So, you’re thinking about selling your FBA business? Good for you! You’ve worked hard to make your company successful. As the Amazon market gets more competitive, multiples go up, and fees continue to increase, selling your FBA business has become a more popular option than ever. The brand acquisition space has grown to $13 billion as a result.
But wait…Where do you even begin? Below, we’ll go through the process of planning an exit. This is about more than simply handing off the business and forgetting about it. Here are ways to prepare for an exit that can also help raise the valuation of your business.
1. Get your FBA financials in order
This is the single thing mentioned most often by sellers. There are several reasons for this, but more than anything, it makes life not just easier for the buyer, but also for you. Having a clear financial picture creates a better understanding of the actual value of the company, as well as if there are problem areas that need to be addressed before selling your FBA business.
There’s no way around it: Selling your FBA business is complicated. There are extensive documents that can be difficult to understand while planning for taxes only adds further complexity. All of it is time-consuming.
However, if financials are organized and easy to understand, this will go a long way toward facilitating a fair sale. The extra time spent organizing pays off with increased efficiency and clarity. The fact that it improves the speed of close can save you even more money.
Organizing financials can seem simple, but it does take work and time to get them sharp and professional. If there’s still time to incorporate a system to track financials in real-time — like accrual-based accounting — this will make it even easier in the long run.
2. Organize your supply chain and vendors
Supply chain and vendors is where a product-based business begins; without them, there is no business. While you won’t know in advance if the buyer wants to keep your supply chain systems or vendors, preparing the appropriate channels for that transition offers further value to the company making the purchase. It shows attention to detail on your end, and incorporating your supply chain and vendors into the deal can be a huge benefit for most buyers, especially when considering the time the buyer might need to set up their own systems for these processes.
Establishing a plan to hand off the supply chain when selling your FBA business also helps your vendors and teammates involved in those processes. By keeping them up to date on your end, they aren’t blindsided by the transition, and they know that their operations may need to be updated moving forward. Finally, it also prevents the rug from being pulled out from under them in the event the purchaser does not move forward with their services.
3. Handoff FBA marketing and sales materials
A proper brand acquirer will be as invested in growing your brand as you are. This means that everything you’ve invested in helping it grow should be handed off to the company that will continue to help it grow.
This starts with basic assets. Fonts, colors, logos, anything that will help create branding consistency after the handoff. Then, historical ad campaigns and data will help inform future strategies. Any and all marketing documents, like white papers and case studies as well as lists of former consultants and service providers, will also go a long way toward a smooth transition.
Finally, when selling your FBA business, you need to make sure the acquirer has an understanding of how your audience relates to your brand. Whether it’s through insights from research across channels or your customer email list metrics, you want the company that acquires your brand to be able to pick up where you left off. For these reasons, you want to make sure the information is easily accessible and clearly outlined for the brand acquirer (you can even provide them with a handoff document for the marketing team).
4. Make your product listings easily sortable
The more inventory you have, the more sorting you’re going to need to do before selling your FBA business. Cleaning up listings and product information now reduces future headaches for both parties involved. While your main focus has been on making listings easy for buyers to find, now the focus is on making them easy for the acquiring company to find.
The company you’re selling your FBA business to should have an easy time sorting through the products that will soon be theirs. To start, all product descriptions should be optimized, with titles, descriptions, and bullet points featuring the appropriate information. Images should be clear, and sizes/weight/etc. should be accurate. Basically, take care of everything that ensures that any listing can be found and understood easily.
Legacy sorting systems can survive for far too long on a team that knows what they’re looking for, but in the transition to a new company, the old way of doing things simply might not be clear enough moving forward.
5. Know your number
Knowing how to value your business is extremely important in negotiating with potential buyers. Taking into account factors like age, history of growth and revenue, and the costs of running the business will all affect its worth. A company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) is a common starting point, while the aforementioned factors contribute to the value of the multiple. A good rule of thumb is that the longer a company has been around and shown consistent, increasing profitability, the more you can make for selling your FBA business.
By establishing your own (reasonable) understanding of your business’s value, you go into a negotiation with a fair offer in mind. While no one wants to get lowballed, extremely high valuations also raise red flags. You don’t want to get pulled into exclusivity by a too-good-to-be-true offer, only to then be negotiated significantly down. When you have a sense of what you’re worth, you’ll have a firmer ground to stand on while selling your FBA business.
6. Closing with the right partner
Now that you know what to do to prepare for selling your FBA business, it’s time to find the right partner to sell your FBA business to. Not every brand acquisition company is the right fit for every brand. At Boosted Commerce, we narrow our focus in order to allow us to find the brands we can grow and love. If you’re ready to explore an exit, reach out to us today.
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