For many lifestyle entrepreneurs, selling their Amazon FBA business is a chance to move on to bigger and better things. It can provide an opportunity to reduce stress and risk, as well as create more financial freedom by turning your e-commerce venture into a substantial sum of cash.
Sellers can take that money and use it to pursue their passions or travel the world, ultimately being able to live a life full of freedom and adventure!
Plus, many sellers can still remain involved in the growth and success of their former businesses by serving as investors or ambassadors.
It’s no secret that Amazon FBA businesses can be full of potential and riches, but how exactly do business brokers value these businesses?
It’s often an intimidating experience – like walking through a minefield of numbers and metrics.
Quick Takeaways:
- Unlocking Business Value: Selling your Amazon FBA business can empower you to unlock the full potential of your venture and realize the fruits of your labor, expertly positioned with an Amazon broker.
- Role of Amazon Business Brokers: Amazon business brokers are experts in valuing and selling FBA businesses, serving as intermediaries, valuers, and negotiators, ensuring a profitable exit using a broker.
- Factors in Valuation: Key factors for valuation include revenue, profit margins, brand recognition, intellectual property, and market share, which are essential in determining the value pyramid of your LLC on Amazon.
- Choosing the Right Broker: Selecting the right Amazon business broker is crucial for a successful and profitable sale, offering expert guidance in the seller’s business niche.
- Maximizing Business Appeal: Optimize your business for sale by assessing performance, organizing finances, and documenting all aspects, making your ecommerce business appealing to potential buyers.
- Sales Timeline: The time to sell an Amazon FBA business can vary depending on business size and market demand, with expert flipper service helping navigate LOIs, negotiation, and closing.
- Leveraged Buyouts: Leveraged buyouts are a financing strategy used by acquirers, like private equity firms, to purchase companies, showcasing the benefits of working with experienced FBA sellers.
- Valuation Boost: Acquirers can increase valuation multiples through strategic acquisitions and operational improvements, enhancing the profitable business process.
- Private Equity Strategy: Private equity firms use leveraged buyouts to maximize returns while managing risk, offering a seller’s business a higher exit value.
- Brokers’ Valuable Role: Amazon business brokers provide valuable insights and expertise for achieving accurate valuations and successful sales, guiding you through the process of working with ecommerce businesses.
But if you take a step back from the complexity of it all, there’s quite an interesting process behind how Amazon ecommerce business brokers determine the value of an Amazon FBA business.
But first…
Why Sell Your Amazon FBA Business?
Selling your Amazon FBA business can be an incredibly daunting and nerve-wracking venture. After all, you’ve put in countless hours of hard work building your business, while skillfully nurturing it from the ground up.
Many FBA entrepreneurs who reach this point find themselves unsure of what to do next. In fact, my husband & I found ourselves in this exact position in late 2019 when we decided to sell our own Amazon business.
We found ourselves teetering for months, should we, shouldn’t we? Should we find an Amazon FBA broker to help out?
For starters, it’s important to understand why you might consider putting up your Amazon FBA business for sale.
Aside from the obvious creation of potentially life-changing income, you may also have other reasons to put your Amazon FBA for sale such as;
- To invest in other businesses and ventures to create additional streams of income
- Having more time to spend with loved ones and pursue hobbies
- Consolidate resources and businesses to reduce overhead costs
- Generate capital to expand existing businesses or develop new products
- Take advantage of market opportunities and exit while the timing is right
- Travel the world!
Aside from receiving a valuable sum of capital for your venture, selling your Amazon FBA business can be a great way to unlock the full potential of your venture and realize the fruits of your labor.
It can empower you to start anew with the wealth of experience you gained while launching your business. Plus, by taking the initiative to work with a reputable Amazon business broker, you ensure your business receives a proper evaluation and its true market value.
What Do Amazon Business Brokers Do?
Amazon business brokers specialize in helping business owners buy and sell Amazon FBA businesses. They are experts in the field and understand the incredibly lucrative potential of these businesses, regardless if they are digital business brokers or not.
The broker we worked with during the sale of our business was invaluable. His expertise, the contacts he had, and the guidance he gave us through the entire process were worth every penny of the commission he charged.
