How to Sell an Amazon FBA Business for Maximum Profit
Thinking of selling your Amazon FBA business? You’re in the right place.
After selling 244 Amazon FBA businesses over the past three years alone, we learned how to help sellers get a profitable exit.
While FBA businesses have great potential to sell, they also have many moving parts. And more moving parts means a more complicated sale. Many FBA sellers aren’t sure where to start. This comprehensive guide will help you understand everything you need to know about selling an Amazon FBA business.
The Facts Behind Selling an Amazon FBA Business
If our latest industry report tells us anything, it’s that now is as good a time as any to sell your FBA business. As our sales data show, FBA is a popular business model for both buyers and sellers, as it made up 85% of all e-commerce businesses sold last year.
We sold 97 FBA businesses in 2020, which increased year-on-year (24% from 2019 to 2020 and 41% from 2018 to 2019).
The average sale price for an FBA business on our marketplace in 2020 was $538,741. This is up by an impressive 80% from the previous year, where the average sale price was $279,254.
If you’re considering selling your FBA business, you’ll be glad to hear that sales multiples are also growing year-on-year. Overall, an FBA business was sold at a multiple of 28.5x in 2020, which was up 11% from 2019.
But wait! You can see the average sales multiple is even higher when you analyze by price tier.
The average sale multiple rises even higher when you analyze it by price tier:
It was an exciting time in 2020, as we saw the first sale of an eight-figure FBA business, and we sold not just one, but two of this size.
Keep in mind that the majority of FBA businesses we sell are in the six-figure range. Even so, the stats are showing that it’s an exciting time to sell.
We’ve seen a diverse crowd of buyers entering our marketplace, ranging from individuals looking for a relatively low barrier to entry to e-commerce entrepreneurship, to investors and private equity firms competing against one other to acquire FBA businesses.
As a seller, this is all good news for you since the increased interest drives multiples higher and sale prices are going up.
When’s the Right Time to Sell?
It’s clear, based on previous data, that FBA businesses are an increasingly valuable asset to buy or sell.
You’re probably wondering when you should sell to get a fair sale price.
The great news is that there isn’t an optimal time outside of when you’re ready to sell because businesses are bought and sold all year round. Timing the market is a difficult thing to do, and it’s why we recommend that if you’re a first-time seller, to make your decision based on when it’s right for you.
“But why would anyone sell a profitable FBA business?”
After interviewing hundreds of sellers, we’ve heard a wide range of reasons which you might identify with.
Some business owners just didn’t have the time to run the business due to a death in the family or because they recently started a family. Others said they wanted to put the money towards their kids’ college education or buy their dream house.
Perhaps you’re thinking of selling because of a change in personal circumstances. There are a lot of unseen emotional costs in managing an FBA business and planning an exit could be the only way to release some of the stress of running a profitable business.
Even if you can’t run the business like you used to, selling gives you a huge amount of capital at once that you can use in any way.
Some sellers who are looking for a new challenge take the opportunity to reinvest these funds into a new business project. One tactic is to buy smaller FBA businesses, improve them with your knowledge and experience of scaling an FBA startup, and sell it for a profit in 12-24 months.
No matter what your reason is for selling, see what your goals for selling are first before listing your business for sale.
What if My FBA Business is Seasonal?
If your FBA business is highly seasonal, you might be tempted to hold off until it’s peak season.
While this makes sense, seasonal businesses are usually looked at over a 12-month valuation period to take into account mountain highs and valley lows in sales. On the other hand, you could use seasonality to persuade buyers to buy during the off-season so they can reap the benefits when buyer demand is highest.
The safest bet is to sell when you’re ready and when your FBA business has a value closer to your expectations.
How to Maximize Your Profit
To start planning for a higher valuation, see how much your FBA business is worth by using our free valuation tool. It only takes five minutes.
You’ll get a ballpark figure of your business’s value to help you decide if it’s the right time to sell or not.
Selling your FBA business isn’t a decision you make on a whim. That’s why having an exit strategy is important.
If your valuation shows your business isn’t at the value you hoped it would be, you can take proactive steps to improve it so it receives a higher valuation in the future. Careful exit planning like this is the best way to help you sell your business for maximum profit.
