No matter how much you love your Amazon business, it's important that you continually strive to turn it into an asset with resale value. Many Amazon FBA sellers get so caught up in running their businesses that they forget the awesome fact that they might be creating something that could net them a massive payday whenever they're ready to move on to other ventures or just ride off into the sunset.
In this article, I'm going to explain how to find out how much your Amazon business might actually be worth and how to start making sure that you are taking the right steps to maximize your resale value going forward.
Inside the Selling Process
The process of selling your Amazon business is relatively straightforward but takes a lot of work. Here is the process in a nutshell.
Step #1 Get a valuation completed of your site from a 3rd party broker Every brokerage I've seen offers some sort of free evaluator tool I'll cover brokers in more detail shortly.
Step #2 Collect a business "Propectus." A prospectus is a collection of all the facts of your business. It includes things like profit and earnings reports, inventory reports, details on recurring costs and anything else that a buyer might want to see before spending a big wad of cash on your storefront.
Step #3 Choose a marketplace that sells Amazon businesses or find buyers yourself. You can technically sell a business yourself but I highly recommend you use a 3rd party marketplace like Flippa.com or Empireflippers.com. You will pay a relatively large fee (between 8%-15% of the sale) but it isn't easy to find a buyer on your own. Actually, it's nearly impossible. A good broker could also help you earn more on the sale of the storefront that could help offset the commissions you'll pay.
Step #4 Negotiate price and terms of sale. Do NOT take this part lightly. Clarity is king when it comes to selling any business assets. Make sure no stone is left unturned and that you and the buyer are on the same page before closing any deal.
Step #5 Seller transfers assets and buyer transfers funds. Using a brokerage makes this part much safer. They are able to store money in escrow and ensure that no funny business happens. Selling or buying a storefront involves life changing amounts of money changing hands. Be smart.
Step #6 Support buyer as they take ownership of the business. The duration and extent of your support should be clearly outlined in your terms of sale. The seller should explain clearly to the buyer how to source products to sell on the platform and any other useful information should be shared.
Where to Sell Your Amazon Business
When it comes to selling an Amazon business, there are only two legitimate 3rd party companies I recommend.
These companies work as brokers to facilitate the transaction and they oversee the smooth transition of assets and information between buyer and seller.
Flippa has been around since 2009 and their website says that they have helped over 40,000 entrepreneurs buy and sell websites.
Flippa started listing Amazon FBA businesses around 2017 on their marketplace.
They work with an internal team of brokers that help facilitate the listing, sale and transfer of storefronts.
How Much Does It Cost to List an Amazon Storefront on Flippa?: $200 to list + 15% of Total Sale (Success Fee). I reached out to Flippa for information on the options available to Amazon sellers since they technically listed Amazon businesses under "assets," which could be sold for much less
Flippa is best for storefronts profiting between $0 and $1,500,000 per year.
In fact, there were a couple of storefronts listed that were LOSING money.
Yikes. Anything smaller than $200,000 is technically too low but it's clear there is a work around here as many storefronts have been listed that don't make that much.
Empire Flippers is very similar to Flippa. They haven't been around as long as Flippa but they have completed more Amazon storefront sales (83).
They also have a much higher average sale price and a higher multiplier.
(Resale) Multiplier = Total Sale Price/Monthly Net Profit
Example: If you sold your storefront for $300,000 and you had an average monthly net profit of $10,000/month, you would have a multiplier of 30.
30 = 300,000/10,000
The average storefront on empire flippers has a 27.27 multiplier while the average Flippa site is lower at 22.64. There are obviously many other factors at play and this multiplier varies greatly based on many your storefront (more on what makes a storefront valuable shortly).
How Much Does It Cost to List an Amazon Storefront on Empire Flippers?: Empire Flippers is definitely a better option for very large storefronts thanks to the fact that their success fee drops inversely to the sale price. You pay a flat fee of $297 for your first listing and then $97 for each future listing. In addition to this fee you'll pay between 15% and 8% of the storefront's final sale price.
