Should You Sell Your Amazon Business?
Amazon has made it easy for small businesses to market and sell their products to massive audiences, and the wider business world has started to take notice. Investors are currently in a rush to acquire successful Amazon small business brands so they can grow the brands into household names — and they're spending billions to do so.
For Amazon sellers, this gold rush presents an opportunity as these "Amazon aggregator" firms look to add new brands to their portfolios. If you're an FBA seller interested in retiring, cutting your workload, or just cashing out, now's the time to consider selling your Amazon business — because it's a seller's market.
But is your business ready to be sold — and do you really want to take this step? Let's talk about what these aggregators are and whether it makes sense to sell your Amazon FBA business.
Should You Sell Your Amazon Business?
What You Need to Know About Amazon Aggregators
Over the past few years, businesses looking to acquire or expand existing Amazon FBA brands have grown significantly — they're estimated to have raised $6 billion since early 2020 — and they're on the hunt for successful Amazon FBA sellers to acquire.
SEE ALSO: 9 FBA Alternatives That Amazon Sellers Should Consider
These firms aren't looking to buy just any businesses, though: they're searching for brands they can build on. They have capital, resources, and established teams of experts who can overcome the hurdles of growing a business from scratch. And that can be a good thing, because small businesses sometimes struggle to scale up. The logistics of running a business become increasingly complex as it grows, and that's not a hurdle every owner can clear. Sellers who started as a single person working out of a home office may eventually find they need help with marketing, maintaining product listings, providing great customer service, managing supply chains and manufacturing. That's where Amazon aggregators can help.
Thrasio, a major Amazon aggregator, has already acquired and consolidated more than 100 brands selling more than 15,000 products. And when the company finds a business worth buying, it's ready to jump on it: Thrasio can close an acquisition deal in just 35 days. The company is reportedly buying one to three businesses a week, with the businesses' EBITDA growing by 156% after the acquisition on average. (EBITDA stands for earnings before interest, taxes, depreciation, and amortization.)
And Thrasio isn't the only well-funded firm that's focused on buying up Amazon brands. There's also Heyday, Branded, and Perch, as well as brokerages that list brands for sale, like Empire Flippers and The FBA Broker. If you want to sell your Amazon FBA business, you have plenty of options.
What Types of Businesses Do Amazon Aggregators Buy?
These firms are looking for established businesses with a proven track record of sales and typically over $200,000 in annual profits — with the financial records to back it up. Amazon aggregators aren't interested in making a business from scratch: they're looking for brands who already have great products, good reviews, and solid finances. They take successful preexisting brands and scale them up to be bigger and better.
Ideal brands will manufacture unique products that aren't available anywhere else. Aggregators aren't necessarily looking for particular types of products, but they are looking for products with staying power. They don't usually want items in highly competitive or constantly changing categories, like phone cases. Where there's a nonstop flow of new products, it's difficult to maintain a top Amazon ranking. The most in-demand brands will already have a good, established reputation, with products that have plenty of high reviews — an average of 4.5 stars or better — to prove that both the brand and the items can go the distance.
Though the details vary, aggregators are looking for stable, reliable moneymakers with growth potential. If you want to sell your Amazon business, you need to be able to prove your brand fits this description.
'Should I Sell My Amazon Business?'
There are lots of reasons you might want to sell your Amazon business. Keeping a business going on any platform is hard work, especially as it grows, and it's easy to become burned out and overwhelmed by the workload needed to stay successful. For these Amazon sellers, selling to an aggregator firm can be the perfect solution: it lets them get cash out of their business, and either continue to work in some smaller role or move on to something new. Others may want to retire, or have access to cash to invest in a new venture or make a major purchase.
SEE ALSO: The Ultimate Guide to Reducing Amazon Seller Fees
But there are reasons not to sell, too. If you enjoy running your business and you're earning enough to keep it growing without stress, selling probably isn't the right choice. Perhaps the company is simply important to you and you wish to retain full control, and any sale will either limit or end your involvement with the brand. And sometimes you simply can't sell — if your business is still new (less than a year old) or doesn't have a solid history of success, it could be too soon to sell.
