Are you thinking about selling your Amazon business? We’ve compiled a list of helpful tips and recommendations for eCommerce sellers who are looking to successfully exit Amazon.
How to Successfully Exit Amazon?
As capital keeps pouring into the Amazon marketplace, it proves its worth a serious endeavor. Aggregator companies acquiring successful brands on Amazon have raised over $13 billion in 2020.
source: Marketplace Pulse
With that being said, selling an Amazon seller account can be a thrilling endeavor.
It’s natural for any business owner to worry about a potential exit. But exit can be a positive experience, as long as you prepare well and know what to expect. If you’re just starting, it’s tempting to think about the profit you’ll be making. But you should also ask yourself how much work you want to put in before you begin, how much time you’re willing to put into it, and at what price you’re ready to sell your business.
Prepare Your Amazon Business’s Financial Statements
Prepare documented, timely, and accurate financial statements for your Amazon business: debt, revenue, and expense statements. Make sure that all of your financial paperwork is well-organized and quick for your buyer to navigate through. Pay close attention to the following:
- Profit and Loss Statements
- Selling Expenses
- Tax Return
- Loans and Debts
- Employee compensations.
When a buyer evaluates the value of a seller on Amazon FBA, they want to scrutinize all expenditures, savings, and investments, understanding the full scope of their business. It is recommended that you be prepared to provide all that info, including receipts, proof of purchase, and any other relevant materials.
Calculate the SDE
The seller’s discretionary earnings (SDE) is the most vital number for your exit, so take your time calculating it. This number determines the closing deal’s price – the sum for which you will be selling your business. SDE comprises net profit and add-backs – business owner expenditures that won’t be transferred to the new owner when the business is acquired. Generally, these are payouts to individuals who work for a company and are the owner’s relatives.
Keep Your Business Running Smoothly
One sure way to sell your business profitably is to make sure your company is performing well. Prior to exit, pay close attention to sales, marketing, and management. Try reaching a wider audience. Some companies are using their production, sales, and distribution partners as part of an extended supply chain, leveraging the additional expertise from these partners to help ensure that it runs smoothly.
If you are looking to optimize your business operations and streamline your feedback loop, there are certain strategies that can help:
- carefully examine elements such as your supply/demand to ensure that the process runs smoothly without obstacles or micromanagement;
- review your brand and company values – they should align;
- make sure your marketing striving generate positive outcomes;
- ensure that the business can operate without you monitoring it 24/7 – buyers usually aren’t willing to spend too much time organizing and managing a newly gained company in order to ensure its growth, as this is contrary to the intent of its purchase.
Increase the Value of Your Amazon FBA
You might consider that since you’re planning to exit, you don’t have to work on increasing your business’s profitability. Nevertheless, keep this in mind: the bigger the value of your business, the more you can charge for it. Buyers will be calculating the possible profit after the sale, so try to at least keep the near future in mind.
You can raise your business’s value in many ways:
- diversify your portfolio;
- invest in brand visibility/awareness;
- try enhancing your Amazon Seller Rank;
- facilitate your manufacturing process;
- ensure beneficial supply contract conditions.
Pick the Right Time
In business, the now-and-next philosophy applies whenever there is a need to decide what you should be focusing on. Many executives wait until the moment is right, which leaves the possibility of losing out on opportunity and relevance. Business executives need to be able to trust their gut.
Timing is everything in all aspects of the business – a closed sale, a completed project, an exciting new initiative. The question is: are you keeping the momentum going? Are you taking the opportunity to plug your brand into the moment and show your customers what’s new?
Build a Reliable Supply Chain
The Amazon FBA business is all about supply and demand. Amazon relies heavily on its global logistics network to ensure its successful deliveries. This robust supply chain is the backbone of Amazon’s success and everything starts with a supplier. Amazon’s success has its authors in many aspects, but a key element for the greatest part is the reliability of the supply chain network, which guards the brand integrity at any cost.
Good relationships with your supplier and guarantee that the process is well-organized and reliable assures that you can complete your orders on time. Keep in mind the Amazon FBA limits are constantly changing. So maintaining close and trustful relationships with your supplier and 3PL storage is as crucial as it is.
Boost Your Margins and Discard Ineffective Products
Review your sales data and invoices regularly to find new ways of increasing revenues and sales. Maybe, you’ll find some products that aren’t performing as well as you expected.
eCommerce sellers should have a strategy for triage. Discarded products have the chance to reduce your operating costs and increase your turnover. It’s easy to get caught up trying to push the product even when it doesn’t deliver the sales you need. If you’ve been trying to sell a certain product for months without any significant sales, it’s time to rethink your strategy.
Choose a Method for Selling Your Business
Selling your business can be a nerve-wracking process with myriad decisions and stressful hardships. One thing to avoid is the temptation to just park your seats with the first buyer that comes along. Make sure the buyer you choose is the right fit for you and your business. You need to be sure that it’s the best decision for your goals and for your business.
Choosing a method for selling your business can be tough. Consider the following most popular options:
- Direct Sale
Exiting an Amazon FBA business is a hard decision to make. What’s even harder is to sell it profitably. So many variables need to be taken into account that there’s little room for error. Analyze your numbers carefully and try to maintain or better raise your profits – this way you will definitely have a chance for a beneficial deal.
About the Author
This article has been written by the Profit Whales team. Profit Whales is a Full-service marketing agency for Amazon brands, that accelerates sales growth using on & off Amazon traffic to give them an edge over competitors and diversify the revenue streams while increasing the business evaluation.