An add-back is an expense that isn’t needed to maintain your business.
Or, in other words, a one-time expense that you don’t pass onto the next owner of your business.
You might have heard of it – but have you been applying it when selling your FBA business?
Many Amazon FBA business owners neglect add-back, which is essentially the same as leaving money on the table.
Look at it this way: If you don’t apply add-backs to your Amazon FBA valuation, you might sell your business for $120,000 … when you could have got $200,000 for it.
In this article, we’ll be taking a look at the most popular add-backs you need to apply in order to increase your FBA’s valuation.
Got a company car?
Maybe you’ve got travel expenses or even mobile phone accounts.
Or maybe you subscribed to a mastermind.
It’s all good – but none of this should carry forward to a sale.
Sure, the next owner might join the same mastermind and travel to the same conferences – but that’s all on them.
If you’re a savvy entrepreneur, you would have found some ways to cut costs over the years.
Perhaps you decided to suspend shipping by air because you figured it was cheaper to use an alternative method instead.
Or maybe you outsourced it.
Whatever you did, you saved money … but your cost reduction ideas are add-backs that shouldn’t carry onto the next owner.
Yes, the owner’s salary is an add-back!
Because if you’re a solo entrepreneur who’s taking home, say, $150,000 in salary directly from your FBA business, it’s a clear perk. It’s an add-back!
If, on the other hand, you’re running your FBA business in a joint partnership, only one of the owner salaries is eligible for add-backs.
Maybe you’re like many other businesses who invested in intellectual property for your Amazon FBA business.
Maybe you purchased a copyright or a trademark, or maybe you patented something.
If so, these are all one-time expenses that you can add-back.
On that note, intellectual property can also entitle you to tax reliefs, so this is something worth checking out, too.
Many first-time Amazon FBA owners hire people close to them – friends and family members.
This is perfectly fine but it can also mean that you end up paying them more than they’re worth. And if you’re valuing your business while mistakenly factoring in your overpaid employees, you’re selling yourself short.
So take a look at the people who currently work for your company and consider if you’re overpaying them or not. If you are, you will need to adjust their income in order to more accurately reflect what the next owner would be paying the same type of employee.
Add-backs are just one of many things you need to take into consideration when pricing up your business. You also need to look at the age of your business, how automated your business is, and it’s always a smart idea to work alongside a broker who can help you get the best price for your Amazon FBA – and help you get a deal over the line.
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.