How This FBA Seller Built and Sold a Million Dollar Business in Less Than a Year
Updated on September 24, 2021
There is a popular saying among entrepreneurs that goes something like this, “First learn, then you can remove the L.”
One of our recent sellers demonstrated the meaning of this quote perfectly. The seller had years of industry experience, but they knew they’d have to brush up on their FBA knowledge in order to beat competitors at their own game.
This strategic approach and months of focused research paid off when the seller achieved a 36x multiple exit with a sale price of $1,153,895 on our marketplace.
Looking back on their success, the seller commented, “Bootstrapping a brand from $0 to over $1milion in 12 months is a difficult task, but a very rewarding one!”
The good news is, you can achieve this level of success too!
Grab a notepad and learn how this seller built up a successful business and sold it to become a millionaire.
Slow and Steady Wins the Race
Do you remember that old fable about the tortoise and the hare? The lessons learned from that story can be applied to building online businesses too.
Like the hare, you could dive into the business at full speed and tackle obstacles as and when you get to them. With this approach, you’ll certainly reach those initial milestones faster than your competitors, but you’re also sure to encounter many unexpected setbacks along the way.
Or, like our seller, you could take it slow at first, planning your route and anticipating problems before they happen. This will mean you’re slower to leave the start line, but the road to victory is likely to be paved with far fewer obstacles.
Even though the seller had 10 years of eCommerce experience under their belt, they knew that in the fast-paced world of online business, there is always something new to learn.
Determined to start with a strong foundation, the seller did three months of extensive research before creating their Amazon FBA business, starting with identifying the niche.
Identifying a Niche
First, the seller analyzed market data to find a niche that had a strong and growing demand but relatively low levels of competition. This can be like trying to find a needle in a haystack, but fortunately, this experienced seller knew where to look.
They kept a close eye on keyword demand trends, search volume estimates, and the number of reviews on competitors’ products. This allowed the seller to evaluate the maturity of existing direct competitors.
A large, growing search volume across dozens of keywords indicated that the beauty niche was gaining interest and popularity.
On top of this, market prices vs manufacturing costs allowed for large profit margins. This was important, as the seller was bootstrapping the business venture and need to keep their start-up costs low.
Having settled on a niche, the seller turned their attention to gaining an edge over competitors.
Creating a Premium Brand
The seller noticed that branding quality is often overlooked. Platforms like Amazon are overrun with homogenized, generic brands, especially among newer sellers.
The seller made a concerted effort to create a recognizable, trusted brand, with a heartfelt customer focus. They knew this would make their products stand out from the crowd and give them that all-important edge over their competitors.
The seller spent a long time testing different suppliers and making absolutely sure that they had the best quality item and packaged it in attractive, unique packaging.
After having identified these key paths to success, the seller was ready to launch their business.
Using This Research to Create a Successful Business
The seller put up their “open for business” sign in January 2020 and soon enjoyed a stream of happy customers. The business achieved an impressive growth trajectory, gaining over 2,500 product reviews in only 10 months.
The seller’s attention to detail regarding quality and branding paid off as the most popular SKU became a best seller in its category and was awarded numerous Amazon Choice Badges.
Wide profit margins allowed the seller to ramp up their advertising efforts without losing money. They achieved high levels of brand engagement after running campaigns and partnerships with influencers on social media.
At just 10 months old, the business was worth over $1,000,000! By this time, the business was generating an average net profit of $31,205 dollars per month and had become an attractive asset in the seller’s portfolio.
Satisfied with the success they had achieved, the seller was ready to move on from the business. The capital gained from the exit would allow the seller to put their newfound knowledge to the test in a different market.
The seller submitted their business for sale on the Empire Flippers website and scheduled a call with our team of expert seller advisers.
Ensuring the Best Chance of Success on Our Marketplace
In order for a seller to successfully submit their business for sale, we need to see a 12-month earning history. This allows us to properly evaluate the profits and sustainability of each business, ensuring that only the highest-quality businesses are listed on our site.
