Should You Build a Fulfilled by Amazon Brand or Just Launch New Products?
Updated on March 16, 2020
Are you interested in finding out which Amazon FBA setup is most attractive to buyers?
When we consider the valuation of any business listed on our marketplace, we primarily look at two factors that determine the typical and absolute range of the business’ value.
We call these the two pillars.
The first, and often the most important factor, is the revenue the business generates. Revenue is obviously a major factor as it determines a potential buyer’s projected ROI.
The second factor is the overall appeal of the business. The presence of certain operating procedures within your FBA business will determine how desirable of an asset it is to potential buyers. The less you are directly involved, the more valuable your business becomes. From having a team of virtual assistants who manage your customer service requests to building a branded domain site off the Amazon platform, the more you automate your business, the greater the barrier to entry you create for your competitors.
Whether this is your first FBA business or you happen to have a few products already available on your Amazon Seller’s account, you should make yourself aware of what types of buyers will be interested in your business layout when you plan your exit and list the business for sale.
While most businesses on our marketplace have a brand name, website, and products all related to one specific niche, there are also benefits to running a business without a brand that sells a mixture of products in multiple niches.
Before we dig deeper into what types of buyers prefer your specific FBA setup, let’s talk about what an FBA brand is.
So What is a Fulfilled by Amazon Brand?
Having an FBA brand means nothing more than having a brand name or trademark for your business, like any other company that sells multiple products within a niche.
Having a brand name not only allows you to build a reputation within your market but also offers a trust factor to potential customers, who know they are purchasing a product from a trusted and reliable source.
Obtaining a trademark or brand name for your products creates a better opportunity to scale the business, something buyers find highly desirable when purchasing an asset within the FBA space.
Buyers will often consider purchasing an FBA business only if it has a trademark or brand name for the simple fact that it has a strong barrier to copycats duplicating your products and targeting your specific audience.
Let’s look at an example:
Most people are familiar with GoPro and its line of action cameras.
The fourth-largest electronics company in China, Xiaomi, has attempted to produce the same type of product without much traction or success.
Why is that?
Building a brand name, and offering a trusted, quality product with great reviews, creates a much larger barrier to entry for your competition. Existing and new customers will purchase your product over the competition’s product, despite the cost, based on these factors. GoPro has built an amazing reputation having athletes and influencers alike endorse their products, something the competition was unable to compete with.
Now that we understand what an FBA brand is, let’s look at which buyer personas (take our buyer persona quiz here) are interested in purchasing an FBA business with a trusted brand name. We will also determine which buyer personas will consider buying a business that does not have a brand name, that offers products within multiple niches, or that has neither brand name nor niche. Let’s dive in.
The Types of Buyers of FBA Businesses
Based on years of data we have collected on what has the most deal flow on the market, we can safely say what types of buyers are looking at your specific FBA setup.
These are the buyer personas that look for a trademark or brand name business:
- Newbie Norms
- DIY Daves
- Strategic Sallys
Typically, most Newbie Norms will want a trademarked FBA business that sells products all related to one niche. Often, these businesses will fall under the $100K asking price because Newbie Norms are still learning the ins and outs of running an online business.
Newbie Norms usually have a 9–5 job that takes up most of their time, so they will be more interested in a business with a branded domain site already set up, enabling them to focus on building a fully functioning website out themselves.
DIY Daves also look for small details to be already in place, which allows them to focus on bigger tasks, such as conversion rate optimization (CRO), search engine optimization (SEO), or building and optimizing an email list. For this persona, the simplicity and ease of taking over the business is a determining factor, as is knowledge that the risk of competitors entering their market is low.
Strategic Sallys often already have a few online businesses under their belt. However, a business that sells products within one niche is far more important to this persona than the brand name. Strategic Sallys will focus on marketing their products to the same target audience as their other businesses, so a business that sells a mixture of unrelated products doesn’t fit into their overall business goals.
These are the buyer personas that will consider an FBA business without a brand name:
- Flipper Freds
- Portfolio Pauls
- Investor Ivans
These personas sometimes fall into the category of those looking for a branded FBA business selling products in one niche, but, due to the nature of their business goals, they will often consider an FBA without a brand name or an FBA without products in one specific niche.
Flipper Freds often see an FBA business without an established brand name and without optimized product listings as low-hanging fruit. Their team of VAs can easily optimize product listings and apply for a business trademark in time to make a quick ROI when they offload the asset 12–24 months after acquisition.
Portfolio Pauls, on the other hand, will see unrelated products as an opportunity. By rolling these product listings into other businesses they already own, Portfolio Pauls can promote these products to an addressable audience they have already built.
Investor Ivans are the buyer persona most interested purchasing an Amazon FBA business without a brand, specific niche, or established website.
Their primary focus is on the dividends of these products rather than the trusted brand itself. Investor Ivans also work with funds and private equity firms that are looking to grow using multiple sources from a larger pool of investors.
For example, if an FBA business features five SKUs unrelated to one another, but each one generates thousands in revenue each month, the buyer can transfer these listings to other accounts or businesses and offload those assets for a much larger return, similar to what Portfolio Pauls would do.
So Which FBA Setup is Right for You?
Whether you build an FBA business brand with products all in one niche or you offer a mixture of unrelated products that each generate thousands in revenue per month, there will be buyers interested in your business setup.
The average FBA business is on our marketplace for 64 days, and the average multiple is 22.77x (as you can see from our latest state of the industry report), so there are plenty of interested buyers for whichever FBA setup best fits your business goals.
The main takeaway is that your primary focus should be to set up your business to offer the best barrier to entry for competitors that you can create.
This will always offer the best return on your hard work, will make it difficult for other businesses to compete, and will make your chosen setup desirable to an investor, regardless of whether you have a brand of related products or not.
If you have an FBA business and would like to assess where it currently sits, check out our free valuation tool to get a rough estimate of what your asset is worth today.
