Amazon has been one of the greatest gifts to online sellers ever. Start-up costs are low, you’ve got access to hundreds of millions of customers, and you don’t even need to build a website.
Oh, and you can eventually sell your Amazon store for a crazy profit.
This is something a lot of people don’t realise. As long as your store is turning a profit consistently, there is every chance you can sell it for a good price.
If you want to sell your Amazon business for big money, there are a few factors you need to consider. Not every single Amazon business is going to sell for a high price. In this article, we’ll be providing a few insights into how to sell your Amazon business for big money, including how to prepare it for sale, and how to see things from the buyer’s perspective.
Ready? Let’s dive in.
Before you put your business up for sale, you need to make sure that the time is right, and that you’re selling for the right reasons.
We’ve seen people saying that they want to sell up because they’re exhausted and burnt out. That’s fine – but what if you suddenly feel revitalised a few weeks later and decide you want to continue?
We’ve also seen others saying that they want to sell up because they’re having a child and need to dedicate more time to their family. That’s a perfectly legitimate reason to sell one’s business.
Make sure you understand your reasons for doing this, and that you haven’t decided to sell simply because you’ve had a bad month.
Moreover, it’s a good idea to plan to sell, as opposed to merely deciding.
What’s the difference?
When you plan to sell, you allow yourself time to streamline your business, which ensures that you’re able to maximise its value. If you merely decide to sell, you won’t give yourself that time.
As we just mentioned, when you plan ahead, you give yourself enough time to streamline and automate your business.
Why is this crucial?
An Amazon business that isn’t automated is a lot of hard work – and it can really put buyers off.
Think about it: When a potential buyer knows they have to either manually carry out things like monitoring SKUs, rule changing and price checking or automate everything themselves, it’s going to lower their valuation of your business. They want a business that’s easy to manage – not hard.
Imagine this scenario, too: If you haven’t automated your supply process yet, you will prevent more buyers from getting involved. For instance, if you’re sourcing all your products from suppliers in, say, the Manhattan area, a buyer who’s located in San Francisco wouldn’t be able to realistically manage your business. As such, they won’t make a bid.
What are some areas you should automate? There are a few. Here are some:
As well as automating your Amazon business, another surefire way to increase its value so that you sell it for big money is to make sure that it’s stable.
Essentially, an Amazon business that looks risky, has no clear path to growth and lacks correct documentation will sell for peanuts.
Here are some things to consider:
If your current valuation is too low and you’re worried you won’t get enough money for your Amazon business, there are a few ways you can add more value to it so that you can sell it for big money.
For example, there are a number of things a prospective buyer will look out for when determining how much your business is truly worth to them.
It starts with the type of business you run. Are you a unique brand, a reseller or a private label? If you want to sell your Amazon business for big bucks, it helps if you’re a unique brand – or if you at least sell unique products, such as a custom formula.
Private labels are also valuable, while reseller’s find it harder to sell their business, typically because theirs is seen as being riskier.
The age of your business matters, too. An Amazon business that’s been around for over three years is seen as established, and therefore it’s more sellable. This is also why timing matters so much, which is something we touched on earlier. If your business has been around for one-to-two years, it might be worth holding off a little longer so that it a) becomes more established and b) becomes more attractive to sellers.
If your Amazon business is less than one year old, you can definitely expect to get low-balled. It’s definitely a good idea to wait a while, and to spend some time growing your business. Don’t forget that it’s during the first year that many of us learn what works and what doesn’t work. If you’re selling a business during this phase, it’s hardly going to have much value. Therefore, it’s a much better idea to spend the next two years investing in your business and boosting your profits.
Another thing you need to bear in mind when adding more value to your business is your annual net profit. If you’re not turning over an annual profit consistently, it’s hard to see any buyer being interested. And why would they?
To figure out if you’re turning a profit each month, I recommend that you employ accrual accounting. Without a proper P&L statement, you won’t understand your true monthly net profit and may assume it’s either much higher or much lower than it actually is.
Your profit goes a long way to determining who’ll be interested in your business, and what they’ll bid for it. For instance, let’s imagine a corporate executive who’s sick of the rat race. They want a change of pace and direction, and they want to buy an online business.