If you’re unsure how to get started with your exit plan, talk to an industry professional to give you a nudge in the right direction.
If you get a valuation from our tool and want to speak to someone for advice, you can set up a free call with one of our business advisors who’ll be happy to talk more about how you can sell your business.
Booking a call doesn’t commit you to selling your business. Speaking to an expert in online businesses could help you with your plan to improve your business’s future valuation.
We’ll go over a few things you can do to make your business a more attractive deal to potential buyers.
The points below aren’t an exhaustive list but can be used as a starting point for your own exit strategy.
Register for Brand Registry
Buyers look for FBA brands that have a deep “moat.”
One of the biggest dangers to any e-commerce store is someone starting up a copycat brand on Alibaba and ripping off their products.
An FBA brand that’s registered on Amazon Brand Registry has an extra layer of protection against counterfeit products. It shows buyers your products are authentic and makes it easier to take down any counterfeit listings on the marketplace.
You can also access a range of helpful marketing tools through your Seller Central account to improve the look of your product listings, which can have a positive impact on sales.
The more layers of protection you can add to your business, the stronger your FBA defense is. In the same way, diversifying your store’s revenue supply and traffic sources will soften the impact of unexpected changes and will be positive from a buyer’s point of view.
A common way to increase monthly revenue is by adding new products to your current range. Complimentary products can be sold in Amazon Bundles, so you generate more revenue from individual sales and cross-selling.
Affiliate marketing is another way to generate more revenue. By signing up as a vendor on affiliate programs, content creators are incentivized to link to your products as they earn a commission from each sale.
Content sites are also a great way to extend your organic reach so your business doesn’t have to rely on paid advertising on Amazon, which make your business a more attractive asset to buyers.
PPC advertising is how most FBA sellers drive customers to their listings. Growing another traffic channel through organic search decreases your reliance on Amazon and adds another layer of protection to your business.
If you can set up a storefront on other e-commerce platforms like eBay or Shopify, you can increase your brand exposure.
Known as multichannel selling, buyers who are looking to scale their newly acquired business find this diversification a huge advantage.
Buyers aren’t looking to buy a job.
This is why the more hands-off your operations are, the wider your buyer pool.
Although the number of hours needed to maintain the business won’t directly affect your business’s valuation, it can make a difference on whether a buyer will make an offer or not.
We’ve found less than 10 hours per week to be the ideal time to manage a business. If you’re spending more than 10 hours each week, it’s probably better for you to outsource some of the time consuming tasks while handling areas where your forte lies.
You can hire freelance SEO copywriters for content creation or a virtual assistant (VA) to take on general tasks.
Fewer responsibilities mean a buyer can focus on scaling the business, which is a positive in many buyers’ eyes.
Optimizing the Supply Chain
A well-oiled supply chain means it’s easier to get inventory from your manufacturer to FBA fulfillment centers.
It might make more sense to hire a 3PL service provider to manage the logistics if it’s taking you too much time or if logistics planning isn’t your strength.
To avoid long-term storage fees, you might consider hiring a warehouse to store your inventory first before sending it to FBA warehouses.
An optimized supply chain helps you avoid running out of stock so you don’t miss out on sales. This builds trust in buyers that the business will be able to meet customer demand especially during peak periods.
Selling an Amazon Business Privately
So what are your options for selling your FBA business?
The best two choices are through a private sale or using an online business broker.
With a private sale, you won’t have to pay the commission fee that brokers charge.
It might be tempting to use an unvetted marketplace like Flippa or auction sites like Craigslist to meet private buyers.
However, it’s not advisable to use these types of marketplaces, mainly because of the lack of protection in terms of hiding your FBA business’s intimate details. Copycats can reverse engineer your business to create a competitor brand overnight.
If you’re going down the private sale route, make sure you conceal your FBA brand name and the products being sold on your storefront. These details should only be revealed to serious buyers who can prove their intent by showing proof of funds or place a deposit.
As well as having a system in place to find qualified buyers, consider using an escrow service to handle payments. Both buyers and sellers can be protected during the last stage of the sale when the business changes hands.
A private sale will require you to learn how to market your business for sale and find qualified buyers.
If you’re willing to put in the work and have plenty of time on your hands, this might be an option for you to sell your FBA brand.
