Updated: Sep 27, 2021
Wanting to sell your FBA business may stem from many different reasons, but whatever the motivation, every business owner would like to see proper compensation when letting go of an e-commerce company they worked on tirelessly.
Selling your business does not equate to a loss. Letting go of that FBA business that you launched and grew on the Amazon marketplace may feel uneasy at first. As you start to understand the ropes of selling an Amazon business, in this post we will offer you pros and cons on the top three partners that could provide you a successful exit from your FBA company. Before deciding to sell your online business, there are a few things you should consider first, as this decision can have a huge impact that may turn your life around.
Make sure you are taking the right step forward by asking yourself:
Why am I selling my FBA business?
How much do I think my business is worth and what’s the lowest number I’ll accept?
How soon would you like to sell and do you feel confident to negotiate by yourself?
If after asking yourself these questions, you are even more determined to cash out on your Amazon business, then you are ready to sell your business. The next step in the process is deciding who exactly you should sell to.
There are three primary types of buyers eager and willing to invest in existing Amazon companies: brokers, private equity firms, and aggregators. Knowing what these buyers are all about and how they can meet your needs and what you as the seller can expect will give you a better idea of what you can get in return for passing off your FBA business.
So what are the differences among these three buyers?
What Do Brokers Do?
Brokers are individuals or companies that bridge sellers to interested buyers.
The advantage of using a broker is their dedication. They are experts when it comes to business sales, making deals and closing deals. Their business revolves around the satisfaction of their clients and making sure that they get the best deal available. They invest in solid business sales to guarantee a trustworthy name in the industry.
Here are some of the benefits of working with a broker when selling your FBA business:
Brokers help you prepare your business to make sure that it attracts the attention of the right buyers willing to give you the monetary amount that matches the real worth of your business.
Brokers can help you create a profit and loss analysis that will provide you a chance to show target buyers that your business is worth taking on.
Brokers know and have direct connection with multiple buyers in the market, and they can offer you several choices so you can pick the right option to respond to your business and brand.
In short, brokers will do everything for you to the point of closing the deal and getting you the compensation you deserve.
So, what’s the catch?
Brokers will usually take a 10% to 12% cut from the total sales amount. For inexperienced sellers or anyone who prefers a professional help them through the process, such a percentage is small compared to the benefits and knowledge brokers bring to the table.
What Do Aggregators or Roll-ups Do?
With brokers, you are going to spend time shopping around for different buyers in the market. However, with aggregators (aka roll-ups), you connect directly with an Amazon aggregator. There’s no need to go from one buyer to another, constantly putting your business under the microscope. With aggregators, like Umbrella Fund, you can contact them directly and they will often do some of the legwork that brokers do, such as providing an accurate valuation of your company.
Compared to working with brokers, choosing an aggregator provides the seller with an expert in the Amazon marketplace, often growing their already extensive portfolio of third-party FBA sellers. An aggregator like Umbrella Fund who has consistently invested in and grown multiple FBA companies and specializes in niche industries, with streamlined due diligence processes and transparent practices, all led by e-commerce experts, will give you a fair-market evaluation and facilitate the sale with ease.
What Do Private Equity Firms Do?
If you want to retain some kind of ownership of the business even after selling it off to your buyer, you might want to check what private equities offer.
Private equity firms handle sales and closings with the option of providing the owner a share in the business, so that even post-transaction, as an FBA entrepreneur, you are involved in the growth of the business, if not the operations. This means that instead of letting go of the business completely, you will still be able to keep your finger on the pulse of your business in the future. Private equity firms often offer 4 -6x your FBA business’s net profit upfront, and in addition to that, rollover equity.
The downside of going through a firm like this is that you don’t rid yourself of the company completely, so if you’re hoping to make a completely clean exit from your FBA business and move onto your next venture, this is not ideal for you.
What You Need to Remember
When in the process of selling your business, you need to outline what you really want: do you want to let go of your business or do you want to continue to take part even once the sale is complete. It is important to think about the future and weigh your expectations in relation to the sale that you aim to make.
This will help you decide whether you are going to contact a broker, an aggregator, or a private equity firm.
Remember that brokers are often contacted by FBA sellers who want to completely sell off everything to their buyers and do not have any interest in handing the process on their own. It is often a lengthier timeline and requires more inspection of your business and matching up with the right buyer.
On the other hand, aggregators offer third-party entrepreneurs the option of a streamlined and relatively quick sale to knowledgeable, experienced investors.
Private equity firms offer sellers the option of keeping stake in the business as part owner after the transaction of sale is completed.
The best choice of partner when you choose to sell your FBA business will depend on what you expect and what involvement you want with the business after you have made the sale.