Naturally, they want to retain their six-figure salary, which means that they will only look at your business seriously if it’s going to help them achieve their financial goals. As such, your business would need to be making six figures each year consistently. If it isn’t, your business might have more appeal to, say, a mailman with savings who’s decided it’s time to pivot but who doesn’t have the same deep pockets as the corporate exec. As such, he might low-ball you.
Once you know what your profit is, you then need to gather together as many metrics and as much proof as you can, as these will help your buyers get a better understanding of the true value of your business.
As you seek to make your Amazon business more valuable, consider its defensibility, too. In other words, how vulnerable is it to a rival entering the market with the same products as you … and taking away your market share?
This all comes down to how hard or easy it is to source your product. If, for example, the product(s) you sell are easily accessible on online marketplaces like Amazon, there’s essentially nothing preventing a rival from getting a slice of the pie (unless you’re a brand with an army of loyal customers).
On the flip side, if you’ve got a patent for a product, or if the products you sell are hard to get hold of, your multiple can increase.
When considering your defensibility, take a look at how loyal customers are to you, how easy/hard it is to source your products, as well as the quality of your rivals’ similar products. Is it lower than yours?
Diversification gives your brand a bit of an edge because – let’s face it – anyone who runs an Amazon business is at the mercy of Amazon itself. Sometimes, we’re just one step away from an account suspension, and two steps away from losing our business and rankings entirely.
Therefore, it’s important that you understand how your brand can continue if the worst-case scenario was to happen. Not only do you need to understand this, but you also need to prove it to potential buyers. Honestly, this gives you peace of mind in the first place, and it also gives potential buyers peace of mind. Plus, it can add extra $$$ to your price tag.
How can we diversify? Well, you need alternative methods of sourcing and selling your products, as well as alternative sources of traffic. Ideally, this is why you’d create an entire brand that can operate independently of Amazon if it had to. Any business that is tied solely to Amazon is always living on the edge. And while that can sound exciting, it’s not exactly attractive to serious buyers.
Traffic sources, for example, don’t have to just come from within Amazon. They can come from your website if you have one (important if you have a brand), social media platforms, especially Facebook; and they can also come from channels like email.
It’s also a good idea to broaden your products and niches in the event that competition heats up. I would say that you should aim to have 70% of your income maximum coming from one product. It’s a smart idea to list numerous products in numerous niches.
Don’t forget, too, that you can use PPC within Amazon to drive highly profitable paid traffic within the marketplace.
Working with high-quality suppliers will bump up the value of your Amazon business and help you sell it for big money. Better suppliers have better inventory levels, they have speedier delivery and they use the latest technology.
It’s even better if you can land an exclusive deal with them, as this means you’ll be the only business on Amazon that’s selling a particular product.
On the flip side, if you’re currently working with shoddy suppliers who have a bad reputation, your business will lose some of its value. Why? Largely because it means buyers can go directly to these suppliers and launch their own business on the spot. This is especially true if you’re working with a generic dropshipping company.
If you truly love your business (and who doesn’t?), you’ll want to sell it to someone who you know is going to take good care of it.
When selling your Amazon business for big money, it’s important that you choose the right buyer. They will not only pay you what your business is worth, but they will also love it as much as you did.
Some sellers decide to sell to cash buyers, as this makes things simpler for them. You could do that too, but it’s also a smart idea to look at a few other things:
Are they financially secure/stable? If they aren’t, their finances may delay the sale or prevent you from getting the price you want.
Do they have experience with growing an Amazon business? You could sell your business to a complete Amazon newbie – but they might wreck the beautiful thing you’ve spent the last years putting together
What is their personality like? Personality matters because you’ll be working alongside the buyer for the first 3 months after the sale. Are they easy to be around and easy to work with/deal with?
Another point about personality: When someone is agreeable and easy to get along with, it smooths over the transition period. This means you might not have to spend 3 months working alongside them after you’ve sold your business to them. You may only need to work with them for a few days, saving you time and money.
Selling your Amazon business for big money is exciting, and it should also herald a new dawn for you.
The question is, what’s next?
For now, however, it’s important that you implement the steps and advice in this article, and do the right things as you seek to extract the most value out of your business as possible, as well as find the right buyer. Of course, the best way to do that – is to get us to do it for you.
Get the timing right, bump up your businesses value – and get selling.
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