Selling with a Broker
The other recommended option is to use an online business broker.
A reputable broker has a high-quality audience of buyers who can prove they will pay top dollar for a good business. This is the main reason sellers choose a broker.
Not only will a good broker list your business for sale, but they’ll also help you market your business to the right types of buyers to increase the chances of you finding the right deal.
You probably want to make sure the buyer will keep the business going. After all, you poured your blood, sweat, and tears into the asset, so you’d naturally want the buyer to be set up for success.
A full-service broker can go a long way to help make sure the right deal happens for all parties. We want to share our processes with you so you can compare our services with other brokers to help you with your due diligence.
When choosing the right broker, it’s best to work with one that’s experienced in selling different types of FBA businesses.
As shown earlier, we’ve helped sell FBA businesses from a wide range of pricing tiers, from mid-five figures to a huge eight-figure sum. More Amazon sellers use our service each year because of our reputation as the largest curated marketplace for online businesses.
To maintain that reputation, we’re very selective about which businesses we list for sale.
Last year, we rejected over 84% of submitted listings each week.
To make sure we’re keeping a high standard of businesses for sale on our marketplace, we have a strict vetting process for buyers and sellers (see here for more details).
Some of the info we require includes verified monthly expenses, screenshots of monthly revenue, and access to analytics. Having this information gives buyers confidence in your business which makes them more likely to place an offer.
We have a wide range of buyers on our marketplace who’ve shown they have over $1.4 billion in verified proof of funds!
Some of these buyers are individuals who want to run their own profitable e-commerce business for the first time. They want a business that won’t take up too much time while giving them room to learn.
We also have high-net-worth individuals and private equity firms who will compete to buy your business.
Once your FBA business has been approved, our sales team will help you every step of the way, from vetting to discussing offers from buyers. Our team of business advisors will help you with deal preparation and negotiation so you’ll have a game plan before talking with buyers.
We also have a specialized migrations team that will help you with the transition. We’re one of the few brokers to offer this inclusive service without additional cost. It can seriously help calm the nerves that tend to flare up at the end of a deal, which is the most crucial stage.
For use of our services, we charge anywhere from 2-15% in commission, which are some of the best rates in the industry.
It’s normal for brokers to include an exclusivity period for using their service. In our case, we only have a two-month exclusivity period. It’s one of the shortest because we’re confident that we can help you sell your business within 60 days.
If you’re undecided about which broker to go with, don’t be afraid to ask what a broker is doing for you as well as what kind of deal flow they have in Amazon FBA specifically.
Preparing Your Amazon FBA Business for Sale
If you’re prepared to sell your FBA business, there are a few things you can do to prepare in advance.
Having your finances and documents ready will save you time and potential headaches later when buyers ask for details and you’re scrambling at the last minute trying to find where you stored the information.
We’ll also address some of the most common questions buyers tend to ask below so you’re more prepared.
Get Your Finances in Order
Having your finances in order makes preparing your profit and loss (P&L) statement much easier.
The P&L statement is the most important document you’ll need when selling your business. It usually contains all your incomings and outgoings, your business’s monthly gross revenue and gross profit, and even which SKUs generate the most income.
One-off expenses like add-backs are normally included to show buyers what kind of expenses aren’t necessary to run the business, such as a trip to a conference or buying keyword research software like Jungle Scout.
Staying on top of your finances is good practice in general, but it’s especially important if you’re selling your business. It’s recommended that you hire an accountant to go over your finances annually.
Organize Your SKUs
For FBA businesses, the “less is more” approach towards SKUs will work in your favor.
Review your SKU list to see which you can delist so you can basically trim the fat from your business of unprofitable products or inactive listings.
Having too many SKUs active on your FBA store can be unmanageable to maintain. We’ve found the ideal range of products to be between three and eight.
This is large enough for a quality pool of products where each pulls their own weight in generating revenue for the store, while being a small enough group to manage – both of which are highly attractive to buyers.
As we mentioned earlier, buyers often look for a type of business that is relatively hands-off and doesn’t require too much input from them to maintain.
One way to minimize the need for owner input is by creating standard operating procedures (SOPs). These are simple guidelines to follow on how certain processes work and essentially act as a user’s manual.
