How To Maximize Your Valuation by Partnering With a 3PL
April 1, 2022
Why Would You Want To Sell Your Business?
It’s finally here. The exit. A moment that every aspiring entrepreneur dreams of. Selling your business can be a monumental decision that will forever impact your life. But before you get to the point of a sale, you must first maximize the value of your business to ensure that you walk away with the cash that you deserve.
But what will a company be looking for when considering buying your Amazon business? If your product is out of stock — or if you have glaring supply chain issues — no one will grant you the exit you’re looking for. Your supply chain is by far your bottom line’s most important factor. If customers can’t access your product, you’re toast.
A resilient and effective supply chain solution can help boost your valuation — meaning that you get the most out of selling your business. If your business has a streamlined advertising process, and you have worked to optimize your costs, then you will also be incredibly attractive to potential buyers.
So how do you fairly value your business? There are several approaches to valuation. When it comes to getting the best price for your Amazon-focused business, take a look at the EF Valuation Tool.
This article explores several key strategies you can employ to maximize your valuation as you prepare for your big exit.
Review Your Supply Chain:
You should regularly review your supply chain to ensure that it’s operating as efficiently as possible. This involves assessing all aspects of your supply chain, including your suppliers, your distribution channels, and even your customers.
Think of areas where there are inefficiencies. Ask questions like:
- Is my cost as optimal as it can be?
- Am I investing too much time into my supply chain’s day-to-day elements?
- Could software automate or outsource more daily processes?
- How can I improve the time-to-market on my products?
- Am I getting the best price and speed for my domestic and international shipments?
- Should I explore partnering with an Amazon-focused 3PL?
Consider areas where you can add value to your supply chain. This could include finding ways to optimize your warehouse space. Think two steps ahead by forecasting your requirements for space, or offload this responsibility to a 3PL and give yourself more time to focus on other parts of your business.
Another consideration is your ability to sell multi-channel. If your supply chain can accommodate FBM, FBA, eBay, and your own Shopify site, you will have a diversified supply chain that is more resistant to potential supply or demand shocks.
At every stage, consider how various costs impact your profitability. Reduce your supply chain’s redundant elements, and always aim to make your business as lean and efficient as possible. Read more about different strategies for improving your supply chain here.
Reframing Your Supply Chain:
Don’t think of your supply chain as an arbitrary part of your business — instead, think of it as a partnership. Your supply chain reflects your ability to manage your business in an organized, efficient manner. Picking the right suppliers, customers, and fulfillment team can massively impact your business’s overall efficiency and value.
In the realm of e-commerce, your supply chain is one of the most critical aspects of your business, which is why it’s crucial to constantly search for ways to make it both lean and resilient.
Your supply chain should support your core operations and be intertwined with your business team. Always encourage communication and transparency between key stakeholders in your business and within your supply chain. An efficient supply chain leads to more product inside of Amazon, thus leading to more revenue and a higher valuation for your business.
Consider optimizing by selling through multiple warehouses. This will improve your geographic proximity to Amazon Fulfillment Centers, which will then lead to cheaper and faster shipping for your end consumers. All of which will ultimately improve profit and increase your valuation.
3PLs can offer immense logistical value to your business. Some key points to consider are:
- Streamlining your shipping and fulfillment processes
- Handling price marketing, labeling, and kitting
- Expanding your product offerings through bundling
Ideally, you should partner with a single 3PL that can offer you warehousing, fulfillment, value-added services, and transportation. By selecting one company, you can reduce the number of contracts to coordinate, thus reducing the administrative load on you and your team. It will also allow you to centralize your logistics, resulting in increased resiliency, predictability, and reliability.
Lowering Costs and Increasing Your Capability:
Price: the holy grail of e-commerce fulfillment. Many shippers spend hours each day using convoluted rate-shopping platforms in search of the best deal. If your business isn’t a high-volume shipper, consider partnering with a 3PL. Most carriers will negotiate prices based on volume. It can often be cheaper than it would be for individual merchants because of the relationship and volume that 3PLs have in comparison to a run-of-the-mill seller.
An added benefit of partnering with a 3PL is that it allows you to divert employee manpower away from the day-to-day tasks created by logistics management, giving them more time for important tasks like sales and marketing. A 3PL will free you from monotonous logistical tasks and allow you to focus on scaling your business.
As you have probably discovered, having an efficient supply chain is a monumental task that requires immense knowledge and expertise. Even just devoting time to learning about the nuances of supply chain management is a difficult task.
Finally, review your 3PL’s ability to allow you to sell omnichannel. This ability will maximize the value you get from a single partner. The right partner will allow you to simultaneously sell on Amazon, Shopify, Walmart, and eBay. They will also make it possible for you to completely avoid any of the complex logistical and administrative hurdles you need to overcome before becoming a multi-channel vendor.
Consider the example of being able to sell via FBM and FBA. Utilizing your 3PL for FBM will enable you to effectively sell slow-moving products and larger items, while also keeping a high stock of products year-round. It will also let you experiment with new bundles and avoid inventory limits during the peak season. Ensuring that you have available stock that is ready to ship should always be your top priority.
Here are some more creative ways to help improve your supply chain’s efficiency and boost your business’s valuation.
Streamlining Communication and Improving Your Information Exchange:
Always look for ways to streamline communication within your supply chain. Focus on an instant — or quick — solution that gives you clear insight into the state of your chain. Encourage transparency with your vendors and partners. Doing so will limit friction and reduce issues, such as backorders. Read more about common issues like backorders here.
Having consistent and clear lines of communication will allow you to stay agile and respond to global, market, and logistical events with speed and grace. Imagine purchasing a business, only to realize that it will fail as soon as there is one major supply chain shortage that occurs because of war or an accident. You would feel a pretty strong sense of buyer’s remorse. Communication can build resiliency in your supply chain, ensuring that it won’t crack under pressure.
The importance of developing relationships with key stakeholders in your supply chain cannot be overstated. Once you start forming bonds with your vendors, customers, and your 3PL, you can eventually set key performance indicators (KPIs) to help measure your supply chain’s performance. You should conduct quarterly or annual evaluations of your supply chain to improve efficiency and increase redundancy. Building relationships and having key KPIs can help you make informed, meaningful decisions that will genuinely improve your business.
Choosing the Right Amazon-Focused 3PL:
Partnering with the right Amazon-focused 3PL can significantly impact both the success and valuation of your business. It’s important to ensure that your 3PL partner will grow alongside you and won’t place any artificial limits on your ability to grow. Ask questions like:
- Can they keep up with my inbound and outbound products?
- Do they have enough storage to accommodate my sales growth?
- Are they invested in my success and growth?
- Can they optimize my supply chain?
- Will they allow me to worry less about logistics and focus on scaling my business?
Not every 3PL has the necessary expertise required to handle FBA shipments. If you hastily select one or approach a 3PL without first researching their history, mistakes are likely to follow. This may result in everything from a simple error like mislabeled products, all the way to damaged inventory — which can lower your valuation. If you aren’t aware of what makes a great Amazon-focused 3PL, check out this useful guide about selecting a 3PL that will prioritize your growth and help your business succeed.
There are dozens of 3PLs in Canada alone, and picking the right one can be a huge task. Start by taking a look at AMZ Prep. As Canada’s premier Amazon-focused 3PL, they are a dedicated, knowledgeable team who will prioritize your success.
If you still aren’t satisfied or you have already tried many of the aforementioned tips and tricks above, take a look at this comprehensive guide on improving the value of your Amazon FBA business.
