Mistakes to Avoid When Selling Your Amazon FBA Business

Mistakes to Avoid When Selling Your Amazon FBA Business

Many aspiring entrepreneurs start on Amazon, hoping to land a multi-million dollar exit one day. It’s not a far-fetched dream—Amazon businesses have a high market value. And the right brand can sell for anywhere between 3.5-6 times their business’s annual profit.

Unfortunately, only a handful get an offer that reflects their business’s true worth. Why?

The most common reason is inadequate preparation. Yes, sellers make mistakes that lower the value of their business.
If you’re an FBA seller considering an exit, you need to tread carefully, read between the lines and plan your FBA exit.

Ready to learn how to land the best possible deal?

Table of сontents:

Avoid these mistakes while selling your Amazon FBA Business

How do you ensure you’re selling your business the right way? – By planning for it!

But also by learning from others’ mistakes. So what are the common mistakes you should avoid when selling your Amazon FBA business? Let’s take a look!

1. Not having an exit plan

Many part-time FBA sellers stumble across a viral product and then consider a lucrative exit. A few tire of one business and need the thrill of building another from scratch. Some are just exhausted from competing on Amazon and want an out.

Whatever your reason, putting up a “for sale” sign isn’t an exit plan or strategy. Knowing what your business is worth and identifying when you want to sell your business is the right way to go. Once you’re clear on your financial expectations and timeline, you’ll be able to plan when and how to go about completing the formalities leading up to your exit.

2. Being underprepared

Running an Amazon FBA business isn’t easy. Adding to this, the responsibility of preparing for an exit makes everything so much harder.

This is where setting a realistic timeline for an exit can make all the difference. If you don’t leave yourself enough time, you won’t be prepared when aggregators approach you.

Unable to provide prospective buyers with the right documents, financial overview, seller account access, etc., will only slow the exit process indefinitely. Make sure to automate your internal processes, delegate responsibilities to your team, and keep yourself free enough to deal with decision-making.

Also, always make sure to have enough time to do a background check of the aggregator you consider working with and prepare a list of questions to ask the Amazon FBA buyer so you get a clear picture of what to expect during the sale process.l

3. Not reading the fine print

Are you allowed to sell your Amazon FBA business? Does Amazon stand in your way of doing so? How do you navigate the legal obligations and still make a sale?

Many FBA sellers are unaware that Amazon does not allow you to sell your Amazon Seller Central account. But you can sell your FBA business in one of two ways:

  • You transfer your product pages to your buyer’s account and initiate a listing page takeover. It is time and effort-intensive.
  • You replace your tax details with your buyer’s information and execute an account takeover. It is fast and easy.

Irrespective of which method you opt for, ensure you and your buyer are on the same page. Otherwise, you might end up with a bad deal and incur Amazon’s wrath. Now that’s exactly the kind of sticky situation you should avoid.

4. Poorly maintained financials

Buyers are wary of businesses that do not have well-maintained finances. If your finances are in a mess, your chances of selling your business are slim.

So keep your balance sheets, tax, and account records up-to-date. Make sure you track your expenditures well, separate your expenses, and maintain a proper list of your inventory.

Clean financials can win you your buyer’s approval and score a higher valuation. On top of this, a good balance sheet will help you negotiate a better deal and close the sale very fast.

5. Wrongful valuation guided by COVID impact

The ongoing COVID-19 pandemic has boosted many Amazon sellers’ sales. Just because your current sales look great based on this pandemic-induced price inflation doesn’t mean you overestimate your business’s value. Your buyers will look beyond your immediate numbers to consider your performance before the pandemic.

Undervaluing your business is a sin, but overestimating your worth is unacceptable. Take a look at your actual numbers, list your assets, consider your competition, and then value your business accordingly.

6. Not addressing unresolved legal issues

When selling your business, ensure you have no unresolved legal liabilities. You should have your licenses and permits in a row. Consult an attorney if need be, but make sure there are no loose ends.

Undisclosed and unresolved legal issues can make buyers ditch the deal. You might be all prepared to sell, but no one will be willing to execute the contract! So be fair and square with your prospective buyer.

7. Not paying attention to profit maximization

If you’re selling your business, shift your focus to profit maximization. Wondering what this means or how to go about maximizing your profit?

By ensuring you give your potential buyer everything they need:

  • A sustainable growth plan with a high-converting sales pipeline
  • A definitive niche of repeat customers
  • A clean slate in terms of your finances and legal
  • A well-maintained inventory with quality goods and even better customer service
  • Efficient operational processes that execute everyday tasks with perfection

8. Taking decisions to heart

Getting attached to your business is natural, especially if you’re a first-time small business owner on Amazon. But, steer clear of emotions when negotiating a deal to sell your business. You don’t want to get carried away or make the wrong decision.

Not all buyers are meant for your business. You need to have a careful screening process to select the ones who show an inclination towards buying your business. Work with reason and logic, not emotions.

9. Not preparing for due diligence process

You simply cannot sell your business without performing the necessary due diligence. This is a lengthy process that requires you to check your inventory, remove slow products or those that aren’t moving, ensure you’re not in violation of Amazon’s inventory policies, increase sales by pushing marketing campaigns, diversify traffic channels, ensure your customer reviews and ratings are positive—you get the idea. There’s a lot to be done.

Don’t avoid the due diligence part or cut corners. Equally, do not hide or present incomplete information to your buyer. It reflects badly on your business ethics and can harm your reputation.

10. Not understanding the proper business terminology

You need to be well-versed in Amazon’s terminology and have a reliable working knowledge of your FBA business.

Your knowledge is imperative in driving and closing a deal. For example, if you’re unaware of the difference between your Seller Central Account and the businesses listed under it, you might end up trying to sell your account. Since Amazon forbids its sellers from selling their accounts, you’ll invite unnecessary trouble.

Another example would be if you have a reseller business but don’t know what it entails. Selling a reseller business is infinitely more difficult and complex than selling an individual or professional account.

Know your game and make sure it is strong. It will help you prepare a foolproof exit strategy, execute the sale to perfection, and in turn, make the profits you deserve.

Bonus: Mistakes you should avoid at any cost

  • Not running your business while dealing with the exit strategy
  • Unresolved suspension issues
  • Not possessing the proper certifications, trademark, patent, or full ownership for the product
  • Lying about your financials
  • Lying about the state of the business 
  • Doing giveaways right before acquisition in order to boost traffic and engagement 
  • Hiding information about the business and ownership 
  • Talking too much about tax reduction instead of profit maximization
  • Not having a clear growth plan

Key takeaway

Selling your Amazon FBA business is not an easy process. However, avoiding common mistakes and learning from other people’s mistakes will help you navigate the sale easier and faster.

Despite how extensive it appears, preparing your exit strategically, consulting a lawyer, hiring a selling expert, and going that extra mile can help you land a lucrative deal.

To quote Phil Knight, you must “Play by the rules, but be ferocious.”

After all, it is your business, and your hard work deserves its due credit.

Are you ready for an exit? – Benitago offers a free business valuation within 24h, you need just to fill in this form!

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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