As the intermediary between the business owner and the buyer, brokers are perfectly positioned to both value your business, as well as help facilitate the sale and will charge a commission of the sale price, usually between 8 – 15%.
Their prime services include;
1. Valuing Your Amazon FBA Business
Amazon business brokers value an Amazon FBA business by taking into account several key factors which include the current market conditions, sales history and trends, product features and pricing, customer reviews, and potential for growth.
They also consider the profitability of the business and its competitors as well as the current owner’s competitive advantage in the marketplace. By carefully analyzing all of these variables, they work out an accurate valuation that will ensure a fair price is achieved for both parties involved in the sale.
In addition to assessing the worth of your business in monetary terms, your broker can also provide valuable insights into opportunities for improvement that may help you grow its value over time.
2. Creating the Business Sales Memorandum
Your brokerage firm of choice will create what’s called a sales memorandum for your Amazon FBA business in order to accurately convey the value, risks, and rewards of investing.
By carefully considering various components such as customer demographics, product features and pricing, past sales performance, and potential for growth, the broker works out an accurate valuation that is fair for both parties.
The memorandum is simply a sales document for your business that serves to highlight any additional assets or resources included in the sale as well as any opportunities for further growth that may be available after taking ownership.
A good sales memorandum will provide buyers with all of the necessary information needed to make an informed decision about investing in your business.
3. Advertising to Potential Buyers
A professional Amazon business broker has both the experience and the connections to help you market your Amazon FBA business effectively to prospective buyers.
They know the importance of positioning your business for sale and will create an effective sales strategy that focuses on the key strengths, benefits, and competitive advantages your business has to offer.
In addition, they will also look into existing and potential buyer pools including FBA aggregates, venture capitalists, or angel investors, and craft a compelling marketing message that speaks directly to those interested in investing in the business.
They may even recommend additional marketing channels and methods that could be used to increase exposure and draw attention from prospective buyers.
4. Negotiating the Sale
An Amazon business broker is trained to help negotiate the sale of your Amazon FBA business. They have experience in researching, evaluating, and analyzing all aspects of a business transaction and will work with both parties to ensure fair market value is reached.
The broker understands the value of leverage when negotiating and can use this knowledge to put you in the best position possible when discussing terms and prices.
They will also ensure that the seller’s interests are represented throughout the process, advocating for a favorable outcome that leaves everyone happy with the results.
5. Due Diligence & Closing the Deal
Due diligence is where many buyers and sellers trip up. Your buyer will likely ask a lot of questions and request a swathe of information, which can quickly become overwhelming, before buying.
Your broker can bridge the gap between buyer and seller and help both answer buyer questions and guide you on what information to gather and share.
They’ll review all the financials and other documents of your Amazon FBA business to make sure there are no irregularities or inaccuracies and will provide an assessment of the company’s performance and prospects that can be used by prospective buyers in their decision-making process.
The broker will also review legal documents such as the terms of sale agreement, asset deals, or any other contracts that may be involved in the transaction. All this helps ensure everything is completed accurately, ethically, and efficiently so that a successful sale can be completed.
All in all Amazon business brokers provide a range of services that help buyers and sellers make sure that the transaction is as smooth and straightforward as possible.
By leveraging their expertise and resources, brokerage firms are invaluable when it comes to valuing and buying or selling an Amazon FBA business.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
Pros and Cons of Using an Amazon Business Broker
Pros:
- Expert Guidance: Amazon business brokers bring their expertise to the table, providing valuable guidance throughout the selling process.
- Optimized Valuation: These professionals specialize in valuing Amazon FBA businesses, ensuring you get the best price for your profitable business.
- Time Efficiency: Working with an Amazon broker can expedite the sale process, potentially reducing the time it takes to sell your business.
- Access to Market Insights: Amazon brokers have access to market data, helping you make informed decisions about when to sell your ecommerce business.
- Negotiation Skills: They excel in LOIs, negotiation, and closing, ensuring you get a fair deal and avoid potential pitfalls.
Cons:
- Commission Fees: Amazon business brokers typically charge a commission of the sale price, which can reduce your overall proceeds.
