Everything you need to know about selling your Amazon FBA business

You’ve built your FBA business - you got 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 noone else has - then you need to find out how much your business can fetch. 

How much is my company worth? 

The current going market multiple for an FBA business is typically between 2-4x the EBITDA or Seller’s Discretionary Earnings over the past year, with the median at just over 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 registry 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 using their own capital
• $500,000 - $1 million: Bit of 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. Start to see buyer’s 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.

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Sales process

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Before anything gets going, it’s crucial that whoever is coming in to buy all or part of your business if 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 on to 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, paid and the business changes hands. It typically only takes up to 5 days.

Need help?

Schedule a free 30-minute audit call with a specialist today. 

Our Solution Architects are trained to understand your business and present your best options to grow on Amazon. All advice is customized to your needs.

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About us

Threecolts acquires, launches, and grows eCommerce software & services, and owns other stellar businesses including Old Street Media, HotShp, SellerBench, Tactical Arbitrage, Bindwise, RefundSniper, ChannelReply, and FeedbackWhiz.

Old Street Media supports businesses with their advertising, inventory management, and other eCommerce services. We collaborate with over 4000 brands and have generated $600M in sales in the past year.

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