When the seller first approached us to sell their business, we knew it would do well on our marketplace. It was bringing in high monthly revenue, the products had great reviews on Amazon, and the profit margins were high.
The only catch was that the business was just 10 months old.
The seller understood that a quality marketplace attracts quality buyers. They agreed to delay the sale for 2 months, allowing the business to meet the 12-month minimum submission requirement, so we could complete our vetting process before listing the business for sale.
Determining the Value of the Business
When the seller submitted their business to Empire Flippers, they were hoping for a multiple of at least 32x, which would produce a sale price of around $700,000.
We take into account a number of factors when calculating the value of a business, but the standard formula looks something like this:
When deciding on a multiple, we look at factors like the earnings history, the business model, the number of products it sells, and the business’s age. Here at Empire Flippers, we use a monthly multiple that typically falls between 30x and 50x, although the recent increased performance of FBA businesses has given these multiples a sizeable boost.
After valuing the business, we were happy to exceed the seller’s expectations by suggesting a 36x pricing multiple and a listing price of $1,123,378.00.
As this was such a young business, we used a six-month pricing period, instead of the standard 12 months, to exclude the early months when the business was still gaining traction. This presented a more accurate reflection of the current state of the business.
The Business goes live on Our Marketplace
The business gained immediate interest from buyers when it went live. In fact, 34 interested buyers unlocked the listing in the first 24 hours!
When businesses are listed on our marketplace, we redact sensitive information that can identify the business in the public eye. This protects both the buyer and the seller against copycats who might replicate the business, thus becoming competitors.
Unlocking the business allows you to view this hidden information.
Among the interested buyers who unlocked the business were several aggregators. Our diverse marketplace attracts a variety of large brand aggregators and high-net-worth individuals. These entities have the spending power to purchase multiple businesses in a short period of time.
When an attractive business is listed on the marketplace, various aggregators and high-net-worth individuals often place competitive offers.
This level of competition can help to drive up the sale price of the business. It can also help businesses to sell faster as keen buyers keep an eagle eye on our marketplace, ready to jump in and make an offer before the business is snapped up by a competitor.
The Seller’s Hard Work Pays Off
After conversations with five interested buyers, the seller found the buyer that was right for their business and successfully negotiated the sale.
The business sold in just 11 days, nine days less than the average seven-figure FBA business takes to get an offer that is accepted by the seller. As an added bonus, competition between interested buyers drove the sales price up from $1,123,378.00 to $1,153,895, gaining the seller an extra $30,517.
In a study we conducted on the sales of FBA businesses, we found that 77% of FBA businesses in the seven-figure plus price range sell with an earnout, and this seller’s business was no exception.
A two-year performance earnout was negotiated, with a stability payment for year one and performance payments for years one and two.
The seller may have spent three long months conducting research before starting this business, but they’ll continue to reap the benefits of their patience and diligence for many years to come!
Achieving the Perfect Exit
In the fluid world of online business, there are many ways to outsmart your competitors, but few things work better than good old-fashioned research.
Competitor research will reveal how you can create an easily distinguishable brand in a niche that will grow alongside your business.
Here at Empire Flippers, we’re passionate about empowering business owners by providing them with the knowledge they need to succeed.
Knowledge is power, so if you’re preparing to sell your FBA business be sure to check out The Definitive Field Guide to Selling Your FBA Business. We’ve put together this free ebook to teach entrepreneurs like you how to sell your FBA business to the right person, for the right price, at the right time.
If statistics and trends are what make you tick, download our comprehensive State of the Industry Report. We analyzed 844 businesses we sold over the last three years to provide you with data-backed insights and predictions about the online buying & selling industry.
Lastly, if you want to see if the research you’ve implemented in your business has paid off, use our free valuation tool to see how much your business is worth.