- Loss of Control: When you exit using a broker, you may have less control over the sales process and negotiations.
- Costs: There may be additional costs associated with hiring a broker, impacting the overall profitability of the sale.
- Broker Selection: Choosing the right [FBA seller] can be a challenge, and making the wrong choice may lead to a less-than-ideal outcome.
- Dependence on Expertise: Relying on expert guidance means trusting another party with crucial decisions about your LLC on Amazon, which may not align with your vision.
How to Sell Your Amazon Business Using a Broker
To sell your Amazon FBA business successfully, here’s what you need to know about using a broker.
Before working with a broker, you’ll need to have a complete understanding of what’s included in the sale, such as your current inventory levels, working capital, pricing metrics, and growth potential. Your broker will be able to help with this.
They’ll also help you identify potential buyers and prepare a formal pitch package with all the relevant details that potential buyers need to know.
During the negotiations, your broker will be there to ensure your best interests are taken into consideration. They’ll also be able to help you with the paperwork and fulfill any legal requests from the potential buyer.
Once a deal is secured, your broker will help you ensure a smooth transition of ownership.
Taking the time to find a well-seasoned business broker is essential − they’ll have the resources and knowledge to help get the best possible outcome when you decide to sell your Amazon FBA business.
If you look after your broker and give them the information they need, they’ll take the hassle out of the process, leaving you more time to focus on your next venture.
What Amazon Business Brokers Look For Before Marketing An Amazon Business For Sale
When Amazon business brokers are marketing an Amazon business for sale, there are numerous variables to be considered before advertising it for the highest profit.
Some of the main things brokers are looking for include;
- Average monthly sales on Amazon are between $10,000/mo and $500,000/mo
- Gross margin (after all COGS and selling fees) of 25% to 50%
- Amazon account and listings in good standing
- All or most products being sold are private brands owned by the seller, preferably with applicable trademarks
- Established off-Amazon presence: website, social media presence, email list, and sales on other marketplaces. This is a nice bonus but not essential for the sale of your Amazon business, however, it’s worth noting an engaged email list is a high-value item that could increase the value of your overall sale considerably.
As experienced professionals, the broker’s job is to make sure that the various assets, such as current inventory levels, brand recognition, and intellectual property, are fully evaluated and their value is taken into account.
Let’s dig into some areas your broker will be looking at;
1. Revenue & Profit Margins
Brokers need to evaluate a company’s revenue and profit margins to place it accurately in its correct market value. Knowing exactly how much money is generated within a certain time period, along with if there are any unforeseen costs associated is vital to price the business competitively.
2. Brand Recognition
Brand recognition is something that cannot be underestimated when choosing to sell an Amazon business. Knowing the value of the brand name and its recognition among customers is a major part of valuing the business.
Is it associated with quality and trust? If so, it could potentially be sold for a much higher price than if it is poorly known among the public.
3. Intellectual Property
Also, take into account intellectual property. Are there any unique ideas, processes, or products which give the company its competitive edge? If so, these valuable rights need to be identified in order for the broker to calculate the accurate value of the business for sale.
4. Market Share
Market share is an essential indicator of how much a buyer can expect from their purchase. How much of the market does the company own and how much potential does it have to expand?
Knowing this helps the broker to determine a definite price for the business, based on its current and future value.
Amazon business brokers are experienced professionals in their field, thoroughly examining the ins and outs of a business to achieve the highest price before marketing it for sale.
Ensuring that all variables, such as revenue, profits, brand recognition, and intellectual property, as well as market share, have been given due consideration helps the broker to price and advertise the business accurately.
How to Make Your Business More Attractive to Potential Buyers
When it comes to selling your Amazon FBA business, you’ll want to make it as attractive as possible to potential buyers.
Amazon business brokers can help you value your business, but you can also take steps to maximize its appeal before putting it on the market.
- The first thing you should do is assess your business’s performance. Try to identify areas of success, as well as areas where your business could use improvement. If there are any weak points, make changes or at least have a solid plan for how you would address them for a buyer. If prospective buyers see the potential for improvement, they’ll likely view your business more favorably.
