Like any ambitious FBA business owner, you’re looking for ways to increase the value of your Amazon business. Perhaps, you’re still in the early stages of growth and want to establish a clear roadmap to success. Or, maybe you have a well-established business and you want to exit within the coming months. The good news is that you’ve probably already done at least some of the legwork.
You’ve figured out how to succeed on Amazon and leveraged your knowledge to create a successful Amazon business. You’ve created a business that you believe people will be interested in buying. What you may not have done yet is put yourself in the shoes of a prospective buyer—have you done everything you can to ensure your business runs smoothly for the next owner?
Just as importantly, have you done everything you can to ensure your business runs efficiently for you? If your end goal is to increase the value of your Amazon business, you need to take a step back and thoroughly examine your business processes, spending behaviors, growth strategies, and documentation.
Here are five high-leverage steps you can take to increase the value of your FBA business.
- Establish a Clear Growth Strategy
More than likely, the buyer of your business will want to have a clear understanding of how to scale it post-acquisition. By providing prospective buyers with a clearly-defined plan for the future, you make it significantly easier for them to achieve their goals. In turn, this step adds considerable value to your business.
Create a List of Products to Launch
A simple product roadmap can go a long way toward making your business more attractive to buyers. This can include offering a well-documented launch strategy for a new product line, an improved version of an existing flagship product, or even just expanding your Amazon store into new categories. For example, if you sell private label cosmetics, you could expand into other personal care products such as moisturizers, perfumes, or deodorants.
Define a Marketing Strategy
You already have your own marketing strategy in place. In addition to thoroughly documenting this strategy for prospective buyers, take some time to brainstorm a few ways your strategy could evolve in the future. This may include implementing content marketing, running ads on a new social media platform, or any other strategy that shows promise for your business.
Evaluate Possible Expansions
Expanding into a new market is arguably one of the best ways to increase the value of your Amazon business, especially if that market is relatively unsaturated. Prior to selling, identify and assess a few markets that you feel represent promising opportunities.
- Minimize Single Points of Failure
If there’s one lesson everyone in the eCommerce sector should take to heart, it’s diversification. The more reliant a business is on a single product, category, or sales channel, the greater the risk it represents for a prospective buyer. Consequently, the fewer linchpins there are, the more you increase the value of your Amazon business.
Many Amazon FBA businesses have a few products that sell better than the rest of their inventory. Problems begin to arise when those products represent the vast majority of your revenue.
What happens if the market shifts and there’s no longer any demand? More than likely, your business’s revenue declines significantly. To minimize the risks associated with hero products, you should always be trying to ensure that you have multiple high-performing products.
There’s a good chance that your business works with at least one supplier it could deem critical. The question you need to ask is what happens if that supplier becomes unavailable. Do you have secondary supply chain partners you can contact in order to ensure you don’t experience any interruption to your inventory?
Suppliers aren’t the only potential point of failure from an operational standpoint, either. Any product or service that’s heavily reliant on the expertise or contributions of a single employee could be viewed as a risk. Make sure you have mechanisms in place for addressing that, such as thorough documentation for prospective replacements.
- Address Wasteful Spending
Many businesses waste money without even realizing it. If you’ve not taken a recent look at your budget, there’s a good chance yours is one of them. Therefore, make sure to look carefully at your budget before listing your business for sale.
To more effectively increase the value of your Amazon business, watch out for the following problems.
Amazon PPC advertising, much like any other paid marketing channel, is a massive money sink if you don’t know what you’re doing. According to eCommerce platform JungleScout, the average return on advertising spend for Amazon PPC is 4. If yours is below that, it means you’re not spending efficiently.
Because for one reason or another, your ads aren’t performing. In the process of defining your marketing strategy, you need to determine why. That way, you can figure out what you need to do differently.
Although not technically wasteful spending, inefficiency anywhere in your business will cost you money. Maybe you’re still manually doing processes that can be easily automated—such as printing and shipping invoices. Your business might also be laboring under poor inventory management or bad shipping and handling processes.
As you’ve probably guessed, the list goes on. That’s precisely why you need to adopt an efficiency-focused mindset. Always be on the lookout for opportunities to simplify and streamline.
Because the more efficient your operations, the more you can increase the value of your Amazon business. Coincidentally, this is the perfect lead-in to the next point.
- Implement Standard Operating Procedures
The best way to make your business more efficient, capable, and successful is through the implementation of standard operating procedures. That SOPs also increase the value of your Amazon business by allowing for an easier transfer of ownership is just the icing on the cake.
Given that Amazon, USA maintains over 300 SOPs you could potentially document, your best bet is to divide them into broad buckets and prioritize the processes that will offer the most significant efficiency gains. Note also that this is not something you should do on your own. Consult with legal, human resources, marketing, and financial experts.
How are new products documented and listed? What is your business’s process for updating, modifying, or deleting a listing? SOPs related to product listings should also include general best practices/standards for creating new listings and pushing them not just to Amazon, but any other sales channels on which your business operates.
How does your business monitor and maintain its inventory? What happens in the event that there’s an excess supply of a particular product or you run out of something crucial? How does your business manage order fulfillment, shipments, and returns?
It bears mentioning that inventory management is one of the best candidates for automation—keep this in mind when considering your SOPs.
When something goes wrong with a product, who can your customers contact for assistance? Does your business have a process in place for responding to negative feedback? Have you devised scripts/guidelines for your customer service agents to follow when managing complaints and concerns?
Reporting & Metrics
What systems and processes do you have in place for measuring overall performance? Do you have similar procedures for identifying and addressing issues such as canceled listings, returns, negative reviews, and downward trends in sales? How frequently are reports generated and reviewed by key stakeholders?
As you’ve likely guessed, you need to implement some form of analytics solution to support the SOPs you draft around reporting—the amount of work required to manage such a large volume of data manually is far too significant to be worthwhile.
SOPs around marketing and advertising establish how, when, and why products are promoted. They also detail the key performance indicators to be applied to each marketing campaign and the tools and platforms a team should use to support that campaign. If your end goal is to increase the value of your Amazon business, you cannot ignore this segment.
This includes how transactions are recorded, how and when financial reports are issued, and how payments are facilitated. You should also institute SOPs around taxation—especially sales tax, which is typically a source of significant confusion for Amazon sellers. Your buyer shouldn’t have to figure out your business’s sales tax nexus post-purchase.
That information needs to be available to them at the time of sale.
If your business maintains proprietary software, how is that software operated and maintained? If relevant, you should also define SOPs for talent acquisition, onboarding, and contractor relations. Crisis management also falls under this umbrella.
- Record Financials on an Accrual Basis
The last and arguably most important way to increase the value of your Amazon business centers on its bookkeeping practices. In that regard, accrual-based accounting provides greater detail and insight into your business’s trends, margins, and overall financial health. By recording revenues and expenses as they are incurred, you more accurately represent factors such as on-hand inventory.
Cash-based accounting, the alternative to accrual-based accounting, fails to do this, as it focuses entirely on cash flow.
Ultimately, whatever type of financial records you maintain, the most important thing is that they are as accurate and comprehensive as possible.
Sell Your Amazon Business for Maximum Value
By understanding the unique qualities of your business as well as your goals, the team of Advisors at Quiet Light can offer a professional valuation based on years of industry experience. If you decide to move forward, they can also provide you with clear and actionable guidance to help you secure the best deal possible when it’s time to sell your Amazon business. Because you don’t pay anything until your business is sold, there’s no risk involved in the valuation process. Reach out to Quiet Light today to discover how much your FBA business is worth.
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