Five Things to Consider When Selling Your FBA Business to Attract Qualified Institutional Buyers
Updated: Sep 3, 2021
As an entrepreneur, selling your Amazon business does not indicate defeat, and on the contrary, it may be a sign of success. Often, as an Amazon business grows it can become harder to contain and manage, and owners may struggle to keep up with the growth. When this happens, FBA owners sometimes choose to sell their business and liquidate their investment, cashing out on the efforts that they’ve put into operating in Amazon for many years. If you sell your Amazon business, it can turn out to be one of the most rewarding and unexpected options an FBA business owner can experience.
With all the changes taking place globally as people and businesses continually adjust to the pandemic, Amazon has come out stronger than ever and is always updating policy and releasing new information as it accommodates a growing number of both sellers and buyers. With several sellers overwhelmed as they try to keep up with ever-changing practices, the desire to exit from Amazon FBA businesses has also increased during this exceptional time.
If you are an FBA seller on Amazon, then you might simply be interested in how to find a qualified buyer, and subsequently getting them to pay attention to the business you are ready to offer.
There are several factors that make Amazon acquisition companies among the top choices for those looking to sell their Amazon FBA business with the hope of making sure that the brand remains strong and the name of the business retains its impact in the market. Amazon acquisition companies–aka aggregators–focus on improving and developing existing brands, and making sure the businesses continue to profit in its operations.
One of the benefits of Amazon aggregators is that you can make a successful exit as a seller, but your Amazon business will continue to live on and grow even after you have made the sale.
How do you make sure you get the attention of a qualified institutional buyer, ready to offer you solid market value that you and your business deserve? Here are five things to consider when thinking of selling your FBA business to help you attract the right institutional buyers in the market.
ONE: Make Sure You Have a Winning Product
Competition in Amazon is tough, with more and more individuals interested in the idea of selling online and hopping on the e-commerce bandwagon. Because of this, Amazon aggregators want to make sure that their newly acquired businesses have the best chances of making a mark in the market and outselling the competition. Among the primary factors necessary to make a business a “winner” is a winning product offering.
Is the product sold by your company sought out by a large portion of the public? Do you keep competitive prices with the competition to guarantee continuous sales?
What advantages does your brand or product offer compared to others in the platform within the same category? These are all questions that need to be considered and answered ‘yes’ to if you want to receive a hefty offer for your company when putting it up for sale.
TWO: Registered Brand and Trademark
Why is your business brand important? It forms your business identity, especially when trying to stand out from other sellers on the platform.
Without a brand, it would be hard for you to make a splash on Amazon that garners the attention of aggregators; creating a unique identity drives sales up, because, if your brand is not different from the next, why buy your product over another seller’s, if they are both almost identical? You want to establish a product and brand that customers can relate to and recognize, prompting buyers to repetitively look for your product specifically.
Amazon aggregators offer substantial investments for FBA businesses that maintain a lead in the cutthroat marketplace of online sales on Amazon.
Often, sellers looking to sell their businesses without a trademarked brand won’t warrant the immediate attention that a singular brand does.
THREE: Scale and Size of the Business and the Market it Serves
Amazon businesses are often measured through their Seller Discretionary Earnings (SDE) which is the final profit you take home. Often aggregators prefer to buy those with at least $250,000 SDE.
The reason behind this choice is probably quite clear: qualified institutional buyers want a sure return on investment when they take on an FBA business, and want to know that it will continue to earn them more in the future. These aggregators already have experience and specific strategies in place to guide new acquisitions, nonetheless, for these strategies to work, they need to know what possibilities lie in future developments and expansions. The easiest way to determine future success depends on the current performance of these Amazon businesses and what kind of impact they make on the market.
FOUR: Transferability of the Business
As an owner and entrepreneur, how much have you done for your business?
From basic record keeping to improving marketing efforts and customer outreach, an investor needs to see your business as a well-oiled machine. If you are set to provide an aggregator the proof that they need to determine that your company is a sure bet, then it is an attractive and smooth transfer as far as the investor is concerned.
Amazon aggregators like UmbrellaFund tend to work with multiple businesses at a time, and they apply advantageous strategies to these brands in efforts of future expansion, ultimately doing everything possible for optimal financial gains from their newly acquired operations. Starting from zero is usually not a profitable option, but if you as an Amazon entrepreneur already have a system in place, the acquisition company need not put too much effort into getting your business off the ground. FBA businesses that are easily transferable from owner to aggregator will appeal to more investors.
FIVE: Stable Product Category
Within the Amazon platform, there are products that record consistent buyer demand, while there are other products that only sell during specific seasons. Seasonal products are highly marketed during a particular time of the year, and they may move huge amounts during their given peak season with high profits, however, if this profit is not comparable to an item that boasts year round high profits, then another steadier brand selling less-seasonal products will draw better aggregator offers.
Consistency of sales is important. Aggregators are very specific when it comes to measuring the consistency of operations, as well as the rate of sales affecting the organization and the value that it carries. The more consistent your recorded sales are, the more interesting an offer your business presents for an aggregator.
Finding a Fitting Amazon Aggregator
These five factors that you need to take into consideration should give you an idea of how to evaluate your own Amazon FBA business, especially when preparing to find the right aggregator to fit your needs.
The next step in the process is researching and picking a fitting Amazon aggregator to invest in your brand and business, and lead it on the path you have paved. It is critical to pick a company that understands your brand and rewards your efforts, placing value on the business that you worked hard to launch.
Finding a trustworthy Amazon FBA acquisition company can be done by reading up on different options and checking backgrounds, brand portfolio, and work experience, especially as it relates to your product niche and journey. When you do find an aggregator that fits your expectations, contact them and ask all the questions you have in your mind. As you’re researching, proper aggregators should be able to provide a valuation of your company so that you have a general idea of what your company is worth.
At the same time, you also need to prepare yourself to answer the questions they may have for you about your FBA business history, to make sure your business visions align.
The five points noted herein highlight the primary concerns of Amazon sellers and indicate how aggregators go about choosing their next investment. Measuring possibilities for future success is a critical marker in the decision that Amazon acquirers make when considering to take on an FBA business.
If you are a seller, developing strong and attractive characteristics in your own Amazon store takes time and patience, but when done right, your efforts will pay off. Establishing a company that sells a winning product with a trademarked brand that can make for a smooth transfer of ownership will give you a better chance at cashing out your Amazon FBA business at a handsome price.
If you’re ready to sell your Amazon business but you’re not sure where to start researching, Umbrella Fund can walk you through the process, give you an express valuation, and help you step by step.