How can you build the right exit strategy?
While it feels good to build and scale an Amazon FBA business, the real pride comes from selling it for a price you know it’s worth. This is the true sign that all your commitment, effort and skill was worth it. You built something that lasted, that generated revenue – and which is now safely in the hands of an equally competent entrepreneur.
This is why it’s so important that you develop the right Amazon FBA strategy. Not only will doing so ensure you get a price you deserve, it will also ensure you hand the keys over to someone you know is going to continue doing as fine a job as you did.
In this article, we’ll be sharing with you the necessary steps you need to put into place so that your Amazon FBA sale goes through smoothly, and so that it satisfies all interested parties.
The funny thing about first-time Amazon FBA sellers is that they don’t actually know how much their business is worth when they decide it’s time to sell.
If we were to ask them how much it’s worth, maybe they’d grow agitated as they employ a bit of guesswork and magical thinking to come up with an answer.
The easiest way to figure out how much your FBA business is worth is by using this formula:
Inventory at Cost + Monthly Net Profit x Multiple
To get an approximate valuation of your business, you just need to enter the correct values.
For instance, inventory of cost is easy to work out when you include the grand sum of your inventory, which includes packaging and shipping. That said, it’s worth bearing in mind that a massive stockpile of inventory could do damage to your valuation because a potential buyer might be wary of taking over so much stock.
On the flip side, an empty inventory puts buyers on red alert, too. It’s all about having manageable inventory.
Monthly net profit, meanwhile, can be determined by taking a look at the last 12 months of business. You could even use a 6 months average if you want.
Lastly, there’s the multiple, which typically varies from 20x to 40x. It really depends on how old your business is, how recognised it is, and so on. Bigger businesses usually have a bigger multiple (40x).
If you calculate your FBA valuation and realize it’s nowhere near where you wanted it to be, perhaps now isn’t the right time to sell. It might be the case that your business is just too young, or maybe that you haven’t fully automated your business yet.
And by the way, automating your business will make it a lot more appealing to potential buyers (and smooth over your sale) because buyers don’t want to be taking on a full-time job here. They want to buy an FBA business that they don’t have to get too involved with on a day-to-day business.
Other ways you can increase your business’s value is by building a stronger brand on social media and improving your relationship with suppliers (buyers don’t want to take over a business that has a shaky relationship with suppliers).
If you want to secure the smoothest of business exits, you need to sell your FBA business on the right platform.
The good news is there are lots of platforms to choose from.
The bad news is there are lots of platforms to choose from!
So which one(s) is the right one for you?
Let’s explore some options:
Selling direct means selling your business all by yourself. If you’ve never done this before, just the idea of selling your business alone can be daunting.
It’s challenging, it’s time-consuming, and you will need to do a lot of research before you’re able to find prospective buyers.
Is it worth it?
On the positive side, you will take home all the proceeds.
Many first-time Amazon FBA sellers choose to work with a broker when it comes time to sell their business. It’s the option we most recommend.
Brokers are more experienced than you. They often have years of experience selling multiple businesses similar to yours, and they know exactly how to strike a fair deal.
They will also help you price up your business, and they have an extensive list of prospective buyers who are interested in buying FBA businesses.
Brokers charge a commission, which means they don’t take a penny off you until your business is sold. It also means they’ll be working extra hard to get a good deal.
Can you sell your Amazon FBA business at auction?
You sure can.
All you need is a marketplace, a listing – and that’s it. The bidding fun begins.
However, there are fees involved, including the auction fee itself. How much this fee depends entirely on the marketplace you choose. There will be lots of paperwork to sort out, too.
Lastly, before you take your FBA business to market, it’s really important that your books are all in order. This will ensure a) a smoother sale and b) it will also guarantee more buyers come to the table.
After all, no one will be interested in a business that doesn’t add up.
So make sure to prepare your finances and know your numbers intimately. This means that, whenever a prospect asks you a numbers question, you’ve got the answer to hand.
Or, it may also be the case that a prospect wants to see a financial document, such as the terms of service and agreement between you and a supplier. If you don’t know where this is? You could lose the sale.
An Amazon FBA exit strategy will help to smooth over not just the sale of your business, but also your life after Amazon. It will ensure you’re able to sell your business within a reasonable timeframe while putting the money in your pocket that you need to help you move swiftly onto your next professional venture.
Use the tips in this article to understand exactly how much your business is worth. Before doing the right things and working with the right people, such as a broker, who can help you prepare your finances – and sell your business.
Ready to sell your business for the best possible price? Start by clicking the link below! No obligation, no hard sell. Just solid, professional advice.