All You Need To Know About Selling Your Amazon FBA Business

You’ve built your FBA business—you have employees, partners, and other stakeholder relationships—and are considering the next step. Maybe you’ve got to a point in the business’ growth story where you need to scale but don’t have the resources, or you’re finding managing the business is getting to be a chore.

You could be working on something else you find more exciting, for which you need more time or capital, or maybe you just want the extra cash and want to get out of the game altogether. What do you do? 

First of all, don’t just jump into it. It’s taken a lot of hard work to get it to this stage, and you need to consider if selling it off is the best thing for you. If after consideration you still want to exit—whether you’re a reseller competing for the buy box, a private label with consistent supply, or have proprietary products no one else has—then you need to find out how much your business can fetch.

How Much Is My Company Worth?

Research from Marketplace Pulse showed that the current market multiple for an FBA business typically ranges from 4x to 8x the Seller’s Discretionary Earnings (SDE) or Adjusted EBITDA. The potential for an earn-out can even bring the total valuation to over 10x. At the start of 2020, the average valuations were beginning at only 2.5x to 3x.

Getting your payout towards the top end of that range is influenced by factors including the size of the business itself - the bigger they are, the more they tend to go for - and the size of the market for your product, indicating future opportunity. 

Right now, for example, is a pretty good time to be in the FBA business. Online retail has grown tremendously over the pandemic, and some estimates have it forecast to grow around 14% in 2021.

Additionally, if you’ve racked up a good amount of intellectual property (patents, exclusive agreements with manufacturers, trademarks and other brand registries, etc.) as well as good reviews and higher ranked products - especially if they’re diversified - you’re more likely to get higher multiples when it comes time to sell.

Operating expenses that don’t have a direct impact on the success of the business - such as overheads like office rent or owner’s salary - would get thrown back onto the profit column as “add-backs” increasing the overall upfront payment. 

The ultimate sale price of the business will also tend to determine the kind of buyer that you deal with: 

• Under $500,000: Typically, private investors use their own capital.
• $500,000 - $1 million: Bit of a slow segment, too high for private investors, and too low for private equity. Buyer’s market.
• $1 million - $5 million: Lots of activity here, with lots of buyers looking to deploy capital, making it a seller’s market. You start to see buyers using acquisition finance.
• Above $5 million: The only players with enough juice to play at this level are the private equity and strategic investors looking for established brands and proven models that have found a niche in the market and can expand even outside Amazon.
  

Sales Process

Before anything gets going, it’s crucial that whoever is coming in to buy all or part of your business is the right fit. This is especially true if you are only selling down part of the business.

Once you’ve got a good counterparty, you can get to business. Timelines vary depending on a multitude of factors, but the takeover process typically takes between 5-6 months. During this time, despite whatever may be going on behind the scenes to sell the business, don’t take your eye off the ball - remember that nothing is for certain and the deal could fall through for any number of reasons. Keeping your day-to-day operations going is crucial.

Generally speaking, the sales process has three main parts:

• Letter of Intent (LOI):  Serving as something of a bridge between informal discussions and getting the deal over the line, the first step is drawing up a letter of intent, a non-binding letter outlining the main terms of the transaction, like the price, to get everyone on the same page. Typically, this phase takes between 30-60 days, during which time overarching terms are negotiated and drafts get sent back and forth. 
• Due Diligence and Purchase Agreement: This is the part where, under an NDA, the buyer gets access to the company books and other processes to make sure that everything’s on the level and that what they’ve been told maps onto reality. Concurrently, the buyer and seller negotiate the precise terms of the deal and the seller can carry out its own due diligence on the buyer to figure out their working style and track record. This part usually takes around 90 days, during which time the buyer can also go out and get additional financing for the acquisition if need be. 
• Closing: The last step is the quickest when everything gets signed and paid and the business changes hands.
  

About Us

Threecolts is a comprehensive suite of advanced ecommerce software solutions. We're designed to empower retail vendors and marketplace sellers on Amazon, Walmart, and beyond. Our tools optimize every aspect of ecommerce operations to ensure maximum profitability.

For sellers aiming to earn through reselling, Tactical Arbitrage helps you find hidden deals 5X faster. ScoutIQ provides instant insights for scoring in stores. DataSpark helps you get your next bestseller on Walmart Marketplace across over 14 million products in its database.

If you want to sell globally without storing, shipping, or risking money on inventory, SellerRunning simplifies cross-border dropshipping. We let you manage and expand your ecommerce business across multiple Amazon marketplaces seamlessly.

Managing products across leading ecommerce channels has never been easier either. ExportYourStore ensures hassle-free cross-listing and product syncing. Meanwhile, Hemi integrates over 100 ecommerce platforms, handling everything from inventory to logistics.

For efficient financial operations, FeedbackWhiz Profits offers a robust ecommerce accounting solution. We give you total control over your finances. You can track earnings and spending and visualize financial data without much effort.

You can also enhance your customer service with ChannelReply. Centralize marketplace communications through order data alongside support tickets from major marketplaces. Meanwhile, Onsite Support combines AI tools and custom-built help centers to amp up your support capacity. With these two, you can ensure that your customer service team can do more with less work.

Simplify Amazon operations with InventoryLab. It's an all-in-one solution that enhances everything from sourcing to logistics to accounting. We make inventory management and business workflows as streamlined as possible, so you won’t have to think about it.

Protect your profits with our advanced recovery solutions. DimeTyd Amazon helps 1P vendors recover lost revenues from overbilling and inventory discrepancies. DimeTyd Walmart simplifies the process of disputing unacknowledged shipments and organizing deductions. DimeTyd Sellers offers comprehensive monitoring and dispute resolution for Amazon FBA.

Automate your pricing strategies with SmartRepricer. We'll help you stay competitive by adjusting prices automatically based on custom rules. You can make sure that you always win the Buy Box with just a few clicks.

Finally, safeguard your online reputation with our reviews and alerts solutions. FeedbackWhiz Emails lets you handle Amazon review requests with personalized feedback campaigns. CR Feedback offers cost-effective feedback gathering for eBay and Amazon review requests. FeedbackWhiz Alerts keeps you informed with timely notifications on reviews, threats to your listings, and other important events.