold on our marketplace, especially when family responsibilities that demand a seller’s primary focus come into play.

The buyer who ultimately acquired this asset did so by raising a fund to purchase the asset with the caveats mentioned above. While receiving a full cash offer upfront is the goal for almost all sellers on our marketplace, a business this size will often have an offer on the table that entails an earn-out period of some sort.

This is where having a team of dedicated business analysts, such as the ones we offer, really starts to pay off, ensuring both the buyer and seller are happy with a deal’s terms.

After some back and forth negotiations were made, a final deal was constructed that included a sales multiple of 31x and a final sales price of $1,942,500.

An upfront cash payment of $1,048,800 was made to the seller after $120K worth of inventory was transferred to the buyer, and an earn-out of $802,500 was to be paid over the course of the first year after completing the migration of the asset to the buyer.

All things considered, the seller received $1,851,300 after factoring out our commission, during which their business had only been live on our marketplace for 55 days. That is slightly below the average time a business is on our marketplace which you can see from our 2020 state of the industry report.

Not a bad payout considering the seller had built this asset from the ground up in just three years.

When the seller considered how quickly the business was sold, given the need to focus more of their time on the new addition to their family, they were more than happy with the deal overall.

This is a prime example of why using our service to broker the buying and selling of such a large business is a huge benefit for both parties. With the complex deal structure these particular acquisitions entail, a broker eases the anxiety of closing the deal in a timely manner.

The Migration Process for a 7-Figure Business

Migrating a 7-figure Amazon FBA / eCommerce business can be quite a challenge when you consider the rules Amazon has in place for this type of migration process.

However, considering we have performed such operations countless times before, transferring business assets to the new owner was made with ease thanks to our dedicated migration team.

All of the assets included in the sale (such as electronic products, logo files, brand registry accounts, the Shopify web store along with the 10 additional domains, design registrations, account listings, published content, and all other customer service and automation accounts) were transferred to the new owner without any issues.

This is something that we receive constant praise from our clients for: we are the only broker within the current online space that has a dedicated team just for the migration process.

As you can see from this case study, Amazon FBA and eCommerce businesses can be extremely profitable. This business model can also offer a huge exit for those looking to cash out in a timely fashion as the platform itself is something other business owners, potential investors, and funds are already familiar with running.

Are you ready for a profitable exit? Click here to schedule an exit call with one of our business analysts today.

We are the largest curated marketplace when it comes to buying and selling online businesses, and have the most deal flow on the market today. But don’t just take our word for it, Check out our latest scoreboard.

Looking to buy an Amazon FBA / eCommerce business similar to this one?

We believe in matching buyers with the right business at the right time, so if you’re interested in starting the process of acquiring a profitable business, schedule a criteria call with one of our advisors to get the ball rolling.

It’s a huge reason that we have so many repeat buyers: We will actively work with you to help you find the asset criteria that work best for you.

Ready to take the next step? Already have a listing you like? Call us today to find out how you can unlock that listing to get your due diligence process started.

Make a living buying and selling websites

Sign up now to get our best tips, strategies, and case studies

Leave a Reply

Your email address will not be published. Required fields are marked *

Have a Business to Sell?

Click here to get the process started today.