Dec 30 , 2021
The Right Way To Exit An Amazon Business
When you’re going through the excitement of launching an Amazon business you’re probably not even considering how you would eventually exit the business. After all, there’s a lot to do - like profits to be made - and there’s certainly a lot to learn. But, all good things eventually end, and now that you’ve decided to move on from your Amazon venture you need to ensure all your hard work and time and money spent don’t go to waste. You need to exit your Amazon business the right way. There are very clear steps to successfully exiting an Amazon business, but unfortunately, many entrepreneurs take the quick and easy route of simply walking away from their store and allowing it to die a natural death.
The Right Way To Exit An Amazon Business
You may not realize it but your Amazon business is a huge asset; if you’re ready to retire or move on to something else, your Amazon store should be primed for the market because it’s definitely a super saleable asset. In this post, we’ll explain the key steps to making a clean business exit from Amazon.
There’s so much money being poured into the Amazon FBA (Fulfilment by Amazon) market today that we’re seeing more and more sellers considering selling their Amazon stores. If you’re wondering what’s the right and most profitable way to sell your Amazon business, simply follow these easy steps to achieve a hassle-free exit and to ensure your business realizes the very best selling price.
No. 1: Make Sure Your Legal Documents Are In Order
By legal documents, we’re referring to Patents, IP Rights, and Trademark Registrations. All this information must be readily available to prospective purchasers because you’ll find that many aggregators will check your registry in both China and the US (in addition to other markets where your products are sold). Most brand buyers on Amazon are only interested in private label companies where key aspects of the asset purchase are the brand and the trademark registry.
It stands to reason that you can’t possibly know how much your business is worth if you don’t know how much you’re making. Messy books guarantee a low exit price, so ensure your financial statements are accurate and up-to-date. One of the most critical elements of a successful Amazon FBA business sale is maintaining reliable financial statements. The basis of a business evaluation is formed by your numbers, so the price you ultimately receive for your business will be helped enormously by excellent record-keeping.
No. 2: Improve The Profitability Of Your Business
As an Amazon FBA seller who is now looking for a profitable exit, understand that while it’s great to have a large number of total sales, no one will be interested in purchasing an asset that’s not profitable. If unexpected costs have arisen, we suggest you consider waiting for another six months of positive net operating income before you take your brand to market. Some of the challenges involved with being profitable include marketing spend (TACOS and ACOS), salary, and payroll and administrative costs (G&A). It’s not wise to artificially pump up sales numbers with a heavy marketing spend – instead, focus on steady growth.
No. 3: Focus on Specific Categories and Hero SKUs
While not all aggregators are looking for the same thing, most are looking for brands with 3-8 SKUs. This means the new operator can quickly integrate your business into existing supply chain flows and onboard it into their portfolio. If your Amazon business has one Hero SKU prior to exit, don’t start rolling out new products - just focus on that one product.
No. 4: Buyers Love Shopify
Many buyers are looking for Amazon businesses that have a separate Shopify store, or indeed any other eCommerce store, but it must be well managed. It supports an Amazon business, it’s an extra outlet for the brand, and it creates buyer interest. Creating a Shopify store is easy and straightforward: it takes just a few minutes and it doesn’t create much extra work if you handle the distribution yourself, meaning you’re not using Amazon Fulfilment. If it’s successful and you find it too time-consuming handling the orders (what a great problem to have!) then there are logistic and distribution companies available to help you out.
No. 5: Continue Operating As A Going Concern
Continue operating as usual and start reducing complexities. Amazon business purchasers are looking for simplicity. Complex Amazon FBA businesses are difficult to sell, in fact, sometimes owners are unable to sell them at all.
Key Ways of Limiting Complexity of Amazon FBA Businesses
1 )Reduce the SKU count,
2) Stop selling on ineffective marketplaces,
3) Decrease new SKU launches approx. 4 -5 months prior to the expected sale date,
4) Establish clear operating procedures for key business processes,
5 )Ensure clear storefronts with only relevant SKUs on display.
No. 6: Simplify Supply Chain and Automate Processes
Your Amazon business will be more enticing to buyers if the business behind the profits is easy to manage. To demonstrate a transparent and well-structured business, maintain good relationships with your suppliers by contacting them a couple of days before placing your business on the market. Make sure you’re current with your product team, VAs, and third-party warehouses (if applicable) and up-to-date with their day-to-day activities.
No. 7: Track All Records and Client Data From All Platforms
It’s very important to the successful sale of your Amazon business that you maintain all client data and have a current record of all client and partner emails. Having this information on hand displays a well-organised business, in addition to providing a clear insight into how you envision the business moving forward and the best way to move forward with new ownership. A serious aggregator will be very appreciative of this information, which will probably be reflected in the final sale price.
Further Tips For Exiting An Amazon FBA Business
1) Selling on Amazon can, at times, be a complex and problematic business. If there’s a problem, make sure you take care of it prior to exiting the business, thus allowing the new brand owner to have a clean start. If the problem can’t be fixed, communicate this with the buyer. Better to be honest than try and hide a problem.
2) Timing is key with any exit strategy, and the best time is when things are going great – not when you’re on a downward trend. Keep in mind that an exit should be a win-win for both parties.
3) As your Amazon FBA exit nears, continue maintaining your business operations. Don’t run out of inventory and keep the business in stock.
4) Get rid of products that aren’t selling prior to exiting the business, thus freeing up working capital and preparing for the exit without the burden of dead stock. Focus only on what’s making money and drop everything else.
If it’s your intention to move forward with exiting your Amazon FBA business, we strongly urge you to engage the services of a professional eCommerce consultant or accounting firm to ensure the process goes as smoothly as possible and you achieve top dollar for your business.
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