Fulfillment by Amazon(FBA) business model has quickly become one of the largest and most exciting online business spaces. A well-developed FBA business is an attractive investment opportunity for business buyers without the desire or skill to start one from scratch. It’s an attractive online business to own. FBA business model is enabling huge financial rewards for millions of merchants to leverage Amazon’s distribution network and customers.
Even though each business is different, three things can help you determine if you can sell your business or not:
- Business Type
- Business Age
- SDE( Seller Discretionary Earnings)
Each of these things plays an equally important role when determining saleability. Let’s discuss this in more detail.
Private Label: This type of business can be more attractive to buyers and has some leverage because supply is consistent, and also, there is a good chance it will continue to sell since the item has a history. A private label means you have your brand.
Reseller: In the process, you buy wholesale and make a margin by retail selling on Amazon. This looks like retail arbitrage. If the business makes a good profit, resellers range is like heart-to sell or impossible to sell sometimes. This FBA business style is less attractive to buyers because of some reasons:
- There is no limit on the budget competition.
- Every product must be bought individually and on sale so that supply can be a problem.
- The buyer is only buying access to your Amazon Seller Central Account.
If you have good contacts with wholesalers to sell on Amazon, that could make your business easier.
Proprietary Products: This is called your FBA business’s gold standard because only your company sells this specific item. Buyers often agree to pay a premium, which will make your business more sustainable long-term.
2. Business Age: Before buying your business, a buyer will want to know the record of your business financial growth report to estimate how long it will take time to make their investment back. You may receive a better proposition as a seller how longer your business is running. If your business is under a year old, the buyer may want to take the risk because you can’t show a full year calendar that will impact sales.
3. SDE( Seller Discretionary Earnings): The offer you propose to the buyer is directly related to your net profit, so you need to know your numbers clearly before selling your Amazon business. To formulate an offer for your Amazon business, the buyer will use a multiple of your annual net profit.
SDE means= Revenue-Expenses+Add-backs
For calculating the net profit, we need to calculate SDE because it turns the basis of your business valuation. Business expenses include the cost of goods, employees, Amazon fees, fulfillment services, etc. Suppose you are paying yourself a salary as the owner, including this personal income as back. Also, you need to include company taxes if you are paying. But not be added personal expenses which aren’t business-related.
However, if you know the business type you have on Amazon, the age of your business, and your SDE, you can begin to determine your business’s sale value. You also need to research some Amazon business points – current market value, identify elements that may be hurting your current value, and identify low-hanging fruit that might increase your business value.
Click here to learn more about the procedure.
If you have any questions, let me know and I’ll help you start or scale your Amazon business. To find out the details please join my Facebook Page/Group and connect with me.
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