Selling your business can mean different things, depending on the details of the deal. You may wash your hands of the business completely, handing over full control to the buyer and walking away — an ideal choice for anyone who's burned out. But some buyers may want you to stay on in some capacity to see that things continue to run smoothly, which can be a good option for sellers who just need support to keep their business growing. Sales can take many forms, and as long as you have a desirable plan, you may be able to negotiate to get exactly what you want.
In the end, the question of whether to sell or not is mostly a matter of personal choice. But if you have even the slightest interest, we recommend contacting one of these aggregators to see what types of deals they'll offer. A good deal can make cashing out quite tempting.
What Is an Amazon Business Worth?
Right now, it's a seller's market as investment firms look to buy and build existing brands. Amazon aggregators are flush with investment money and eager to spend it, which puts you in a good position if you want to sell your Amazon storefront.
The money on offer depends on your business, but it's typically 2.5 to 4.5 times your EBITDA. More established businesses with higher earnings will get offers on the higher end of that range, while smaller businesses without a lengthy track record can expect to receive offers on the lower end. Many Amazon aggregators and business brokers will give you an idea of your brand's value if you give them a bit of information, like this online valuation tool from Empire Flippers.
When you sell your Amazon business, your earnings may come in a variety of forms. You may get a simple upfront payment, or you may receive a payment plus equity or a percentage of earnings. It all depends on your business and how desirable it is to buyers. You may be able to sell your business entirely and walk away, or continue working in some capacity with a salary. It all depends on the deal you make with the buyer.
When you start thinking about selling your Amazon business, be sure to shop around. Different aggregators may make more compelling offers, and a desirable brand may even find itself in the middle of a bidding war. Check with multiple firms to be sure you're getting exactly the deal you want, and deserve.
How to Prepare to Sell an Amazon Business
If you think your brand matches what Amazon aggregators are looking for and have decided it's time to sell your Amazon business, the first thing you need is good financial records to prove your company is worth buying. A potential buyer will want to learn every detail about your finances, so they know just how profitable you are. It's best to get your books in order before you start trying to sell, even if that means spending some money to have an accounting firm tidy up your records. If your books are incomplete or inaccurate, it will slow down — or entirely stop — a sale, so be sure everything is in order.
SEE ALSO: 8 Amazon Listing Optimization Tips You May Not Have Considered
And potential investors will be looking for more than just basic financial information. They'll also be interested in the following:
- How long you've been in business. An older business with a proven history of success is more desirable than a brand-new business. In fact, businesses under a year old may not be able to find buyers.
- Your product listings, reviews, and rankings on Amazon. High-quality listings with great reviews will impress potential buyers.
- How many hours you and your staff work to support the business. Firms are looking for businesses that run like well-oiled machines, and if you're working 80 hours a week to keep your business going, that may not be a good sign.
- What your competition is like, and the defensibility of your brand. If you're in a highly competitive product category, your brand may be less desirable. Buyers don't want a brand whose rankings could collapse overnight when competitors roll out new products.
- Everything there is to know about your manufacturing and sales process. Buyers will want to know about your suppliers, sales channels (if you have more than Amazon), traffic sources, conversion rates, and more to understand the end-to-end process.
Potential buyers are looking for Amazon businesses that are already running smoothly and profitably. You'll want to have clear documentation of every aspect to demonstrate how your business runs — and just like the financial details, it's best to have this information compiled in advance.
And one last thing to do before reaching out to potential buyers: be sure your Amazon listings look great. Firms looking to buy Amazon FBA businesses are likely to check and see if listings are optimized with good keywords, images, and descriptions. Buyers will be looking for good product reviews and high rankings in different product categories. Remember, these investors want to buy successful businesses, and having high-quality listings can demonstrate the achievements of your brand. It's worth taking some time to review your product listings and polish them before approaching potential buyers.
If you have your records together, getting offers (or at least estimates) can be quite simple — some Amazon aggregators and brokerage firms will give you an estimated value online, sometimes for simply filling out a form. All it takes is going to a firm's website and clicking a few buttons to get started.
You can begin by checking out these major Amazon aggregator firms. They aren't the only businesses buying Amazon storefronts, but they're some of the largest:
Just remember, no matter how good the first offer sounds, take the time to entertain offers or estimates from multiple firms. That way, you can be sure you're getting the most possible out of the sale.
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