The deal is done.
You’ve either just sold a business, or you just bought a business. Now, you’ve reached the most critical part of the entire transaction – migrating the business over to the new owner or taking the reigns yourself.
This process can take between three to eight weeks, with an Amazon FBA business tending to be on the longer side.
No other broker has an entire department dedicated to this task. But we realize just how critical it is that you have someone there to help you through this process. That is why we have industry professionals to make sure your migration is successful.
Let’s breakdown the process and see what you can expect once you enter this last leg of your transaction.
What is a Migration?
Migration happens after the business is bought.
We have received the funds for the business, so we take the business listing off our marketplace and notify our migrations advisers to start their work.
Migration itself is simply handing the asset over to the new owner.
How this is done changes based on the business model and the complexity of the business.
The actual migration process can take between three to eight weeks. If you’re buying or selling an Amazon FBA business, you’re likely going to be on the longer end of that process. Amazon is often disorganized and slow with their communication, sometimes extending a migration considerably despite everything else going perfectly
Keep in mind that during the migration period, all the funds the business is earning goes to the buyer. Please plan for this.
How is It Done?
The first step is the seller giving your login info for all relevant parts of the asset to our migration team. This information is kept confidential and secure and is only used to help us make the process go smooth as we hand over the asset to the buyer.
You might be wondering at this point, if you’re handing over your account logins then how are you going to get paid out next week for last month’s worth of commissions? This is something that crops up, especially with affiliate sites where the account pays out on a net-30.
We help to reconcile the revenue here for both parties, so you don’t have to worry about any loss revenue during this part of the transaction.
Once the login info is attained, we begin the process of switching the asset over. The process of monetization is slightly, or sometimes significantly, different in each case. We have standardized the process, and our team has dealt with every issue you could imagine. That means you’re in safe hands when it comes to handing the asset over, or when it comes to troubleshooting even the more esoteric challenges that can crop up.
And, of course, the entire time you will have our migration advisors communicating with you about how things are going or if they need anything from you to help them complete the next step.
The Revenue Verification Period
At Empire Flippers we seek to protect both sellers and buyers. We want everyone to win on every deal. That means when the business has been successfully migrated to the new owner, that owner will have a 14-day period to verify gross revenue.
The formula is:
(Listing Gross Monthly Revenue) / 30 * 14 – 50%
Here is the breakdown after applying the above formula:
50% Threshold: $3,807.76
Daily Average: $329.85
Monthly Average: $9,895.77
Listing Monthly Average: $16,319
Percentage Of Listing: 60.63%
So what happens if it DOES fall below the 50% threshold?
The buyer can either renegotiate the final sales price of the business, something our migration advisors and business analysts can help with, or the buyer can reverse the deal because it is not producing the revenue stated.
If this happens, our migration advisors will go through their complete checklists again to make sure everything was done properly.
It is important to remember that everything must be set up exactly as how the business being sold was set up.
That means if the buyer wants to change to a different hosting service than what the seller had, they must wait until after the 14-day verification period.
To replicate the original set up of the business being sold, we will choose the same services the seller was using. If the buyer wants to change those services, they’re free to do so after the 14-day period.
It’s worth noting that the buyer can end the 14-day period at any time. Many buyers are happy to end the period sooner if they’re experienced and the numbers they’re seeing look good; signing off early means that they can start doing other tasks associated with their acquisition that they’re not allowed to do during the 14-day period, such as conversion rate optimization or new SEO initiatives.
Once the Revenue Verification period is completed successfully, we release the seller’s money minus our commission through a bank wire. This is the money the buyer wired to Empire Flippers either through bankwire or through cryptocurrency.
After the seller is paid out, the deal is done and the migration is complete.
What About Earn Outs?
In the case of an earn out where a buyer pays a large sum upfront and then pays the remainder over a period of time, we will continue to manage that earn out on behalf of the seller.
The buyer will make their earn out payments to us, and we will send the money to the seller minus our commission fee.
By doing it this way, we put ourselves in the same position as the seller to help make sure they get the full sales price the buyer offered.
In earn out situations, we will often hold onto certain aspects of the business, such as the domain, until the earn out is fully paid, giving us some leverage in making sure the buyer pays the remaining amount.
If the buyer ends up not making their promised earn out payments, our team will seek to help return the business back to the seller or use our leverage to get the buyer to pay the remaining amount.
A failed earn out is something that can happen, but we’ve sold hundreds of businesses and we’ve seen it happen only in rare circumstances.
Since we take our payment through the earn out just like the seller, we would never recommend an earn out if we believed the buyer might fail to deliver.
If you’d like to learn more about earn outs and deal structuring in general, read this blog post.