If you’re an Amazon FBA seller about to put your business up for sale, one of the most important questions to ask is, ‘Should I complete a direct sale or hire a professional broker?’
You’ll find that internet opinions vary. It’s easy to get confused and nervous about making a wrong choice if there’s no real consensus. And when it comes to private equity, information online is limited.
Here, we’ll give you the pros and cons of all three options so you can make an informed decision and get the best value for your business.
Amazon business brokers specialize in mediating FBA business sales. Think of them as your friendly local realty broker – except that instead of property knowledge, they’re equipped with the tools and expertise to connect you with the right audience and the right markets for FBA businesses.
When you approach an Amazon business broker, they’ll usually have some free tools to quickly value your Amazon FBA brand. They’ll explain how they can help you sell your business. Once you’ve agreed to work with them, they’ll present you with all your options for selling.
Brokers may have accountants on their team, or they’ll be able to recommend an accountant to help sort your financials and calculate your profit and your Seller’s Discretionary Earnings (SDE). They can also assist with preparing your profit and loss statement, and help you clear up any confusion that might arise during the sale process.
They will have an established relationship with Amazon FBA aggregators and will reach out to them with an informed offer regarding your business.
The biggest advantage broker sales have over direct or private sales is that you’ll be able to stay out of the entire process.
You’ll have a team working for you, covering everything from finding buyers to taking care of the paperwork. As a newcomer to FBA sales, this may sound like a huge relief! In most cases, all you’ll need to do is wait for the money.
Convenience comes at a cost. In this case, it’s around 5-15% of the total sale price. Considering that you’re probably selling your business at a loss, it’s a huge percentage.
Some companies also ask for upfront payment but I’d say this is financially unwise.
Unfortunately, some brokers are known to favor regular buyers over others. While this may mean you get a sale faster, it probably won’t be for the best price.
In the case of a direct sale, you’ll be in direct negotiation with the Amazon roll-up firm, and you’ll be responsible for sorting out your own paperwork.
You can negotiate your terms and conditions, raise any concerns about issues, and keep the entire payment for yourself after your Amazon FBA exit.
By using our free resources, you can properly prepare your business for sale without a broker. That’s because all your financials will be ready – and you’ll have a good understanding of how to calculate your SDE (Seller’s Discretionary Earnings).
However, if you are inexperienced in negotiating or don’t know how to clean up your finances, a buyer might take advantage. They could then calculate a lower price than your business is worth.
We don’t recommend going into a direct sale blind. Go for this option only if you’re confident that you can sell your business at the best value, without any help.
You’d also be able to best gauge whether your buyer is a good fit for your business.
If you’re not sure that you can handle all the work and negotiate with a full repertoire of knowledge, then don’t even try hammering out a direct deal. Professional FBA buyers can take advantage of you, and you may not achieve the price that a broker can – even after they’ve taken their cut.
If that sounds like you, it’s better to hire a broker to do everything for you.
Private equity broker firms are the best option for people who want to stay involved in the business after the sale.
These firms will buy and sell your business, and they will assist in growing and scaling it. Private equity brokers will work exclusively with you, making the sale fast and easy.
Private equity firms also pay 4-5 times the SDE – and they pay upfront. So, you will receive an initial payment, stay in charge of operations for your business, and receive a further payment when they sell the business to someone else.
Think of it this way: you’re being paid to stay on and grow your company instead of giving it up immediately. It’s like getting hired by people who want to make sure your company is at its best before it’s sold.
This option is a great idea if you want to get the absolute best deal for your business.
Unlike traditional FBA brokers who sell your business as is, private equity firms work hard to raise the value of your business before negotiating a sale. This way, you’re less likely to lose money when you let it go.
If you’re someone who wants to stay out of things and just sell your business as fast as possible, then a private equity firm might not be the choice for you.
There’s a lot of added effort required before making a sale, so you can’t just cut your losses and move on.
As a business owner, you know how important it is to make the most of your money.
So, before you hand the reins to a business broker, consider this: would you rather spend a few more months building up the value of your business before selling, or sell it at a loss?
At Benitago, we work hand in hand with business owners so they can get the most out of their venture.
If you’d like to know the value of your business, Contact Us for a free valuation today!