The eCommerce industry, and specifically eCommerce on Amazon, has exploded over the past few years. More people than ever are creating businesses and selling their products via Amazon, oftentimes at very high-profit margins (even though FBA – which is notorious for low margins).
There’s a reason why so many brands, and individuals, are clamoring to start selling on Amazon – it’s the biggest (and most successful) company in the history of eCommerce. Which is also why now is a great time for you to sell your Amazon business.
Being able to leverage the growth of an infrastructure (i.e. internet) along with an explosion of the platform’s popularity (eCommerce via Amazon) means major profits (should you decide to sell).
The Legality Issue
Many people who own Amazon-based brands are interested in selling their business to another person, or entity, but they don’t know if the sale is actually legal or not. Likewise, they’re also unsure if Amazon even supports such activities.
Amazon does support the transfer of account ownership, they just don’t blatantly advertise this feature. In order to start the official account transfer process, you’ll need to contact Amazon’s support. After you’ve gone through the appropriate channels, you will be sent a list of requirements for the sale to initiate/become official.
If you’re interested in selling your business on Amazon, it’s highly recommended that you save the instructions you receive, along with any official documentation from Amazon. Providing this information to the buyer will make the process much more transparent (and go off without a hitch).
Valuing Your Amazon Business
The first question that most business owners will have when thinking about selling their business undoubtedly revolves around the value of their brand. Most Amazon business owners take years to fully develop their brand (and Amazon sales channel).
The majority of online businesses are sold with one key metric providing most of the influence in the purchase decision: SDE.
SDE (which stands for seller discretionary earnings), represents the actual profit of the business (i.e. what’s leftover after operating expenses, cost of goods, etc.). This metric is one of the single most important factors in selling your Amazon business.
The multiple that’s applied to the SDE of your business depends on many different areas of operation: traffic, engagement, sales, profits, loss, cost of goods, etc. Anything that directly (or even indirectly) affects your business can cause a change in the multiple applied to the SDE.
There are many Amazon business broker websites on the web, most of which apply a similar methodology to what’s described above. The average value for a successful Amazon business is anywhere from two to three times its current annual profit.
However, there are a few different factors that can decide the actual value of your business. Below we cover some of the more major factors.
Additional Value Factors
How Long Your Business Has Been in Operation
The length of a business’s operation is a deciding factor in most sales. People want to purchase a brand/business that has some standing, not one that’s experienced a short burst of success (and not much else).
Beyond this, they want a stable business. If your business has been in operation for a few years, or even longer, you’ll have a better chance of selling it for an optimal price.
How Many Products You Sell
Specifically, this factor is more in regards to the product concentration of your business. Do most of your sales come from only one product? Do you at least have some level of diversification?
These are important questions to ask yourself before starting the process of selling your Amazon business. These are also important questions that will 100% be asked by people interested in buying your business.
Supply Chain and Logistics
One of the main reasons why people prefer to buy internet businesses is because they have simplified supply chains (especially in regards to dropshipping and FBA businesses).
What are the lead times for your inventory? How long does it take to restock? Are your suppliers solid? How much time is left on your contracts? These are all very important questions, the answers to which will influence the total value of your business.
Numerous factors go into determining how much an internet business is worth. Amazon businesses are insanely popular in the marketplace right now, and there isn’t a better time for you to initiate the selling process. If you want to make the sale go as smoothly as possible, using an internet business broker can’t be recommended enough.