If you’re ready to sell your Amazon FBA business, it’s only natural to wonder how to pick the right Amazon FBA buyer. And it’s a good question. As the brand acquisition space has grown tremendously in just a few years, there are more companies than ever, with more money to spend than ever, who have the “right deal for you.” But there’s more to it than commas and zeroes, and to make sure you’re getting not only the best deal for yourself but also for your brand, here are some things to look out for.
Multiples went up at the end of 2021, which made it a great time to sell. And while there were outliers that saw truly spectacular numbers, the reality is that those exceptions remain exceptions. In general, the average multiple is around 4-5x SDE, as reported by about 60% of sellers. More than that, and it’s time to get suspicious.
This is because of the general negotiation structure of the industry. Generally, deals enter a period of exclusivity after initial negotiations, at which point due diligence is completed. During this time, when more information is uncovered, the initial offer might change -- especially if the multiple was far too high to begin with. In some instances, buyers do not have committed capital and will need to get approval to access funds (or even raise funds) post diligence process, which can cause issues to close or even a change in pricing. However, if you know your worth and have a realistic expectation of what kind of multiple you should be getting, you’ll know when an offer is too good to be true.
Proper Niche and Growth Portfolio
The next thing to look at is the niche that the company occupies. For one, do they even have one? A jack-of-all-trades company is likely going to lack the expertise needed to help your brand continue to grow. To that end, a company that is an expert in a niche wholly unrelated to your brand is also not going to be able to do much with it.
Therefore, looking at the company’s portfolio and track record of growth becomes a key step in deciding how to pick the right Amazon FBA buyer. And it’s not just because of their ability to continue growing your brand. Remember, a brand acquisition company is also a brand builder; they don’t make money unless they help grow what they’ve acquired. Furthermore, most purchase agreements include some type of earnout provision, which means the better they do with your brand, the better you do. So, if a brand doesn’t fit your niche and doesn’t have a track record of building products like yours, why are they coming to you with an offer?
Amazon Expertise and Established Marketing Strategy
Now that you know what you’re looking for, how do you pick the right Amazon FBA buyer in the proper niche with a track record of growth? How do you know they will actually be able to do the same for your brand? It comes down to their ability to understand Amazon and how to implement a strategy on the platform.
This is where you come in, as there are steps you can take to dig a little deeper. Your due diligence should involve seeing what efforts go into promoting the brands a company has already purchased. What kind of PPC strategy do they have? Do they have a dedicated team to grow and manage each brand, or are a few people working multiple jobs? Do they have connections with editorial outlets? In essence, make sure the company you’re trusting your brand to not only knows what they’re doing, but that they’re actually doing it. You should also have your marketing and sales materials ready for a smooth handoff and transition to the company you eventually do sell to, as this will help them continue to connect with your audience.
Speed of Close and Post-Sale Support
The faster a company can close, the sooner you get paid and the fewer fees you rack up. Remember: until the deal is finalized, you’re the one in charge of running your business. Along with paying lawyers and accountants, speed of close quickly becomes important. A fast close doesn’t mean being hasty throughout the rest of the process, however. In fact, you should be careful if it’s too fast in some cases, as it’s equally important that the buyer knows the ins and outs of the business so that they can continue to grow the business and you earn into the growth and earnout.
The process also shouldn’t be so hectic that you yourself get lost in it. There should still be a human element to everything. Handing your business off to continue growing -- earning yourself a potentially life-changing payout in the process -- is about more than just the raw numbers behind it.
About 30% of entrepreneurs are serial entrepreneurs, and starting multiple businesses has never been more achievable. This was the foundation for creating our Seller Circle, which offers benefits like a $1,000 credit for UpWork. You’re choosing a brand acquirer for their ability to take care of your brand, they should also be taking steps to take care of you.
The Right Choice for You
Ultimately, you want someone with the capabilities and willingness to provide service around the full life-cycle of your business. Unless you’re simply going for the highest price (and it’s all right if you are), you want someone accessible, someone who gives you and your brand options. Look for someone who will continue to drive growth and success in your Amazon FBA business long after you receive your money, not just add your brand to their portfolio like a trophy.
Every seller is different, and so is every buyer. With so much money flooding the space, and so many buyers popping up, it can be easy to get lost in the weeds. Not to mention, you still have to run your business while all this is going on. Use this guide as way to lead you in the right direction. And if you’re ready to discuss an exit of your own, contact us today.