- 15% for businesses listed for up to $1M
- 12% for businesses listed from $1M-2M
- 10% for businesses listed from $2M-5M
- 8% for businesses listed at $5M+
If you're storefront sold for over $5M, you would save about $350,000 in fees vs. Flippa. Anything below $1M will end up costing about the same.
If you're storefront is going to sell for more than $1,000,000, EmpireFlippers is likely your best bet.
A few things to keep in mind.
- Brokers will not allow you to list your storefront concurrently across other platforms. If you use EmpireFlippers.com you cannot also list it on Flippa.com until the listing process is over.
- You will be taxed on the profit of selling the business. I wouldn't dare cover this topic in this article. You should have an accountant anyway, but be sure you talk with him or her before selling your business. Advice from a good CPA could save you tens of thousands of dollars. Don't ever go cheap on your accountants!
- Payments aren't always lump sums. In order to really get the fair amount for your business, you may need to be flexible in how buyers pay for the business. All cash buyers aren't common.
- Most storefronts don't sell. What?!? Yes, most sellers list their storefronts at prices that are too high and they don't actually ever find buyers. This is partially because people may be in no real rush to sell and are doing the equivalent of the "make me move," home seller. Even if you're dead set on selling and not just testing the market, it is very likely you might not find a buyer. You can either lower your price or wait until your storefront is more valuable.
Examples of Amazon Businesses That Have Sold
Just to give you a general idea of what some Amazon storefronts are being sold for, I've collected some examples of recently sold listings.
The first two listings are from Flippa.com. You can find all of this information at Flippa.com under "Assets."
Example #1: Private label business sold for $1,420,000 in 2018
This sale was a doozy. It was the biggest Amazon FBA sale that I could find on Flippa. Here are the important factors that made this storefront so valuable.
- Age: 4 Years
- Products: 23 Parent ASINs and 26 Child ASINs
- Niche: Home and Kitchen
- Gross Revenue: $162,817/month ... $1,953,804/year
- Net Profit: $39,363/month ...$472,356/year
- Inventory: ~$180,000
This store sold with a 36x multiplier (36x the monthly profits).
There were a couple of minor discrepancies with this listing. The "at a glance" for instance showed 43 products when the description showed 49.
Here are the reported earnings from March 2017 - February 2018
Here are some important takeaways from the sales copy of the storefront (another benefit of using a broker to list your store).
- Legal Structure in Place: "SBA Approval"
- Lean Processes in Place:" The current owner has optimized almost every aspect of this business to ensure it operates smoothly without more than 1 hour a day of his time."
- Diversified: "7 Amazon marketplaces including North American & Europe, with the USA being 80% of sales"
- Consistent Earnings:"Strong, consistent, non seasonal ROI year after year"
- Reviews:"4,500 reviews and counting." ..."11 products have over 100 reviews.""99% positive seller feedback with over 5,500 ratings."
- Quality Products:"Multiple products with Amazon's Choice or Best Seller Badge."
- Diversified Offerings: "Diversified product price points from $7 to $110."
- Not Reliant on Paid Ads: "Amazon Sponsored Ads is a mere 4.2% of OPEX"
- Support in Place: "A key benefit of this business is the amazing ecosystem build around a solid team in China allowing for expansion into any number of categories."
- Inventory Included: The company is being sold with roughly $180,000 in inventory.
To the naked eye, this business seems to have everything a buyer could want. One thing I noticed though is the brand hasn't diversified OFF of Amazon (or they forget to mention it). If I were buying this storefront, I'd actually be excited to see that an off Amazon storefront wasn't in place because I could likely increase revenue almost immediately with my own Shopify website.
Example #2: Product Sources (No Storefront)
I said I was doing storefront examples, but this one was too interesting not to share. I was shocked to see the products were estimating nearly $6,000/month in profits but the listing was sold at a measly $29,999.
After reading the sales page, I learned what was going on. They weren't selling the storefront and seller account, they were just selling 2 products that they had branded.
- Age: 4 years
- Products: 2
- Niche: Supplements
- Gross Revenue: $13,450/month ... $161,400/year
- Net Profit: $5,814/month ... $69,768/year
- Inventory: $9600 (cost)
Here are some important takeaways from the sales copy of the 2 product line listing.