- Ensure your finances are in order. Keeping accurate records and up-to-date information is essential for any business owner, but it’s especially helpful when you’re looking to attract potential buyers. Put together a detailed financial snapshot of your business highlighting your income, profits, and cash flow.
- Don’t forget to document all aspects of your business. Having well-drafted contracts, policies, and procedures will give potential buyers more assurance of the soundness of your business. This could make all the difference in persuading them to make an offer.
By taking the time to tidy up all aspects of your business, you’ll help make sure it gets the valuation it deserves and turns the head of potential buyers.
Our Top 3 Recommended Amazon Business Brokers
Here are my top three choices in Amazon business brokers. Please note I haven’t just picked these companies off the top of my head.
My husband & I have personally worked with the team at Quiet Light when first looking to sell our Amazon business. I also recently had the pleasure of meeting and masterminding with Greg Elfrink from Empire Flippers (a very nice chap to know and to do business with).
We’ve also spoken at length with Coran Woodmass from the FBA broker and he is another super nice guy who gives so much without asking for anything in return.
It’s tough to choose between these three companies to be honest, but check them out for yourselves and choose whichever one resonates best with you.
1. Empire Flippers
Empire Flippers are the go-to experts when it comes to selling Amazon FBA businesses.
They are widely recognized across the industry and have experience selling businesses ranging from new ones starting out to established ones with several years of sales under their belt.
With their team of experts, they’re well-versed in strategizing a sale and managing any potential bumps in the road for their clients.
2. Quiet Light
Next up is Quiet Light. They help their clients find the best price for their Amazon business and make the transaction process as smooth and secure as possible.
Their team, including the awesome Joe Valley, has decades of combined experience and a large network of buyers. They understand the industry in-depth and I’m confident their clients are in the best hands.
3. The FBA Broker
Finally, The FBA Broker. If you’re looking for absolute transparency and personal service, The FBA Broker is the way to go.
They consult extensively with their clients to help them get the best value and fastest sale possible. There’s nothing to match their attention to detail and commitment to customer satisfaction.
We hope this list has been helpful and has given you a starting point to find a suitable Amazon business broker to work with.
Be careful and selective with who you choose, as making the right decision could mean the difference between a successful and profitable sale.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
Selling Your Amazon FBA Business With Amazon Business Brokers – Summary
Amazon business brokers are a key asset to any Amazon FBA business owners who wish to accurately ascertain their organization’s value.
With their expertise, guidance, and access to data and trends, these brokers provide a systematic approach to the valuation process and ensure that the proper metrics and considerations are taken into account.
By providing this insight and leveraging their extensive industry knowledge, Amazon business brokers are in a better position to ensure that FBA business owners receive accurate and favorable valuations for their companies.
I hope this article has helped and good luck with the sale of your Amazon FBA business!
Selling Your Business To Amazon Aggregators and Private Equity Firms FAQs
What factors affect the sales multiple when selling an Amazon or e-commerce business?
The sales multiple when selling an Amazon or e-commerce business can be influenced by various factors, such as the size of the company, its growth rate, profitability, market position, and overall performance.
Typically, e-commerce businesses are valued based on their revenue or earnings before interest, taxes, depreciation, and amortization (EBITDA).
The sales multiple can range from 2X to 5X or even higher in certain cases. However, the exact multiple depends on the specific circumstances of the business and the prevailing market conditions during the sale.
It’s crucial to partner with an experienced Amazon business broker to determine the appropriate sales multiple and negotiate the best possible deal when selling an e-commerce business.
What is an Amazon broker?
An Amazon broker is a professional firm that specializes in the buying and selling of Amazon businesses. If you’re looking to buy Amazon FBA business or have an Amazon FBA for sale, an Amazon broker can facilitate this process. They offer expertise in valuation, negotiations, and deal structures, making them invaluable assets in the realm of Amazon brokerage.
What is an Amazon FBA agent?
An Amazon FBA agent is an individual or agency that helps manage various aspects of an Amazon FBA (Fulfillment by Amazon) business. They can assist with sourcing products, logistics, listing optimization, and more. If you’re considering putting your Amazon FBA store for sale, an FBA agent can help prepare your business to be more attractive to potential buyers.
