Making an Amazon business successful takes a lot of hard work and commitment. And when it comes time to take the leap and sell your business, getting your business’s valuation right can be difficult. After all, you’ve put your blood, sweat, and tears into the building and scaling of your business, and you can’t quite put a price on that.
However, a viable Amazon FBA exit strategy is crucial to reap the benefits of your efforts. If your business is marketable, you might get a higher valuation for it. This article will help you understand what makes an Amazon Business more sellable and what influences Amazon FBA valuation.
Armed with this knowledge, you can build a strong Amazon FBA brand and negotiate a better deal with an Amazon FBA buyer who sees the value and potential of your business.
Your business model refers to how you conduct your Amazon FBA business. This includes resale, wholesale, retail, private label, and proprietorship. Each model has different risks and profit margins. All models have benefits and drawbacks—all of which your buyer will consider when making an offer. So, if your business model is convenient and profitable and has a straightforward transfer of ownership, you will likely make a better deal.
Please have in mind that Amazon aggregators avoid reseller businesses, perishable goods, CBD and weapons-related businesses, and complicated electronics.
“Old is gold,” they say, and this can apply to your Amazon FBA brand as well. An Amazon roll-up firm might expect you to lower your price if your business is relatively new, as established businesses might be safer investments. This is because there is already a proof of concept.
The fact that you’ve managed to remain in business for a long period shows that you are running a rewarding and reliable business. Moreover, with an established brand, the buyer also gains its reputation and customer base. Therefore, if you’re a relatively new business, weigh the pros and cons of selling now versus waiting for a few years until your business is well established and has grown further.
Update your financial portfolio with accurate evidence of your profits, losses, and other relevant financial data about your brand. This gives an Amazon aggregator a clear idea of the potential or capacity of your business, which you can use to your advantage in negotiating a better deal.
Clearly explain your profit and loss statements. If your financial portfolio is not up to date, a possible buyer might back out of the deal or offer a lower rate because your business’s potential may be unclear.
Your profit margins depend on various factors such as the products you sell, your business model, overhead costs, and more. An Amazon FBA acquirer will pay close attention not just to your existing profit margins but also to your potential and capacity to increase your earnings.
For example, you already have an established market with a loyal customer base, but your profit margins are not up to par. The buyer may still see the promising potential to grow your business as they may be in a position to negotiate a better deal with the supplier or manufacturer. In this instance, you can still gain a decent valuation despite the low margins just because of the high potential. During negotiations, outline why you couldn’t improve your margins, then emphasize your potential.
Improve your ratings for better reputation and payout. Maintain high ratings and reviews by providing good customer service and top-quality products. These are indicators of customer satisfaction and brand loyalty, which in turn affect your long-term success.
Therefore, a potential Amazon FBA acquirer will take your ratings and reviews into consideration as this plays into your brand’s overall reputation as well. If your average ratings are higher and your customer satisfaction is commendable, you might gain a better offer, and your business will be easier to sell.
It is essential to have a well-established supply chain with reliable manufacturers or suppliers who provide you with quality products. This ensures that your supply chain is smooth and efficient. If you have an unreliable supply chain that cannot fulfill the influx of orders, you won’t be able to negotiate a good deal as the Amazon FBA buyer will have to put in additional effort into establishing a proper one.
If an acquirer is happy with the way your supply chain functions, it’ll also add to your negotiating power.
As an Amazon FBA seller, the best way to safeguard your unique products is to secure a trademark or patent. This diminishes the risk factor for your Amazon FBA acquirer and can land you a higher valuation as the acquirer has less worry about competitors.
A trademark on your brand or patent on your products safeguards your business’s acquirers against legal issues with competitors who may copy your brand or products.
Selling a wide range of products is a great business strategy in general as it decreases the risk of failure. Trends come and go, so if you notice that one product is dropping in popularity, your business will be more likely to survive if you have other popular products listed in your store. Offer a diverse range of products, so you have backups in case one product stops performing as well as it used to.
For an acquirer, a business with a wide product range is a better bet compared to a business with just one or two products for the simple reason that the buyer has leeway and can depend on different products to maintain the business, should one product stop selling well.
However, you must also ensure that your product categories are well-organized and easy to distinguish. Having an updated inventory is also essential, as it helps your Amazon aggregator know what and how much stock you have in your inventory.
All costs must be clearly defined to make it easier for aggregators to change the selling price if they wish.
This logic may apply to selling your Amazon FBA business. When buying your business, the acquirer will face a lower level of risk if you have listed products that are properly categorized and with an updated inventory.
Amazon account health is a tool provided by Amazon that helps you stay on track with Amazon policies and rules and monitor your performance targets. It is a very powerful tool that is completely free and helps you plan your growth, solve issues faster, and make sure you are on the right track.
Amazon account health is also one of the first things a potential buyer will look into early in the negotiation process to see your past performance and forecast your future growth. An account with a lot of unresolved issues suspended ASINs, flagged products, violations, suspension, or deactivation is an immediate red flag for the buyer and they may even back out from the conversation or offer you a significantly lower price.
To avoid any unpleasant situation it is best to review your account health and immediately address any unresolved issues. If necessary hire an Amazon specialist or a lawyer who can help you address the issues faster and better.
Amazon values customer safety and therefore your product must comply with certain rules and guidelines imposed by Amazon. Your product must be 100% safe for its users and Amazon will suspend or entirely remove products that customers flag as a potential danger to their health or safety.
Our advice is to spend some time and resources to fully read the requirements for your product and then conduct a thorough inspection. If needed contact a company that specializes in product testing and will issue a certificate that confirms that your product is safe for the intended users.
This is very important to be addressed very early in your Amazon FBA journey if you want to avoid a lot of unpleasant situations, especially if you are selling consumable or baby products.
The buyer may even ask for a sample of your product to be delivered to their address so they can see and test the product personally or even worse they can ask a friend or family to purchase the product for them so they can have the full customer experience. Don’t forget that big aggregators have teams dedicated to reading the fine print and coming up with ideas on how to improve the product so they will be able to detect even the smallest flaw.
Now that you know what influences Amazon FBA valuation, you have a better idea as to what makes an Amazon Business more sellable.
Just remember that to have a higher valuation, your business must be well established and successful. You also need to convince a buyer about your business potential, and therefore, it’s a good idea to invest in these strategies:
Social media marketing to boost sales
A strong customer assistance program
High reputation to gain and retain loyal customers
Portfolio of financial transactions to outline financial position and future potential or predictions
Collection and analysis of data to assist buyers with insights for future strategies, problem-solving, or decision-making
If you need additional guidance and aim to close a deal in a month, get in touch with us at Benitago. Our team of experts handles all the nitty-gritty, so you can rest assured that you will get the best possible valuation for your business.
Selling your Amazon FBA business is challenging, but it doesn’t have to be a difficult process. We’ll make it smooth and simple while ensuring you get a lucrative exit. To contact us fill in this form!