Have You Built a Plan To Exit Your Amazon FBA Business?

The Exit
Rob Bell
July 26, 2021

Have You Built a Plan To Exit Your Amazon FBA Business?

The Exit
Rob Bell
July 26, 2021

Have You Built a Plan To Exit Your Amazon FBA Business?

The Exit
This is some text inside of a div block.
July 26, 2021

Exiting your Amazon FBA business could be one of the biggest financial decisions of your life. Having reviewed thousands of Amazon FBA businesses and acquired dozens of them for multi million dollar pay days, Elevate Brands biggest piece of advice is to be prepared with a robust exit plan. The farther in advance you can start planning the bigger the payday at the end! As we like to say, “The day you should start preparing for an exit is the day you start your Amazon FBA business.” This article outlines some of our top insights on making the most money from exiting your Amazon business and achieving the financial freedom that you deserve.

Exiting your Amazon FBA business could be one of the biggest financial decisions of your life. Having reviewed thousands of Amazon FBA businesses and acquired dozens of them for multi million dollar pay days, Elevate Brands biggest piece of advice is to be prepared with a robust exit plan. The farther in advance you can start planning the bigger the payday at the end! As we like to say, “The day you should start preparing for an exit is the day you start your Amazon FBA business.” This article outlines some of our top insights on making the most money from exiting your Amazon business and achieving the financial freedom that you deserve.

Set Your Objectives Upfront

Before embarking on the road to an Amazon FBA exit, the first step is to outline your objectives. Without objectives, you won’t be able to execute your sale effectively and efficiently — especially because selling your business is such a major life decision.

To determine if your exit is the right decision, you need to outline your life objectives. 

Life objectives to outline:

  • What is the ideal timeline for my exit? 
  • What’s driving me to exit my business? 
  • What problems am I trying to solve?

As the exit process requires unparalleled focus from all parties involved over a short timeframe (30-60 days), people need to be committed to the process. Once you’ve decided to sell your Amazon business, you need to outline your business exit objectives. 

Business exit objectives to outline:

  • How much do I want to secure for my business?
  • When do I want to sell?
  • What else is important to me? Do I want to stay involved in the business or get a clean break?

Numbers, Numbers, Numbers – The Importance of Reliable Financial Statements

Having messy books will guarantee that you get a low exit price. Conversely, having reliable financial statements is one of the most critical elements to selling your Amazon FBA business. Your numbers form the basis of business valuation and ultimately the price you will receive.

After all, if you don't know how much you are making, how will you know how much your business is worth?

Elevate Brands has the in-house capabilities and technology to reconstruct financial statements for an Amazon FBA business very quickly. We have acquired Amazon FBA businesses where the seller did not have financial statements in place. That said, based on our experience, it is far more beneficial to have your financial statements in good standing order before embarking on an exit process.

If you are seriously considering an exit of your Amazon FBA business, we would also highly recommend engaging a professional ecommerce accounting firm or consultant to assist you in this process. While this will involve some small upfront costs, the extra value provided and the ability to close a transaction quickly will more than make up for this.

Some quick financial tips below that will help you prepare for your Amazon FBA exit:

  • Set up a single bank account that is attached to the Amazon FBA business in question. Do not pay for personal expenses that are unrelated to the business through this account. This includes expenses related to other business. By keeping it clean and simple, you create an easy due diligence process for a buyer
  • Track important metrics across the business and make sure you understand how they are driving financial performance in the business. Key metrics include inventory turnover levels, PPC spend (ACos / TACos), and COGS margins
  • Switch from cash accounting to accrual accounting. This will allow you and the buyer to more accurately the true financial performance in the business and avoid the lumpiness associated with big swings in changes in working capital (accounts payable, accounts receivable, inventory)

Operations – Start Reducing Complexity + Keep Operating As A Going Concern

Amazon FBA business buyers value simplicity. In our experience, Amazon FBA businesses that are too complex have more difficulty selling their business or are not even able to sell them at all. 

Businesses that have a developed brand across a handful of SKUs and in a single category will generate significant interest from buyers. Here are our tips on preventing your business from becoming overly complex. 

Top ways to limit Amazon FBA business complexity: 

  • Reduce your SKU count;
  • Reduce new SKU launches 4-5 months before the expected sale date;
  • Stop selling on non-performing market places;
  • Ensure storefronts are clear and only display relevant SKUs; and
  • Establish clear standard operating procedures and redundancies for key business processes

As you approach your Amazon FBA exit, it’s important to maintain your business operations running. Keep the business in stock and don't run out of inventory. Incoming Amazon FBA buyers don’t want to run out of stock the moment that the keys are handed over. 

IP – Securing Your IP to Boost Your Exit Price

If you want to maximise the sale value of your Amazon FBA business, make sure that your Intellectual Property (IP) is protected.

In the Amazon FBA world, this means having Brand Registry. Getting your global trademarks in place before you sell will make the business more attractive to a wide range of buyers. Having design and utility patents for your products will further boost the exit price of your business. Get these in place as well before the sale process.

Fortunately, Amazon is very effective in enforcing patent breaches. Their IP Accelerator program can also help you protect your IP when preparing for an exit. 

Growth – Why You Need to Know Your Growth Levers

Start building your growth narrative as soon as possible. A buyer will likely pay you a higher multiple if there is upside left in the business. Put yourself in the buyer’s shoes and ask yourself — how could they grow the business once a new owner is in place? 

Potential growth levers:

  • New SKUs
  • New Amazon international expansion
  • PPC optimisation
  • Off-Amazon business growth

The more clear the growth narrative is laid out and the more actionable this growth narrative is, the higher valuation a buyer will be willing to pay. 

Are You Ready To Start Prepping For An Amazon FBA Exit?
Amazon FBA businesses have become a valuable and institutionalized asset class. You need to get your house in order to get the most from your Amazon FBA exit. Elevate Brands is one of the most experienced and credible buyers of Amazon FBA businesses. We have already helped countless sellers achieve lucrative, quick, and hassle-free exits. Are you ready for yours?
Listen Here