What would your Amazon FBA Business be worth?

You might not be aware that you are the owner of one of the most sought-after investment opportunities for online firms.   The average...

You might not be aware that you are the owner of one of the most sought-after investment opportunities for online firms.

 

The average sales price for Amazon FBA brands on our platform was $1,246,759.04 in 2021 alone at a 40X multiplier. In comparison, the average Amazon business sold for $538,741.62 in 2020 at a 28.5X multiple, a 231% increase.

 

This enormous increase in deal size can be ascribed to brand aggregators' increasing use of FBA firms to supplement their larger portfolios. When they see a high-quality FBA brand, these institutional buyers with huge pockets compete with one another.

 

To secure the transaction, they occasionally even pay more than the asking amount.

 

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We're posting this because we've come to the conclusion that many Amazon FBA sellers like you are unaware of the possibility of eventually selling your company. Like most business owners, you probably don't have an exit strategy because you're too busy managing and growing your brand.

Without a plan of action, you are only left with two options: close down the company or sell it for considerably less than you would like.

 

What if you sold your business for a six- or seven-figure profit?

 

You may negotiate the best offer for relocating by putting your business in the finest possible shape for sale. So that you're prepared for when you intend to sell, we'll explain how valuations work.

 

Let's begin by discussing the valuation formula.

 

 

The Fundamental Valuation Method

Here is our straightforward valuation formula:

 

Valuation = 12-Month Average Net Profit x Monthly Multiple

 

To determine an initial listing price, we compare the average monthly net profit to a monthly multiple. Other brokers may use EBITDA, a measure of annual profit, for this method, resulting in lower multiples between x2 and x5.

 

Although there isn't much of a difference between utilizing an annual profit value and a monthly profit value to produce valuations, we prefer the latter because it gives a more detailed picture of a company's financial performance.

 

A 12-month price term is utilized to take into consideration seasonality and any changes that may occur throughout the year. We advise first-time sellers to continue with a 12-month price window because a smaller window may not provide prospective purchasers with sufficient information for due research.

The monthly net profit is easy to figure out. The monthly multiple calculation is less difficult.

 

In addition to the average profit, other factors can have an impact on the multiple. For instance, two FBA brands that each generate $10,000 per month may be valued very differently.

 

The following are some elements that impact the monthly multiple:

 

·       The caliber of product ratings and reviews

·       The age of an FBA brand

·       Multichannel sales (diverse traffic)

·       Quantity of SKUs

 

Try utilizing a free valuation tool to obtain a quick idea of how much your company is worth. Remember that the amount is only a ballpark estimate and not what it would be worth after closer examination.

Let's now examine how each of these aspects affects the monthly multiple.

 

The Standard of Product Ratings and Reviews

The strongest evidence of market fit and demand is found in high-quality product reviews and shop ratings, which also have a significant impact on the monthly multiple. One of the first things customers take note of is the general reputation of an FBA brand as demonstrated through customer reviews.

 

As a result, FBA firms selling on our marketplace typically have at least 100 product reviews and a 4.0 average star rating for their hero SKU. This is because we consider reputation when listing businesses. Buyers will be more trusting of a company that is well received by its intended market.

It is worthwhile to work toward earning these distinctions for your storefront because they demonstrate significant product demand and have an Amazon's Choice badge or high Best Sellers Rank.

 

Create a system to consistently obtain evaluations if you're just getting started. Joining the Amazon Vine program to acquire objective reviews and making use of the Seller Message Service on Amazon are a couple of self-help options.

 

The age of your FBA business

The age component affects the monthly multiple because to the time the seller has available, not because older companies inherently qualify for higher sales prices.

 

Of course, the rule is not always true. Even though several seven-figure FBA brands that are less than a year old have been listed, most companies are at least two years old before a seller even considers putting them up for sale.

 

For two reasons, we've discovered that older FBA businesses sell for more money.

 

First, an established company indicates the seller has had more time to build a strong brand. As you are aware, building up your SEO rankings, brand awareness, and review collection all take time.

 

Second, an established FBA brand gives a seller more time to streamline procedures and improve workflow. A seller will have more time to concentrate on growing the business rather than running the operations if they can step away from them and still have them function smoothly.

Consider using virtual assistants to manage customer service and other time-consuming chores to boost your productivity. If you have the money, you could hire someone to do some of the work you're not as strong at, like graphic design or PPC advertising.

 

Multiple Channel Sales

Selling on Amazon broadens brand awareness and assists a company in weaning itself off of Amazon.com.

 

Because customers from demographics outside of your typical reach choose to shop on alternative platforms, omnichannel selling enables you to reach audiences that your Amazon site won't.  Additionally, having a multichannel presence reduces the danger of having your best-selling SKUs suddenly removed from Amazon Seller Central or having your account suspended.

 

Quantity of SKUs

The time it takes to manage each product listing and the revenue-to-SKU ratio depend on the variety of your products.

 

For solopreneurs, managing their product listing pages might be challenging if they have a lot of SKUs. If you're operating your FBA store as a one-man team, we've discovered that the sweet spot is a product variety of between three and eight SKUs. It won't be a big deal because brand aggregators are drawn to seven-figure firms because they have teams that can handle all the many aspects of the company.

 

It might be problematic for inventory control and operational effectiveness if you have dozens of SKUs but only two or three of them are bringing in the majority of the income.

A routine SKU audit is important to determine which SKUs can be removed from the list and which ones should remain.

 

Where to Sell Your Business for the Most Money

You have two basic choices: sell privately or sell through a broker.

 

A DIY marketplace may be suggested by some, but we advise against it for two reasons. Because you have to perform all the work yourself, neither buyers nor sellers are protected in the event that a transaction fails.

 

A private contract can potentially fall victim to some of the same issues. First-time sellers won't know how to bargain with purchasers or properly comprehend the value of their company. An experienced investor will know how to influence negotiations in their favor, costing a seller money on the transaction.

Going the route of the private deal can also cause FOMO. Due to their concern that they won't be able to sell, we've seen sellers accept the first offer that comes up. Frequently, the offer is much less than what they originally sought.

 

You want someone in your corner who can reassure you and assist you when it comes to selling your business. You can market your company and bargain with buyers to get the sales price you want by using a selected broker.

You won't have to consider lowball offers because qualified buyers on curated marketplaces must demonstrate their ability to pay for enterprises; instead, you can concentrate on selecting the finest offer for your company.

 

If You Should Sell, When?

Trying to timing the market like stocks is one of the major errors that sellers make.

 

Rarely has this strategy worked in the past. Instead, we advise selling when your company is at its most prosperous. Most consumers find it appealing to invest in an FBA brand with efficient operations and goods that have received hundreds of favorable reviews.

 

It's acceptable if there are certain things that could be done better. Many sellers are prevented from growing their FBA business further due to a lack of funds or time. The correct buyer may be able to use these areas that still need optimization as growth levers to expand the FBA business.

 

When you sell your business, you'll receive the biggest cash infusion you've ever experienced.

 

To begin preparing your exit strategy, register on our marketplace if you're interested in learning more. Even if you don't sell right away, starting the process ensures that you'll be ready to sell when the time is right.

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A Complete Guide to Selling on Amazon India

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