- Posted on April 6, 2022
- by Benedict Dohmen
Everything Amazon FBA Aggregators Are Looking For When Acquiring an Amazon FBA Brand
One of the most common questions we always get is – What are Amazon FBA aggregators looking for when acquiring an Amazon brand?
This question will have a few different answers depending on the type of aggregator you are speaking with. However, there are a few points that apply to all of them and you should know them before selling your business.
To help you ensure you position in an attractive way to Amazon FBA aggregators, here’s everything you need to know about what they’re looking for. We’ll also add in a few helpful tips on how you can position your business so it gets noticed by Amazon roll-up firms.
Table of сontents:
What are aggregators?
Before we get started, it’s important to establish a good idea of what e-commerce aggregators are.
These are companies that acquire different Amazon brands. They do so for one purpose; to consolidate them under one parent company.
In most cases though, they look for businesses with lots of potential. That’s why numbers are one of the most important things that aggregators look for in a sale.
What are Amazon FBA aggregators looking for?
Now, on to the million-dollar question; how can you make sure your business will interest Amazon aggregators?
First things first—it’s important to know your industry well. Several things immediately catch an aggregator’s eye.
Here are some of the key things most aggregator companies look for:
1. Registered branding
Typically, aggregators prefer an established Amazon FBA business. This includes sellers who own brands that manufacture their merchandise. One of the best ways to do this is to register your trademark.
Not only does this show that a business needs to be taken seriously. But it also protects your interests as well as the aggregators in any event. It’s quite rare—bordering unheard of—to see an aggregator company take on an unregistered brand.
So if you haven’t gotten started on your paperwork just yet, you may want to speed up the process.
While registering your trademark here are 10 more ways you can increase your brand’s value:
2. Potential for profit
No one wants to buy a dying business. While you may be selling yours because it’s begun to go south, that doesn’t mean it isn’t worth money. This is where you should get a handle on your finances. If you have a feasibility study—which you should—definitely throw it in the mix.
Profitability is one of the biggest factors that would incline an aggregator to purchase your business. In a way, it makes sense. After all, why would you buy a company that won’t make you any money?
As long as you’re able to show or prove to the aggregators that your business has a lot of potential for earning money, then you should be good. The same is true regardless of where your business currently stands in the market.
Keep in mind though that aggregators typically look at profit margins. Anything less than 10% is typically ignored. Even then, most Amazon FBA aggregators prefer a margin of at least 15%.
Not sure how Amazon aggregators value Amazon brands? Here are a few links to help you
3. SKU variety and performance
While having a wide range of SKUs seems to attract certain aggregators, it’s not a definitive factor. It all comes down to how much money your business makes.
Say you have around five SKUs. Of those five, you are raking in $2 million in sales. On the other hand, you might also have another business with over 30 SKUs. While this business brings in $3 million in sales, it’s not more profitable than the former.
In this case, your numbers can and will betray you if they don’t add up to show maximum profitability. Your best bet would be to purge your shelves of SKUs that don’t bring in as many sales as the others. This will present a healthier, more streamlined product lineup to buyers.
Don’t get us wrong, aggregators love companies with a lot of SKUs. This shows that you have a diverse range of products to offer.
In fact, aggregators like Benitago prefer businesses with less than ten SKUs.
That said, if most of those products are performing poorly, then you’re looking at lower margins for profit.
It’s also not a good idea to present a business with only a few SKUs that perform well. In this case, balance is everything. You need to have a solid SKU lineup that makes money like clockwork.
Don’t expect an aggregator to be impressed that all your products are generating sales when their profitability ratios are off. Instead of impressing them, it’ll look sloppy and may bring down the overall value of your business.
The bottom line is, having a lot of SKUs can hurt you if you’re not making a reasonable profit from all of them combined.
4. Percentage of Amazon sales
It isn’t uncommon for brands to sell their products on multiple platforms.
Whether it’s Etsy, Shopify, or your website, it just makes sense to spread out your sales channels. That said, Amazon FBA aggregators typically want to see businesses who excel on Amazon more than any other channel.
There isn’t a set percentage goal or requirement but many aggregator companies ideally prefer Amazon sales to take up at least half of a business’s revenue.
After all, if an aggregator is interested in your Amazon FBA business, it makes sense for them to focus most—if not all of their resources—on ensuring high profitability.
Ultimately though, it depends on the aggregator’s preference and interest. Some would be fine with less than 50% amazon sales percentage as long as there is room for improvement and scaling.
5. Demand and viability
Many brands have recently grown popular for featuring “trending” or viral products. While the numbers look impressive for a few months—years if you’re lucky—sales tend to dwindle over time.
And we’re not talking about niching down. We mean businesses whose audience disappears once the hype dies down.
It’s important to understand that FBA aggregator companies typically avoid these kinds of companies. The main reason is that they aren’t sustainable or profitable.
Aggregators want companies that will stay in demand years down the road. After all, there’s no use in putting up pop-up shops that would only waste their time and resources. Who knows when the demand will start to dissipate?
Now, when it comes to viability, you’re walking into an entirely different ballpark. Typically, Amazon aggregators tend to play favorites when it comes to niches. Pets, home goods, gym equipment, baby products, and products that are purchased repeatedly are among the favorite and preferred categories while electronics, fashion, regulated goods, and trendy items are usually avoided.
While some like to have a little bit of everything, many like to acquire businesses within the same industry.
For example, one roll-up firm might prefer to buy out businesses that sell products in the sports industry, while another likes to focus on women-geared brands.
The viability of your business depends on three things:
- Profitability
- Long-term demand
- Niche/industry
Benitago doesn’t comply with this rule and we are willing to consider businesses that most aggregators usually avoid. Contact us to see if we will consider your business.
6. Customer loyalty
A brand that has established a great relationship with its target audience and existing customers is always attractive. This shines a positive light on the projected profitability of a business.
After all, repeat customers are what keep businesses running.
Key takeaway
Finding aggregators to acquire your business is difficult when you don’t know what they’re looking for. Despite the success of your business, if you don’t meet certain criteria, then you may as well go ahead and put your business up for private sale.
That said, the key to successfully closing a deal with aggregator companies is to know how to use your leverage. While you may be the one who needs an aggregator to acquire your Amazon FBA business, it’s important to find aggregators like Benitago who value your time.
Don’t settle for less! Check your business value today, and get closer to securing a great, fair price for your Amazon FBA business.
Now it is your turn – do you have a question for the Benitago team? Or maybe you want to start a conversation with like-minded individuals? Feel free to share your thoughts in the comment section below!
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