Things to Know when Selling Your FBA Business: Understanding Asset Purchase Agreement and Closing
Are you starting to plan a profitable exit from your "FBA" or "Fulfillment by Amazon" business?
Well, if you are, you must understand two key factors first. These two factors are the "Asset Purchase Agreement" and "Closing" of your FBA business.
If this is your first time, you don't have to worry. In this post, you will learn about the critical aspects of these two factors of selling an FBA business which will help you understand both more profoundly. First, take a quick look at the basics of "APA's" or "Asset Purchase Agreements."
What is an "Asset Purchase Agreement," and what's In It?
An "APA" or "Asset Purchase Agreement" is pretty self-explanatory. It's an agreement between two parties: the seller and the buyer. The deal consists of the transfer of ownership from the seller to the buyer and the price for the asset or assets being sold.
This type of contract is different from merger transactions, where the seller must forego all of the assets involved to the buyer.
In APA, the seller may decide which assets to include in the agreement and which to exclude, making them more flexible.
The clearer an asset purchase agreement is, the better. The clearer an APA is, the easier it is for both parties to understand the agreement's contents. For an APA to be fully effective, it must state clearly what assets are being purchased and how many. Being as specific and descriptive as possible is highly beneficial to both parties involved.
Another aspect of APAs you must put into consideration are representations and warranties.
APA usually has sections specifically put in place for terms and clauses for sale warranties. The information in these sections usually includes the quality and condition of the item or asset being sold, its fitness or compatibility with a specific purpose, and the legal status of both parties involved in the agreement. These must be stated clearly in the respective sections of an APA and must be accurate with the facts.
Concerning the assets price, an APA must also include the payment method. Several payment options are available for purchasing an asset, including total or installment payments. If the investment is also involved with debts or loans, the APA must state who claims responsibility for those loans, whether they fall on the buyer or remain with the seller.
Now that you've seen the basics of understanding APAs take a look at the basics of understanding the closing of your FBA business.
Understanding How To "Close" an FBA Business
Knowing how to exit/close your FBA business effectively is critical to your success.
Taking the proper steps to prepare your Amazon business for sale will help secure your exit's success extensively. Here are three simple steps you can practice to understand better how you should close your FBA business.
Figure Out How You Want to Sell Your Business
There are various options available for you if you've decided to sell your FBA business. These options include acquiring help from third-party sellers, directly selling your business, and auctioning and brokering. Weighing these options realistically to figure out which one exactly fits you and your FBA business is essential in ensuring a successful exit.
Make Your Business Worth More
Before exiting, try to increase the overall value of your FBA business first to ensure you get reasonable rates upon your exit. Most buyers of FBA businesses usually are in the market for high-value and successful businesses they can continue to grow and develop. As a result, high-value FBA businesses are in demand, so if you can leverage ways to heighten the overall value of your business, it will help you get a profitable exit once sold.
Get and Give the Facts
To ensure you're ready for your exit, you have to know the biggest to the smallest details of your FBA business financials. Make sure you have your financials at the ready so that your potential buyers see the cash flow and profitability of your FBA business.
Being clear about why your business is valuable to your potential buyer will help in smoothing along the process of closing your sale. You have to be specific about what your business is, its products or services, and what the buyer can expect in terms of profitability and quality of your business.
These are only three simple steps you can use to understand further the importance of knowing how to close an FBA business. Having a solid, well-thought-out closing plan for your FBA business will benefit you as a seller to have both a successful and profitable business exit.
What To Remember
The methods noted in this post are critical to making sure that as you sell your business to your target buyer, you are guided with the right motivation while you secure yourself with the right amount of liquidation necessary to establish a good sale.
Take note that when it comes to selling your FBA business, the concerns of your sellers should be a part of the priorities that you set your attention to. This will make it easier for you to secure a better rate of sale and clause of agreement that will be best for you and your buyer.