Thinking of selling your FBA business but wish it was more valuable?
There is some good news and bad news here. The bad news is that we primarily value an online business according to how much money it’s generating. If revenue is down for you, you’ll need to find ways of increasing it.
The good news is that – fortunately – it’s not just about profits. In fact, there are a few really easy things you can do to bump up your business value. Four really easy ways, in fact. Let’s take a look at what these are.
Is your accounting cash-based? It needs to be accrual-based.
Because it gives a clear picture of how well (or how badly) your business is performing.
How does it do this?
By showing you (and potential buyers) when expenses and income occurred.
See, let’s say that a buyer wants to see how well your business fared in March, April and May. Using accrual-based accounting, he or she can see this at a glance.
That all said, there’s nothing wrong with using cash-based accounting from time to time, too, such as for tax purposes. But it’s a smart idea to contact your accountant ASAP to make the switch because it could take them a few hours, or it could take them a whole week to flip your books.
We’ve mentioned before in a separate article that, the higher your business is valued at, the more a prospective buyer will carry out due diligence before making an offer.
And if you don’t have the right documentation in place, this due diligence phase can kill you. See, they want to find holes in your business. They want to find reasons not to buy it. And if they find holes, they’ll either back out altogether, or they’ll re-negotiate the price. This means you won’t get the price you wanted.
So what documentation do you need? You need:
A business bank account. This bank account must have expenses and income relating to this specific business ONLY. Do not use it for personal things
Correct account setup. I definitely recommend working with a professional accountant for this
Business tax returns. Serious buyers will want to see your business tax returns, which is why it’s so important that you have them ready. Don’t make them wait while you prepare them! Be prepared or – as the saying goes – prepare to fail
To be honest, that’s pretty much all the documentation you need. It’s not much, which means there can be no excuses if you’ve not got it all in place
At the start of the article, we talked about the importance of profits.
And one of the best ways to boost profits is to improve your efficiency.
Because the more efficient your business is, the more productive it is. Thus, profits will rise.
It’s a smart idea, then, to evaluate your business from multiple angles by diving into your internal operations. To help you out, you could bring in an efficiency expert.
Either way, what you’re looking for are areas of your business that aren’t performing too well and are consequently slowing you down (and bringing profits down with them). Once you’ve identified these poorly performing areas, you can then implement new systems that smooth the process.
This is a really simple way of boosting productivity (and revenue). At the same time, it’s worth pointing out that it will also reduce your cost of operation (and as a bonus, quality won’t be sacrificed). Combined, more productivity + lower cost of operation will improve the value of your business and make it more attractive to buyers.
You might be wondering if a growth plan adds value to your business. Does it directly add another 0 to it right now? Probably not.
But we need to look at this right away.
Imagine there are two businesses. Let’s call them My Business and Your Business.
My Business is making $300,000 a year and – by all accounts – doing okay.
Your Business is making $300,000 a year, too.
However, there’s a difference. My Business has prepared a detailed growth plan, whereas Your Business hasn’t.
Does this detailed growth plan allow My Business to stand out? It sure does. And here’s how:
While both businesses are doing the exact same amount each year, buyers will want to see growth potential in either business before they make a serious offer. Growth potential shows them how your/their business is going to be successful going forward. They might not agree to all your plans and suggestions, but it gives them a clear picture of what’s going to happen next.
As such, they’ll be more inclined to opt for My Business instead of Your Business, simply because the former has a clear growth plan and the other does not.
I always tell Amazon sellers to diversify.
Because if a huge chunk of your sales come from just 1 or 2 products, your business will look super risky to potential buyers. What’s stopping a competitor from entering the market and taking your market share? It’s not hard. Also, what happens if Amazon decides to get rid of your best selling product? What are you then left with?
That all said, it’s not a question of adding a zillion SKUs. That won’t make anything better if a huge chunk of your sales still come from 1 or 2 products. But the key is to diversify your product range so that you’re not relying on 1 or 2 products.
These are four easy wins to ramp up your business value. They’re all easy to implement and they’ll all make your business more attractive to buyers. The next step is to execute the tips in this article – and keep generating profits.
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