Characteristics Of A Good Amazon FBA Business Buyer
Deciding how to sell your business and who to sell it to are some of the most important steps in the process. Finding a potential buyer can seem tough, but it’s possible to find a good Amazon FBA buyer – if you know what to look for.
This comprehensive guide is tailored to answer all your questions, so you can make the best choice for you and your business.
Keep the following pointers in mind when discussing sales deals with potential buyers.
1. Offers a fair price
It’s easy to get entangled in a negotiation regarding the value of your brand. Though it is not uncommon for buyers to do everything they can to get the price down and make a better deal for themselves, always be wary of buyers who try to drastically lowball you.
The easiest way to avoid this is to determine your price by calculating your SDE and organizing your financial statements. Then decide on the amount of wiggle room you are comfortable with. This way your buyer can make a sensible offer and you can decide on a compromise that is fair to both parties involved.
Remember to present both sides of your business, so your buyer can make a judgment based on all the information. A genuine buyer that is interested in your company will recognize not just the company’s future potential, but also the effort it took to make it a success.
This should usually result in an offer that doesn’t undermine the company’s inherent value.
2. Readily available funding
A background check on your buyer is always a good idea to understand the status of their financial backing.
The following points are extremely important when considering a buyer’s background:
- Do they have the funds available to disburse as soon as your deal is closed?
- Do they require approval from investors or other partners or banks?
- Do they only have ‘committed’ capital available to invest?
- How many liquid assets do they possess, for investment purposes?
Very often, buyers don’t have the cash they have ‘raised’ in hand to be spent immediately. Rather, they tend to have ‘committed’ capital which requires approval.
This approval depends upon a myriad of variables and can easily fall through – which means that you could potentially be left hanging 30 days later when the LOI exclusivity has ended.
There is also the possibility that your buyers haven’t raised any money, or may have already spent the capital they previously raised. This is extremely common, and they could be using your LOI to raise capital.
If they’re unable to successfully raise funds, your deal may fall through or you may be left on a waiting list for future payments.
3. A reliable track record
Reliability is an important virtue for any businessman or investor to possess. So, how do you know your buyer is serious and reliable? Ask for a track record!
Look for answers to the following questions:
- How many brands has the buyer purchased?
- How quickly have they closed the deal?
- Have they purchased businesses or brands in your specific categories?
- Have their lenders set restrictions on the categories they can invest in?
It is crucial that you feel comfortable during the sales process, and have confidence in your buyer’s experience and knowledge.
A good sign is if your buyer is responsive and actively involved during every step of the process, and ensures that you feel that your interests are safeguarded too.
Reliable brands shouldn’t disappear or ‘ghost’ you and will be prompt with their updates. They also communicate their concerns and voice their opinions to ensure that all parties are on the same page.
4. Fast and accurate processing
When it comes to selling your Amazon FBA business, speed is of the essence. All your conversations regarding the transaction should be fast and accurate.
The buyer may have already established the necessary funds and documentation from beginning to end.
If you notice that your buyer has not properly established a process, it raises a red flag and a valid reason to voice your concerns.
Request that your buyer provides a document detailing the process, along with a predetermined time frame and the deadline for the completion of payments and documentation.
5. Experience with Amazon businesses and brands
Dealing with a buyer who is an Amazon native is guaranteed to make the selling process run more smoothly.
Often buyers from a finance background tend to enter negotiations with misconceptions. They are accustomed to deals taking several months to be finalized and may rely on lawyers who lack experience with the intricacies of selling on Amazon.
This may mean they spend a long time on due diligence items, rather than focusing on your Amazon account.
They may then find ‘surprises’ which causes them to back out extremely late in the process. This can cost you a lot of time, effort, and money.
Amazon native buyers will have an established workflow for your business before it is even purchased, and may offer payments in 3 ways:
- Upfront cash
- Stability payments
- Earnout payments
Inexperienced buyers may not have any established plans regarding what to do with the business – and might only decide what to do with it afterward. This could lead to a lot of nightmarish scenarios including financial losses, and being overshadowed by the competition.
If the buyer ends up being insolvent, you could stand to lose your stability or earn out payment.
How to research efficiently
Research can seem daunting as there is a plethora of information available out there. To ensure that the information you have is honest, accurate, and reliable, always begin by checking the buyer’s website – look for essential information such as details, guides, and reviews.
Google the buyer’s business name to do a thorough background check. You can also speak directly with people who have already done business with the buyer, or have any kind of professional relationship with them.
If you’re not satisfied with the information available you can also reach out directly to the buyer and ask them to provide you with all the necessary information you need.
You also need not hesitate to request the buyer to provide you with proof of past transactions and speak to them regarding any other clarifications you may need.
You can choose to sell your business through a broker, or do it privately yourself – just ensure you know the characteristics of a good Amazon FBA buyer.
We’ve covered everything you should look out for to make the process as smooth as possible. Research extensively, and lastly – trust your instincts.
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