Not only do SOPs help to automate processes for more efficient operations, but they help the new owner transition easier so they can get to grips with their new digital asset.
Take some time to document your workflow in a step-by-step process. You’ll discover how long it takes to complete a task and even fine-tune the process so it takes less time and effort to achieve the same goal.
An FBA business with highly efficient processes and an SOP to refer to cuts down the time a buyer needs to start running your business to optimal levels.
Employee and Supplier Contracts
FBA businesses have many moving parts. It’s common to have a helping hand to manage all the different tasks, either by hiring freelancers or an in-house team.
If you’ve developed a relationship with freelancers after using their services many times, ask them if they’d be willing to work with a new buyer. Chances are they’ll say yes, as they’re familiar with the standard expected of them and the type of work they need to produce for your business.
Getting experienced hands-on-deck to continue with the business will save the buyer time from finding suitable staff to fulfil the same tasks.
However, training new hires or freelancers shouldn’t take too long with the help of SOPs.
If you have any exclusive agreements with your suppliers as a result of good working relationships, do your best to make sure the same agreements will continue after the sale.
A buyer will appreciate inheriting a good working relationship with a trusted supplier who has specific agreements in place to streamline your ordering process, and this relationship could lead to better negotiations to lower your sourcing costs.
Inventory and Business Management
It’s important to have a rough idea of how much inventory your business currently has, either en route to warehouses or is currently held in storage facilities.
By this point, you’re in a good position to submit your FBA business for sale.
If your business is under review, make sure not to make any large-scale changes to avoid affecting your revenue and traffic numbers too much.
Above all, remember to keep running your business as normal so its performance doesn’t drop! Your P&L statement will be updated monthly, so sales drops as a result of you letting your foot off the gas will reflect in your business’s valuation.
How the Sales Process Works
If you followed our advice until now, you’ve got a good foundation to start selling your business. With the groundwork set, we want to give an overview of how our sales process works on our marketplace.
Keep in mind that you should continue running your business as normal. As exciting as selling your business is, sudden drops in performance may cause buyers to become concerned.
You can avoid that by making sure everything is running smoothly and as expected.
How to Value an Amazon FBA Business
To kick start any sales process, you need to undergo a business valuation.
We recommend you get a valuation for your FBA business after at least 12 months of profitability, and update the valuation once a quarter or every few months.
Our valuation formula is straightforward:
12-Month Average Net Profit X Multiple (Typically 20x-50x)
The current inventory’s wholesale value will be added to the valuation.
Net profit is calculated by subtracting any expenses from the gross revenue, like cost of goods sold, Amazon fees, marketing, and employee salaries. A 12-month pricing window eliminates seasonality and helps you get a better valuation in most cases.
If a business is in sharp decline or growth, a shorter pricing window may be used.
While average monthly net profit is easy to work out, the multiple is trickier.
We use a monthly multiple instead of an annual one because we feel it gives a more granular view of a business.
Many factors affect the monthly multiple such as:
- Business age
- Number of SKUs
- Having an email list
- Traffic diversity
These are just a few of the most important factors but there are many more.
Our free valuation tool gives you a quick estimate that’s backed by hundreds of sales data.
The tool will provide you with three valuation points.
The typical valuation is a good spot where you can receive a good sale price for your business that is still attractive to buyers.
If you can hold out for a better offer, you might consider listing your business around the absolute valuation price. Keep in mind that going higher than the typical range narrows your buyer pool and could make it less likely to land a deal.
To sell your FBA business as soon as possible, you could list at a lower price.
We’re confident that our valuation tool provides an accurate estimate of a possible sale price, but it’s always worth speaking with an industry expert to get a truer picture of your business’s worth, especially if your Amazon FBA business has several nuances to it.
Searching for a Buyer
Once you’re happy with the valuation price, you can go ahead and list your business for sale on our marketplace where we take care of promoting your business on your behalf. New listings are updated weekly and go live every Monday at 10 am EST.
Our list of active buyers receive these listings immediately via email and our team of dedicated business analysts will be reaching out to suitable buyers in their contact lists to see if they’d be interested in putting in an offer.
We also help you conduct seller interviews for businesses valued at over $45,000. These audio-only interviews give you a chance to sell your business further and build trust in interested buyers.