How do I find a reliable Amazon broker?
When you’re in the market to buy Amazon FBA business, finding a reliable Amazon broker is crucial. Look for brokers who specialize in Amazon businesses and have a strong track record. Reading client testimonials and asking for case studies can provide valuable insights into their capabilities.
Can an Amazon FBA agent help me increase the value of my FBA business?
Absolutely! An Amazon FBA agent can help optimize your listings, manage inventory, and improve customer relations, thereby increasing the overall value of your business. This can be particularly useful if you plan to have your Amazon FBA for sale in the future.
Is it expensive to hire an Amazon broker?
The cost of hiring an Amazon broker can vary, but it’s usually a percentage of the sale price of the business. Given that they can facilitate a smoother transaction and even help you get a better price for your Amazon FBA store for sale, many consider it a worthy investment.
How long does it usually take to sell an Amazon FBA business?
The time it takes to sell an Amazon FBA business can vary depending on various factors like business size, market demand, and how well-optimized the business is for sale. Typically, smaller businesses may take a shorter time, while larger, more complex businesses may require a longer period.
Do I need an Amazon FBA agent if I’m just starting out?
If you’re just starting out, an Amazon FBA agent can provide invaluable assistance in setting up your business, selecting products, and understanding the Amazon ecosystem. While not strictly necessary, their expertise can give you a head start in establishing a successful FBA business.
What should I look for when buying an Amazon FBA business?
When looking to buy Amazon FBA business, consider factors like profitability, growth potential, customer reviews, and the quality of listings. Doing due diligence will help you make a more informed decision and could save you from potential pitfalls down the line.
How can acquiring companies increase their valuation multiples through Amazon acquisitions?
Acquirers, such as strategic buyers, Amazon aggregators, and private equity firms, can boost their valuation multiples significantly by acquiring companies with lower multiples.
For instance, suppose an acquirer with a 10X EV/EBITDA valuation and an annual EBITDA of $10 million acquires a target with an EBITDA of $1 million per year for a 3X multiple.
In that case, the combined entity would have an EBITDA of $11 million per year and a valuation of $110 million at the acquirer’s multiple.
This would result in a valuation boost of $7 million for the acquirer. Additionally, operational improvements and synergies can further enhance the deal’s value.
Aggregators typically have valuations between 8X and 12X, and their aggressive acquisitions aim to maintain good private market valuations to raise new funds or potentially go public at even higher multiples.
What is a leveraged buyout, and how does it work?
A leveraged buyout (LBO) is a method that acquirers use to purchase a target company using a combination of debt and equity. Private equity (PE) firms often use LBOs to acquire companies, paying only a small fraction out of pocket, using debt facilities and cash from the target’s balance sheet.
The acquirer obtains a low-interest bridge loan to acquire the target. Immediately after the acquisition, the parent company takes out a long-term loan using the child company’s cash flow.
The child company then uses its own cash flows to pay down its loan, but the parent keeps the leverage ratio constant, taking out new loans on the child level to continually maximize leverage.
The parent company pays “special dividends payouts” using the proceeds, and the private equity owners pay only 15% tax on these received dividends. This process is repeated every year, allowing the Private Equity owners to maximize their returns.
However, the use of leverage can be risky, as high-yield loans may cause the child businesses that they purchased to go bankrupt.
What are the disadvantages of Amazon business account?
The disadvantages of an Amazon business account can include additional costs, the requirement to provide business documentation, and potential limitations on certain product categories.
Can I get an LLC from Amazon?
No, Amazon itself does not provide LLCs. An LLC (Limited Liability Company) is a legal structure that you must register with the appropriate state authorities. However, you can use an LLC when selling on Amazon to establish a legal entity for your business.
Do you need an LLC for wholesaling on Amazon?
While having an LLC is not a strict requirement for wholesaling on Amazon, it is generally recommended. An LLC can provide liability protection and help establish a more professional and credible presence for your business, making it a common choice among Amazon sellers.
Our FAQs were kindly answered by Louisa Li.