- Lean Processes in Place: "I spend maximum 2 hours per week and that includes answering customer emails, reordering stock, etc."
- Not Reliant on Paid Ads: "The Amazon ads have an ACoS of around 20-30% and only represent around 20% of the sales."
- 2 Months of Support: "The seller is willing to provide 2 months of post-sale support time (maximum of 10hours) for support and training - with what is reasonable."
This was a pretty interesting offer and I'm really curious if the buyer feels good about this purchase almost 2 years later.
Example #3: Arbitrage/Wholesale Business Listed for $548,927
Many of my followers are retail or online arbitrage sellers. This is a great example of an arbitrage/wholesale storefront being sold on EmpireFlippers.com. This listing hasn't actually sold yet.
- Age: 3 Years
- Products: 1500+ SKUs
- Niche: General (Arbitrage)
- Gross Revenue: $316,552/month ... $161,400/year
- Net Profit: $18,929/month ... $69,768/year
- Inventory: Not included
Now, one of the cool things about EmpireFlippers.com is that they perform interviews with their sellers. This is pretty genius because anyone who's seriously interested in spending $548,927 would like as much information as humanly possible. Here is a recording of that interview.
Here are some important takeaways from the sales copy of this arbitrage storefront.
- Relationships in Place with Suppliers: Adam (the seller) says that they have the ability to get many more SKUs from their suppliers the've made connections with.
- Opportunity to Diversify: This storefront also comes with other assets like eBay accounts and a Shopify website.
- Willing to Offer Support to Buyer: The seller claims they are flexible and want the buyer to succeed.
I had a couple of issues with this offering though.
- Inventory isn't included in the sales price.
- Although Shopify site exists, it is clear it isn't driving meaningful sales.
- The seller claims to spend 20 hours per week on this but that number is a bit convoluted since he has many employees and a partner.
- There aren't enough competitive advantages to justify this price point.
This listing is interesting if nothing else. I'll be keeping an eye on it to see if it actually sells.
Factors That Impact the Resale Value of Your Amazon Business
Finding the valuation of your Amazon storefront isn't as simple as multiplying your monthly profits by 3 years (sales multiplier). There are many other factors that will impact the price buyers are willing to pay. Here are the biggest ones (they aren't in any particular order).
#1 Yearly Earnings
This one should be pretty obvious. If you decide to resell your Amazon business, be prepared to provide detailed reports of your earnings and expenses.
Businesses are more attractive when they have a track record of sales and earnings. A business that was started just a year ago will not sell for as much as a similar business that was created 5 years ago.
Another thing that comes with age on Amazon accounts is brand and category ungatings. Many older storefronts are able to sell in categories that newer sellers can't. This is attractive to buyers.
There are many things that impact how risky purchasing a storefront can be.
- Depth of product line
- Depth of competition
- Presence or absence of competitive advantages
- Profit margins
- Account health (is a suspension likely)
Amazon companies that sell on additional platforms are less risky and therefore more valuable than businesses that only sell on Amazon. Also, the total number of Amazon marketplaces a storefront sells on can be advantageous.
Better branding means more resale value.
- Brand name
- Brand logo
- Brand website
Do yourself a favor and make sure your company has a solid logo and that you at least own your company's domain name.
#5 Ease of Transition
How much work will be involved with transitioning the company to the new owner? Is the seller willing to offer ongoing support?
You'd be wise to offer at least 2 months of support to anyone who purchases your storefront. This is a great sales point and it eases the mind of the buyer.
Standard operating procedures (SOPs) make any transition much easier and will increase the value of your storefront tremendously.
#6 Labor Required
Buyers always want to know, "how much work am I going to have to do?" No one wants to accidentally buy themselves a job! The "leaner" your processes are, the more valuable it will be to a future buyer.
Some storefronts come with inventory and others don't. The valuation of the inventory can vary as well so pay close attention to wether the inventory is reported at cost or at resale value. Empire Flippers does not typically include inventory in the sales price. If the inventory isn't included, negotiate with the seller to include it.
#8 Intangible assets
What you include with your storefront is where the true value is. Does this storefront come with trademarked products? Do you have exclusive deals with suppliers?