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- How Much Could Your FBA Business Be Worth?
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Amazon is growing at a rapid pace, now with approximately 300 million active customers. Accordingly, it’s no longer a secret that Amazon’s FBA (Fulfillment by Amazon) program has attracted countless business owners to the platform. In the beginning, this platform was just for selling books, but you can now get almost everything globally.
The average deal outlay for Amazon FBA brands in 2021 was $1,246,759.04 at a 40X multiple on our marketplace , and last year it was for $538,741.62 at a 28.5X multiple; that’s a 231% increase! This massive change in deal size can be classified as the rise of brand integrators allowing FBA businesses to make extensive portfolios
More About Amazon FBA Business
We understand that many Amazon FBA sellers like you don’t actually know that selling your business is an end goal. In fact, you might be one of the many entrepreneurs busy running and scaling your brand without a defined exit strategy. However, let’s be honest. Without an end goal, you’re left with two choices: either exit the business at a lesser price or shut it down.
What if we say that leaving it for a six-figure or even seven-figure sum is possible? Yes, you can actually accomplish that; by preparing your business to be sold, you can grab the best possible deal. Dragon Dealz brought in here something that might help you understand how valuations work so that you can easily sell your FBA business. Let’s investigate this in greater detail!
The Valuation Formula
Valuation = 12-Month Average Net Profit x Monthly Multiple
The average monthly net profit is positioned against a monthly multiple to achieve an initial listing price. For this formula, other brokers may use EBITDA (i.e., earnings before interest, taxes, and depreciation), an annual profit figure, resulting in lower multiples of 2x through 5x.
To account for seasonality and changes during the year, a 12-month pricing period is utilized. Thus, novice sellers should adhere to a 12-month pricing period. Moreover, calculating your Amazon FBA business valuation helps you sell efficiently and without a loss. Once you’ve researched and evaluated the e-commerce numbers associated with your business, you’ll understand this
The Best Ways to Sell Your Business
Are you wondering how to sell your FBA business? We have you covered! There are two main options: sell via a private deal or use a broker to trade. Sometimes, people might suggest that you use a DIY marketplace, but there are two primary reasons not to go with this approach:
• There will be no protection for buyers and sellers if a deal goes wrong, as you handle the process
• First-time sellers won’t know how to negotiate with buyers and are often baffled by the question,“How much is my FBA business worth?”
When it comes to selling your business, you must have someone in your corner who can honestly provide assurance and support. Employing a curated broker provides you with the necessary tools to hawk your business and negotiate with buyers regarding the sale price you desire.
Let’s talk about the FBA business buyer now!
How to Buy an FBA Business
Amazon’s FBA business is advantageous to both sellers and buyers. In fact, buying an Amazon business is as simple as revamping your Seller Central account with new information. Even though every business varies in nature, there are certain factors that consistently matter. Here’s the checklist that you must go through:
• Study the accounting records of the business
• Learn the suppliers, agreements, lead times, and unforeseen costs
• Understand advertising metrics
•Review the seller’s FBA account health
•Examine the giveaways and promotions
•Analyze your business competition
Also, don’t forget to update the account elements (mentioned below) after buying an Amazon seller account:
•Account name and email address
•Deposit bank statement details
It’s essential to equip yourself with all possible information before stepping into the Amazon business market. Whether you sell directly or use a broker, auction, or marketplace, it is important to be aware of the valuation metrics in order to achieve the best results. Also, remember that buying and selling an FBA business depends on your risk tolerance. Accordingly, be sure to buckle up and sort out your priorities before taking up or selling your FBA business.
Pro Tip: Do not exceed the character limit. Amazon warns explicitly about this, “Whole entry will be rejected upon exceeding the limit”.