These interviews are not compulsory but we’ve received really positive feedback about them from buyers.
You’ll probably see the most action during the first week of your business going live, where buyers will be unlocking your listing and asking questions about specifics.
Our team of business analysts will be in regular contact with you to update you of any interested parties or further developments around potential offers.
Negotiating a Deal
If your FBA business is valued at less than $100,000, our custom-built platform automates a lot of sales processes that allows buyers to make an offer pretty quickly.
When someone makes an offer, this starts a 24-hour circulation period where other buyers are notified. During this time, buyers have a chance to counter-offer with a bid of at least 10% higher than the current one.
The circulation period is one of the most important parts of our sales process that works to give you the highest possible price for your business.
FBA businesses over $100,000 tend to be more complicated and buyers will typically want to set up a call to understand your business better. A business analyst will hop on a pre-conference call to brief you so that you’re better prepared to answer questions.
Larger businesses usually have some form of deal-structuring involved where an earnout is included.
This could be a buyer paying the majority of the deal upfront and paying the balance over a number of weeks or months.
Due to the higher price of larger listings, some buyers won’t have the cash flow to raise the necessary capital to pay in one lump sum. Being open to deal-structuring can work in your favor of landing a successful deal and you might even come out with a higher overall selling price.
Transferring an Amazon FBA Business
Once you’ve agreed on a sale price, the deal isn’t over yet.
Transferring your business to the buyer isn’t as easy as handing over a set of keys to a property.
Migrating an FBA business can be tricky since there are so many different components and providing the wrong information can lead to setbacks of weeks or even months.
To transfer your Amazon Seller Central account, you’ll need to contact Amazon to inform them there’s a change of ownership while submitting the right documents.
If you’re holding onto your seller account and only transferring the product listings, that is a different process which still requires all parties informing Amazon of the deal and who both parties are.
If there’s an EU/UK component, we highly recommend registering for VAT to avoid delaying the migration process. VAT is a tax that’s specific mainly to EU countries and the UK, so buyers will need to be VAT registered if they want to start selling in those markets.
Here we go into more detail on how you can prepare before heading into the final stages of a deal to make the transition smoother.
Every FBA business will be different, and how long a successful migration will take depends on how many assets are being transferred.
Small businesses will have fewer Amazon products to transfer and will likely take less time to complete a migration.
Once migration has finished, the buyer enters a 14-day due diligence period where they can inspect performance and sales are as advertised.
Buyers won’t be able to make any large changes to the business and will mainly be monitoring certain metrics like profit margins.
This due diligence period is standard across the industry, although some buyers choose to waive this period earlier if the business looks good and they want to start making changes as soon as possible.
Typically, sellers offer some type of post-sale support to help with the transition. Usually this is 30 days of email support or video calls.
While the level of support you offer is negotiable with the buyer, it goes a long way toward building trust by showing you want the buyer and the business to succeed. Experienced buyers may not take up your offer but it makes your business a more attractive deal.
By this point, you’ll have received your money according to the deal terms and you can finally celebrate this great milestone. Your business is sold!
How Long Will it Take To Sell an Amazon FBA Business?
On average, FBA businesses sell on our marketplace after 67 days.
Keep in mind that this is an average and some businesses may take longer to sell, especially if they are more complex.
Smaller deals are usually much quicker than larger deals for this reason. Businesses that are listed below $100,000, for instance, have an average sale time of 42 days.
Since every FBA business is different, your business may sell much quicker than expected if a buyer feels your listing is too good a deal to pass up.
It’s happened before where a seller became a millionaire after their FBA business was bought for $1.7 million after 42 days.
It’s important to remember not to rush a deal. There are many steps, from considering a sale to successfully migrating the business. Taking your time to consider the right offers will help you receive a higher selling price.
Selling Your Amazon Business
That ends our breakdown of how to sell your FBA business. We hope you’ve got a good idea of what you need to do to prepare your business for sale; all that’s left to do is to take action.
During your lunch break or when you’ve got a spare moment, use our free valuation tool to get a rough idea of how much your business is worth. If it’s lower than you expected, you can start preparing to increase its value as we described above.
Like the look of how much you could receive? Consider setting up a call with one of our business analysts to start laying out your exit strategy and your plan to sell your business for the most profit.