Learn what matters most when selling your FBA business and what you should focus on to boost your valuation.
Acquisitions of Amazon businesses are at record highs, and it’s a great time to sell because of the buzz around both Amazon FBA and FBM business. If you’ve already decided that you should sell your Amazon business you’re looking for guidance on taking the first step. You may find yourself wondering, “what is my Amazon business worth?” The answer to that question involves a lot of factors. In this article, we’ll reveal the primary factors to understanding the value of your Amazon business, what you should do to get a strong estimate of your business value, and how to increase the value of your Amazon consumer health business.
The short answer to this is “probably.” You probably can sell your Amazon business. However, the real question you want to know the answer to is: “can I sell my Amazon business for what I think it’s worth”? There are three main factors you must review whenever you consider how to value an ecommerce business.
First, which type of Amazon business do you have? Depending on how you do business, your perceived value to buyers will vary.
If you’re selling an exclusive product - unique to your company - you’ve got the best upside if you choose to sell your Amazon business. The product is yours, and you have built a business of loyal customers. Buyers will likely pay more for your business than other types of Amazon sellers. An example of this would be if you sell a custom supplement that you formulated, but you outsource the manufacturing.
Your products aren’t exclusive, but your brand name is. While your business isn’t built off of your own intellectual property, you’ve created some important supply chain processes and acquired some market share. Your business may not be worth as much as if you were selling something exclusive, but if you’re steadily growing, you can command some buyer interest. An example of this would be if you sell women’s health products from a wholesaler that sells to other health and wellness brands. They produce products like fertility strips and package them in wrappers that contain your name and branding.
If you live and die by trying to win the buy box, the only thing you have to offer for sale is your Amazon Seller Central account. Your profits and margin are completely reliant on your hustle to procure products at wholesale and out-price competitors. While it is possible to sell such a business, your bargaining power is the least of the Amazon business types. An example of this would be if you purchase bulk overstock or clearance workout gear from others, then sell it for a small profit.
How long have you been operating your company? If it’s been more than two years, you’re in a great spot. At this age, you can likely prove stability and performance. More data means a buyer can make an informed decision on the likelihood of future growth. If you’ve been operating for under two years, it’s not a deal breaker. Since you’re in the Amazon space, things move so much faster than other, older industries. You may have to work a bit harder to prove your value, but unique aspects of your business like your niche, first-mover advantage, or brand equity can help.
Before we get any further, know this: making sure your accounting is accurate and up-to-date is critical. Your finances, more than anything else, will make or break a sale. The annual net profit is perhaps the most important factor when valuing an Amazon business. Buyers of Amazon businesses want to see positive, upward trends in your revenue, and in your profit. They want to see an upside to a future with your products.
The trends come from analyzing your annual net profit. This is also abbreviated EBITDA (earnings before interest, taxes, depreciation, and amortization). These deductions (the ITDA part of EBITDA) are important for larger businesses. EBITDA is used to assign a value to your business if your revenue is more than $10M annually. Smaller businesses with a lower revenue can use a simpler equation: Seller Discretionary Earnings (SDE). SDE is very straightforward:
SDE = Your revenue - (Cost of Goods Sold - Operating Expenses) + Owner Compensation
Regardless of the size of your business, you need to keep an accurate record of your expenses. As you can see, they play an important part in assigning a value to your Amazon business.
You have put so much into your business - hours, emotions, sweat equity - and possibly your entire savings. However, many business owners can’t separate their emotional attachment from their business’ street value. There are so many factors that determine what a buyer will pay when you’re selling your Amazon business, so you need to keep an open mind and look at the facts, not the feelings. The only way to understand the actual value of your business is through a business valuation. This will reveal the amount for which you can probably sell. For health and wellness brands, Intrinsic offers a specialized free valuation that combines broad industry expertise from category veterans with deep Amazon knowledge.
A session with an Intrinsic expert is extremely valuable even if you’re just starting to investigate selling your Amazon business. It’s a great way to better understand your street value, learn more about how you’re performing, and get advice on how you can improve.
While you’re working towards a business valuation, you can start to understand what someone buying Amazon businesses will review. The documentation they will review will include:
Intrinsic approaches every brand differently - and we bring in resources and experts that are specifically selected for that brand. For example, some founders we work with are on a cash basis accounting model and need help moving to accrual basis. We bring in our trusted partners who can help move that business to accrual basis accounting in a way that’s cost-effective, and gives the founders confidence. Another example we often see is the supply chain - as an incubator focused on health and wellness products, we have unique relationships with reputable, well-run suppliers. We help the brands that need support refining and improving their supply chain by identifying weaknesses and bottlenecks. Then we introduce the right partners to solve those problems. Plus, the added concerns about wellness products can create some concern for a business owner who wants to sell. If you’re going it on your own, you’ll have to provide evidence that your manufacturing practices and supplier relationships are creating safe products. Again, working with partners - or selling to an acquirer - who is an expert in the health products space will be a great advantage.
Any business owner wants their business value to be as high as possible. Once you have your business valued, you may wonder if there are ways to increase that number. Some things that any Amazon business should consider include:
Amazon health and wellness products are a specialized niche, however. As a consumer health business, you should pay additional attention to:
We go into more details about the best ways to increase the value of your Amazon business in a recent blog, but the Intrinsic experts can also help advise you on specifics for your brand.
"Founders who are ready for that next adventure need thought partners - and we bring health and wellness experts, including our advisors Dr. Mehmet Oz and Tony Robbins - to help. Even during that crucial product-market fit stage, we help our founders think through hypotheses and do the research ... You don't have to go it alone." - Erum Hasnain, VP of Acquisitions, Intrinsic
Intrinsic is here to help you take your next step towards selling your Amazon business. We’ve described the basics of valuation, but if you’re ready to get the details, start by getting a business valuation. We can guide you clearly as we talk through your business specifics. The time is never too early to research the process, so if you’re even considering a future sale, schedule a consultation. With a clear understanding of what it takes, and what you should do, you’ll be better prepared to make the right decision for yourself.
Regardless of your mindset today, it’s always a great choice to think about the future. Get started on your next chapter by connecting with Intrinsic.