Being an Amazon seller can be a lucrative venture. The platform is the starting point for shoppers before going to other marketplaces. 23 percent of online shoppers go first on Amazon for inspiration when they don’t have a specific product in mind for purchase. In 2021, it is expected that more than 2.14 billion people are expected to buy goods and services online.
However, as lucrative as it is, selling on Amazon can also become overwhelming. You are competing with more than 2.5 million active sellers so you need to keep your store and inventory updated all the time. The Amazon Marketplace has become so huge that it can become stressful for both newbie and experienced Amazon sellers alike.
There comes a point in your life as an online retailer when selling your Amazon business may be your best option. In this article, we shall delve on the following topics:
1. Reasons For Selling Your Amazon Business
2. Things to Consider Before Selling Your Amazon Business
3. How To Increase Worth of Your Amazon Business
4. Ways To Sell Your Business
5. Tips When Selling Your Amazon Business
Reasons For Selling Your Amazon Business
Selling your Amazon business can be one of the most difficult decisions you will make. In the first place, you have invested so much in that business that you have to think long and hard before selling it. Selling it can also be hard because you may have already grown too attached to your business. However, there are several signals that may signify it’s time for you to let that business go and put it up for sale.
You No Longer Have The Time
Running an Amazon business may take too much of your time. You may no longer have time to focus on the business because you are too busy working on other projects. This is usually a good time to sell your business. Sell it while it is riding high and profitable. Don’t wait for the value of your business to decrease.
The Passion Isn’t There Anymore
Passion is very important when running a business. If there is no more excitement, it might be the perfect time to go ahead and sell your Amazon business. If you feel that your online store is just a daily grind, it usually means that your interest for the business has disappeared. It could also affect your profits and it is something you need to consider.
Your Capital is Increasing
One of the telltale signs that you need to sell your business is increasing capital. When starting a new project, you may need to increase your capital to ramp up your business as quickly as possible. If someone can get $100k investment upfront into your new business, it makes sense to sell your Amazon business to raise the needed money for the new project.
Factors To Consider When Selling Your Amazon Business
When you have finally decided to list your Amazon business for sale, there are factors that will determine the salability of your business.
Type of Business
There are three types of Amazon businesses, namely reseller, private label & proprietary products. Let’s discuss all in more detail.
Resellers
Resellers compete for the Buy Box. They buy wholesale and make a margin as a retailer on Amazon. Resellers range from hard-to-sell to impossible-to-sell even if your business is making good profit. A reseller Amazon business will not be attractive to buyers for the following reasons:
- It is extremely volatile – there is no limit to the amount of competition
- Supply can be a problem – there is no guarantee that a certain item will always be on hand for sale
- Nothing is proprietary – buyers are only buying access to your Amazon Seller Central account
If you have exclusive contracts with wholesalers that sell on Amazon, it could increase the chances of Amazon businesses to be sold.
Private Label
Private label sellers have their own brand but still selling products similar or the same as elsewhere. A private label can give you some leverage and can be more attractive to buyers because it offers consistent supply. If your product has a little history of high quality, there is a good chance that it will sell.
Proprietary Products
If you are selling a product that nobody else is selling, it can increase the value of your brand dramatically. Most likely, buyers will pay a premium which makes your business more defensible in the long term.
Let’s say you are selling a supplement with a unique formula or made your product better. If it’s unique to you and your brand, this shows buyers that your business will continue to stand out in your industry.
Age
Potential buyers will need to know the history of your business earnings so they can have an idea of how long they can get a return of investment. The longer the history, the better the proposition you may receive.
If your Amazon business is less than a year old, the buyer may want a discount for the risk of not knowing how a full calendar will impact their sales.
Annual Net Profit
You need to know your numbers before selling your business. Potential buyers will use a portion of your annual net profit (EBITDA) to determine their buy offer for your business. In other words, the offer for your business will have a direct relation to your net profit.
It is crucial that you provide the potential buyer with accurate and updated information. Any lack or inconsistency in records can be a major turnoff for any potential buyer. Consistency makes it possible to track trends, like increasing, steady, decreasing, or seasonal sales.
Net Worth
Potential buyers aren’t interested with things like the time you spent setting up your favorite products to sell and the obstacles you overcame along the way. For them, the more important thing is the value of your business and its ability to generate a profit for them.
Increasing Worth of Your Amazon Business
Now that you have an idea of the different factors that can make your business sellable, you will next have to figure out what it’s worth. You will never know the true value of your business until there is a potential buyer. If you think that the selling price of your Amazon business is too low, the good news is that you can do something to increase its worth to your potential buyer. Here are some of the things you can do to increase the sale value of your business:
Get good suppliers
High quality suppliers with good inventory levels, quick delivery, and good setups will help increase the value of your Amazon business. If you have an exclusive deal with a supplier, the better it will be for the value of your business. Avoid suppliers with a bad reputation or generic dropshipping companies as this will devalue your brand a lot.
