Aloha, Amazon Seller!
Are you planning to sell your FBA business and want to make it more costly? Follow our tips to significantly increase the value of your Amazon business.
Lately, it is becoming increasingly common for the successful sellers on Amazon.com to think about selling their Amazon FBA business and Amazon brand they created. There are many reasons behind it; a big part of it is that the offers on the market of Amazon businesses sales are quite attractive for the moment, and using the services of brokerage companies helps business owners make a data-driven valuation of their store, get the fair price proposal, and ensures smooth exit.
For the seller who thinks about selling his business, the major concern is to ensure that he gets the best proposal, both from the price and reliability angles. To make sure that the offer you get from the buyer is really the one matching your store's worth, it is a good idea to evaluate your business and see how to deal with the weak points, if the valuation shows them.
The valuation is, in some way, similar to real estate appraisal. When you sell any real estate, you prepare it for sales, and your broker shows its most attractive sides and advantages to the buyer. The same thing happens when you sell your business: you need to have a great product portfolio, a high net profit, reliable supply chain, and show good income statement. Therefore, you need to think about how to increase sales on Amazon FBA and about improving FBA brand to maximize the value of the deal when you sell your business.
How to Value an Amazon FBA Business?
There are a lot of factors influencing the real value of your business. These are, for example, the age and consistency of your business; the business’s net profit; the type of Amazon business; the level of your involvement, etc.
If you want to receive a qualified valuation about how much your business is worth, it’s better to address one of the companies that can help you with the sales. It’s no secret that the buyer will make his own valuation, but at least you will know what the bottom-line price is.
However, you can roughly estimate the value of your business, for instance, to take a preliminary decision whether it’s worth selling or not. The average price estimation usually ranges from 2.5 to 4.5 multiple times the 12-month average monthly net profit. The multiple is the higher, the higher the buyer is valuing a business and other sales metrics and risks.
To estimate your Amazon FBA earnings, you can use the seller discretionary earnings (SDE) valuation method or Earnings before interest, taxes, depreciation, and amortization (EBITDA), depending on the scale of your business.
To get the SDE, use the formula: Revenue – Cost of Goods Sold – Operating Expenses + Owner Salary.
This method is applied to businesses valued at $5,000,000 or less.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is another method to estimate your Amazon FBA earnings. It is applied to evaluate the profitability of a business, and it’s used for businesses valued at over $5,000,000. When using any of these methods, you need to consider add-backs.
How to Increase the Value of Amazon FBA Business?
As said, increasing the value of Amazon business, basically, presumes, that you will think about how to increase sales on Amazon FBA and how to increase the value of FBA brand for selling. These things are most important for the buyer when he considers the deal.
If you made a valuation of your business and found out that there are certain KPIs or sales processes you can improve, you can add value to your Amazon business by reviewing and enhancing them. Optimized listing and efficient processes will definitely make your business more attractive to potential buyers.
10 Tips to Increase the Value of Your Amazon Business
1. Perfect Listings
Make sure that your listings are optimized, updated, that you included all researched keywords and backend keywords, high-quality product images, bullets, videos, A+ content, customer reviews, and all other things that create a perfect product listing. Even if you will not sell your business right now, it will drive more traffic to the listing.
2. Win Reviews and Amazon Badges
The buyer will definitely consider the reputation of your brand, the ratio of positive and negative reviews, and the overall seller feedback. The positive sales history of your brand or product matters as Amazon would rank it higher. Therefore, it is very important to remove as many negative reviews as possible to maximize the seller account value.
Winning Amazon badges, like Best Sellers Badge, Amazon’s Choice Badge, Top Brand Badge, etc. increases visibility and sales and makes your product portfolio more attractive.
3. Figure Out Your Brand’s Bottlenecks
If you will ask for your business valuation, it will most likely show you the majority of the problems with your products and operations, if any. Then it’s a good idea to ask professionals how to remove them. This homework will increase your deal value, and even if you will decide not to sell your store at the far end, will help you grow sales.
4. Get Rid of the ‘Sitters’
Review your inventory and get rid of the items that are not performing. Old stock is a burden and freezes your money you can invest in something more efficient. Moreover, old stock shows a lack of efficient inventory management. You can always try and sell them at discount.
5. Accurate Numbers
You need to always keep track of your main business metrics and product KPIs. The trends should be growing and you should be able to show positive tendencies and growth potential of your Amazon store. If you can show evidence of your business's consistency and smooth operations, this will add value to the investor.
Another part is net profit, profitability, and expenses, especially when it comes to Amazon fees. Constant monitoring of your expenses is very important as it directly influences profitability.
6. Optimized Supplier Chain
Review your manufacturer and supply channels and see if they are functioning properly. If you have good relationships with the manufacturers you can transfer to the buyer, if they are reliable, flexible, supply quality, and deliver your consignments on time – this will be valued when your business is valuated.
7. Product Diversification
As we said above, if you have a strong brand, but a narrow portfolio, this might be considered a business risk. The buyers would consider it more attractive if you have a variety of products in your store. Moreover, if they can find a lot of different items they can navigate between, this increases brand awareness and the time they spend visiting your listings. A wide portfolio enhances trust in the brand name as well.
8. Multiple Sales Channels
Listing your products in multiple marketplaces on Amazon, as well as on the other platforms, increases the visibility and profitability of your business. Selling of Shopify, Walmart, or eBay extends customer base and boosts profit.
9. Sell Globally
Selling Internationally expands your growth potential and increases the value of your store. Amazon has a special program to assist sellers with international sales called Amazon Global Selling. Amazon global marketplace is a platform for Amazon international shopping. With Amazon Global Selling, you can list and sell your products in both Americas, Asia, Middle East, and Europe. Amazon in other countries currently has 20 marketplaces, giving sellers perfect chances for their business expansion. If you are not selling internationally yet, you can find out how to start here.
10. Outsource Your Operations
Outsourcing parts of Amazon's business to professionals helps optimize the processes and increases its efficiency. Also, you can use a lot of seller tools available in the market to monitor your main business metrics. Cloud computing can be used to securely store your data.
If you are thinking of selling your Amazon business and don’t know where to start, SageFund is here to help you. You are welcome to contact us now.