How Soon Should You Start Planning It?
Selling your Amazon business is an inevitable milestone in a business owner’s journey. It can either stem from new life developments or have been part of the plan all along. Whatever the reason, you naturally want to sell your business at the perfect time in its lifecycle.
But how do you find the right time to sell your Amazon business?
The “perfect time” involves a lot of factors other than simply your net profits.
Let’s look at how you can determine the right time to sell your FBA business to get the most out of the sale.
The Business of Selling an Amazon Business
Since January 2020, the cumulative capital raised by Amazon seller aggregators has crossed $13bn. These acquirers range from individual buyers to private equity firms and business aggregators. These companies target mainly private-label sellers, with Amazon as their primary sales channel.
Buyers typically look for differentiated businesses that have:
- Strong brand recognition,
- Steady financial success, or
- They are the first movers in their space.
Such businesses represent ripe for scaling up assets and are valuable to entrepreneurs and FBA aggregators alike.
If your FBA business is organized, diversified, and differentiated enough, you stand a good chance to make some serious money by selling it at the right time and, of course, at the right price.
When Is the Right Time to Sell Your Amazon Business?
It might seem that the only consideration when deciding whether to sell your business or not is how much money it’s making, i.e., the net profits. While it’s an essential factor, it’s not the only one. There are a lot of parameters you need to assess to come to a logical decision.
If you find yourself in more than one of the situations below, it’s probably the right time to sell:
You Had a Steady Trailing 12-Month Revenue
Most buyers value Amazon’s business based on its performance over the past 12 months, specifically, the earnings generated from the business over the past year. While other financial and non-financial factors add to your Amazon business valuation, past performance is the most important factor.
You need to have the preceding twelve months to be as clean, healthy, and valuable as possible. If you’ve made some improvements in your business recently, added new products, or have increased your profit margins only in the past 3-4 months, it’s better to wait. The full valuation for your business won’t be realized until you let the benefits ride out for 12 months.
If you had the past 12 months as the most profitable with a steady income, it’ll be the best time to consider selling your Amazon business.
You Want Funds for Your Next Venture
If you have other brands and ventures that you’re more passionate about and you see long-term potential elsewhere, you can put the money to unlock further opportunities.
You have to make a decision of where your time, energy, and money are best suited. Is it in your current FBA business? Or in another venture where the opportunity seems bigger?
It’s quite possible that you achieved all that you wanted to with your existing FBA business and want to move on to another entrepreneurial venture—may be building another e-commerce business or something a bit traditional. Whatever your next goal is, you might need some monetary help with that.
That’s where selling your FBA business comes in. You can cash in while you’re at the top and utilize the funds generated for sale to fuel your next venture.
You Lack the Expertise to Adapt to Changing Trends
Amazon FBA is a whole new ball game compared to just a few years ago. Running a successful e-commerce business and continuing scaling up needs expertise on a variety of different challenges.
Dealing with copycat sellers, keeping operational costs down, and managing your online brand are some of the many challenges an FBA business owner encounters today. If you’re in a niche in which you don’t have the expertise, it’ll keep getting difficult to keep up with the new trends.
As a seller, you need to forecast future trends based on consumer behavior. If that’s not something that interests you, it might be time to transfer ownership of your venture to someone with more expertise and intent.
You Simply Don’t Enjoy the Grind Anymore
Running a successful FBA business involves a ton of hard work and sacrificing some things you love. After a few years, you might not enjoy the process as much as you did and might want to spend your time and energies elsewhere – pursuing a hobby or bonding with the ones you love.
And that’s okay. It would be best if you didn’t carry on doing something you don’t enjoy anymore. You established a successful business, and now you have the power to earn the rewards and pursue other things in life.
When Should You NOT Sell Your Amazon Business?
Here are some scenarios where you might be tempted to sell your business, but you should avoid doing it:
You Lack the Resources to Scale to the Next Stage
You’ve grown your once nascent enterprise into a fledgling six-figure business. But what next? Scaling an FBA business from the sub-million dollar range to a multi-million dollar entity requires serious funds and infrastructure.
But it’s only in the seven figures that you’ll start seeing huge returns. Many aggregators agree on having deals only with businesses with more than $1 million revenue. While having a seven-figure business will increase the value of your business, it’ll also come with more responsibilities.
You’ll need state-of-the-art automation to keep up with the demand of a growing business and consistent funds to manage operations, staffing, and strategy. Not everyone is capable or willing to transition into this next stage of e-commerce wars.
The solution: Instead of letting go of the best value you can get, partner with a six-figure brand accelerator like ScaleBrand to get the most for your business. The returns will exceed the investment you’ll make with the brand accelerator.
You’re Not Ready Emotionally
Don’t sell your Amazon business if you’re in a distressed emotional state. Selling an Amazon business is a tactical decision, and you need a calm mind to complete the process.
If you’ve just had a rough patch, operational issues, or customer issues, it’d be best to wait a while till you’re in a clear headspace.
If you’re not making the decision clearly, it’s a bad time to do it.
How Soon Should You Start Planning Your Exit?
The sooner you start planning your exit strategy, the better.
At the very least, you need to start executing your plan 12 months before your sale. Otherwise, you’ll not have a clean 12-month period that determines the value of your business.
Ideally, planning for the exit 2 years before you sell gives you enough time to have clear records and maximize the value of your business.
Starting early allows you to make decisions and apply ecommerce growth strategies that’ll increase the saleability of your business, be it automating operations, maintaining accounts, or organizing inventory according to the sale date. You can even think from the buyer’s perspective to make important decisions in your business.
How to Sell Your FBA Business?
Selling your Amazon business to a buyer involves more than finding a buyer. Once you’ve decided to cash in, you need to start exit planning. That involves streamlining your operations & financials and priming your business for a frictionless sale.
You also need to take stock of the assets you’ll be transferring, namely your seller central account, inventory, supplier relationships, and your website. You’ll want access to the right tools and consultation, if needed, to calculate the value of your business accurately.
You can either find potential buyers through your connections or partner with an aggregator specializing in valuating and selling online businesses. For a small percentage of the sale, you can rest assured you’re getting your business’s full worth.
Selling Your Amazon Business
Being able to sell a successful business is an achievement to be proud of. Parting ways with your FBA business doesn’t have to be a sad thing. It’s always better to take stock of your journey and assess whether you have the drive and the means to continue growing your business.
And if you decide to transfer ownership of your venture to someone else, make sure it’s the right person or organization, and you’re not getting shortchanged in the process.