Increase your Amazon Best Sellers Rank
A strong BSB rank means you provide good service, offer good quality products, and your product rankings are likely to increase. These are strong selling points to a potential buyer.
Time in Business
The longer you’ve been running your business, the more valuable it is. This indicates that you have an effective business plan, an in-demand product, and healthy profit margins. A longer historic data also means that it would be easier to predict future success.
Niche
The niche where you sell matters a lot. If you’re selling a generic product with high competition, you need to be at the top of your game for potential buyers to consider buying your business. If you are selling a unique and rare product with low competition, this could be a selling point in itself.
Brand
As mentioned earlier, selling a unique branded product can increase the sale value of your Amazon business compared to selling generic products that can be bought for the same price elsewhere.
Product Range/Diversification
If 90% of your profits come from a single product, it can pose a huge problem for potential buyers because a decrease in demand or launch of a better version of that product would hurt the business. However, by offering diverse products, you could prevent this risk and increase the worth of your business as well.
Defensibility
The ease of competitors entering the market with a similar product can also affect the sale value of your business. If your products are widely available on Amazon or other platforms, competitors can easily take away your market share. On the other hand, if you sell unique products, your market share will be secured and make your Amazon business more attractive to potential buyers. The more defensible your products are, the more valuable it will be to potential buyers.
Ways To Sell Your Amazon Business
Okay. You have done everything to increase the sale value of your business. Now it’s time to put your business up for sale. There are different methods available at your disposal where you can sell your Amazon business:
Marketplace
Marketplaces tend to be crowded with thousands of business listings. If your business doesn’t stand out from the crowd, finding interested buyers can be difficult. If you are experienced at buying and selling businesses and have the time to create a listing, marketplaces can be a viable way of selling a business without having to pay a broker.
However, if you are a busy person or an inexperienced business seller, you may have to explore other ways of selling your business. To list your business on a marketplace, you need to provide a description of your business and some basic financials.
Auction
Auction websites are ideal for businesses valued at less than $5,000 with a quick turnaround time. In an auction, they expect 0.5 – 1.5x earnings multiple. Most buyers are not seasoned businessmen and it is not uncommon for it to be their first purchase. Auctions provide a way to gain a quick sale on a low value business but not for medium to large Amazon businesses.
Do-It Yourself
In DIY, you research potential buyers and cold call them to see if they would be interested in buying your Amazon business. The problem is that your potential buyers are often your competitors so there is the risk of divulging confidential information. If you have earned quite a reputation in your industry and have lots of contacts, DIY would be the most sensible thing to do.
However, DIY method lacks the competitive advantage of having lots of potential buyers and has a relatively low success rate. People usually sell their Amazon businesses privately when approached by an interested buyer.
Broker
If your business is worth more than $25,000 and you don’t have the time, experience, or patience to sell your business, a broker can be a viable option. They have the experience in selling businesses and can easily answer any questions you may have along the way. They can help maximize the sale value and advise you on appropriate terms for your legal protection.
On your end, you need to have all the required information at hand and be organized. Brokers have ready contacts who can buy when the right deal comes. The downside is that brokers tend to be more costly.
Tips When Selling Your Amazon Business
There comes a point when you have to decide whether or not it’s time to let the business go. When you have decided to sell your business, you need to do it right. After all, you have invested time, money, and effort so you need to get something profitable out of selling your Amazon business. Here are some tips to help you make the most out of selling your business.
1. Know when to exit
Sometimes you list your company, then you check the offer and realize that it is not yet time to sell. Sometimes you have to wait. If the time is wrong, do not try to set the correct time. The best exit plan is at least a year in advance. Implement a plan today to reduce export pressures and increase profits.
2. Automate and optimize your Amazon business before selling
What easy profits can you make in your business? What is imperfect or frustrating in running your business? While some buyers enjoy trying out a new business on their own, most buyers want the key to a completely simplified experience. Sure, you may need to check packaging, branding, or logistics, but if that means doubling your business revenue, is it worth it?
3. Choose the right buyer
It doesn’t matter how well your business is doing. If you choose the wrong customer, you can hand over the keys to someone who gets in the way of your business. This is why you need to be buyer careful when selling an Amazon business.
4. Follow the four principles of competitiveness
When you want to sell a business on Amazon, you should be guided by four principles of value. These include:
Risk: What is the risk to your business? Will the customer lose the game? Make your business as secure as possible by eliminating dependencies, barriers to entry, and points of failure.
Growth. Will your business grow strongly after someone buys it? Clients must show that their business is doing well. Make sure your sales figures are growing before planning a sale.
Portability. Is your business easy to convey to customers? If not, follow in Lee’s footsteps and develop your business in a way that doesn’t interfere with your work.
Documentation. Where is your bank statement? How do you keep track of your inventory? If you want to keep track of everything on a napkin or in Excel, the documentation is not enough. Instead, become an accountant and clean up those financial documents.