How to Increase the Value of Your Amazon Business and Make It Sellable
Amazon aggregators play an immense role in the growth of the online marketplace. In recent years, these aggregators have invested billions of dollars in store acquisitions.
Unlike other industries where wealthy businesspeople pour money into anything that is currently profitable, most Amazon aggregators have an acute understanding of the e-commerce landscape. They use their expertise and resources to grow the businesses they acquire and turn them into leading brands.
In 2020, Amazon claimed half of its $386 billion came from third-party sellers. The number of Amazon sellers increased by a staggering 40% in 2021.
But why would brand owners sell their Amazon business after investing time, money and effort in it? Why are so many store owners choosing to flip their profitable Amazon businesses?
Why selling your Amazon business could be a good idea
You may not start an ecommerce business thinking that you’ll eventually sell it, but it’s always good to have that option. Things change. Certain priorities can take a back seat. So making sure that your Amazon store is sellable will better prepare you for the future.
Let’s look at some of the reasons why you may consider selling your Amazon business:
You need money
Whether you require funds to start a new venture, or simply want to take some downtime, the most common reason for selling an Amazon business is to make money. The more revenue you generate, the easier it is to attract potential buyers.
Your business is hitting a ceiling
Growing a business is exciting, but as more competitors enter the industry and the market begins getting saturated, it becomes harder to maintain profit. Do you really want to continue investing in a business that will soon reach its ceiling? Unless you have the funds to differentiate or scale your brand, it could be best to get out before it gets too expensive.
You just aren’t interested anymore
Successful entrepreneurs love the thrill that comes with overcoming challenges. But what happens when you’ve removed all the obstacles and achieved your goals? Many entrepreneurs quickly move onto other ventures after they’ve found success. Just because you’re enjoying operating your business right now, doesn’t mean you’ll feel the same a few years later, in which case, selling may seem like a reasonable option.
Of course, there’s no compulsion to sell, however, there’s no telling what the future may bring. It’s always better to stay on the safe side and ensure that your business is sellable. Selling will become exponentially more difficult when revenues are declining, there’s a decrease in demand, and the competition is intense.
So how do you make an Amazon business more sellable?
How to value your Amazon store
Before exploring value-building strategies for your brand, you need to know how to value your store.
The value of your Amazon store is determined by various factors including net profit, age, stability, and the kind of Amazon business you run. There are companies that value your brand for you, but a few simple calculations should give you a rough idea of where you’re at.
Start by determining your average annual net profit. Multiply it with an industry-standard multiplier. This could be anywhere between 2.5 and 4.5. The more profitable and established your business, the higher the multiplier. This will then give you a rough estimate of the value of your Amazon store.
There are a couple of approaches to estimating your net profit:
- If your business is worth less than $5 million, apply the Seller Discretionary Earnings (SDE) method, which states:
Net profit = Revenue – Cost of Goods Sold – Operating Expenses + Owner Salary
- If your business makes above $5 million, you can use the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) method to calculate your net profit:
Net profit = Net income + Taxes + Interest Expense + Depreciation & Amortization
Once you have an idea of how much your business is worth currently, you can set targets and monitor KPIs to increase its value.
6 ways to make your Amazon business more valuable
1) Optimize your listings
An optimized listing brings more sales for your Amazon store, which in turn helps pump its value. Make listing optimization a top focus. Update your product pages regularly, incorporate trending keywords in the title, bullet points, descriptions, and on the backend, use high-quality videos and images, and make sure to collect those customer reviews.
2) Get on Amazon Brand Registry
No one likes copycat sellers biting into their share of the pie. Registering your brand on the Amazon Brand Registry gets you more control over your listings and distinguishes you from counterfeit brands.
In order to get on Amazon Brand Registry, you’ll need to obtain a trademark. This will take time and involves extensive paperwork, but the rewards you receive are worth the trouble.
Being brand registered with Amazon gives you access to exclusive protection against imitators. You also get a higher win % on Buy Box. Considering that 82% of Amazon buyers purchase goods through the Buy Box, it’s crucial that you have one.
Remember you’re competing against thousands of sellers, it’s important to show potential customers that you’re a brand that they can trust, and being on the Amazon Brand Registry can help you do that.
3) Diversify your product line
As the age-old tale goes, “don’t put all your eggs in one basket”.
In the retail world, one product is not enough! No matter how popular this one product of yours may be, it’s not enough to attract buyers. A single-product store is too big a risk for aggregators and just doesn’t promise enough upside for them.
Focus on diversifying your offerings. You can start with adding more variations of your original product and eventually move to other items selling in your niche.
4) Establish a reliable supply chain
Expect potential buyers to bombard you with questions about your supply chain. Relying on one supplier for your Amazon FBA may be a risk that you were willing to take, but established buyers will not.
You should have at least two suppliers, ideally in two different countries. This way if one supplier is unable to deliver due to new restrictions or shortage in raw material, etc. it won’t impact your ability to sell. Additionally, making use of an Amazon forecasting tool will help you with inventory management.
Make a point to maintain good relations with your suppliers and secure their contracts before approaching buyers to avoid issues later on.
5) Go international
Selling globally should increase sales and visibility. Platforms like Amazon Global Selling give you access to Amazon’s international marketplaces and more than 200 million Prime users. A global store on Amazon always attracts more potential buyers.
6) Accrue positive reviews and win Amazon badges
Amazon wouldn’t be the success story it is without its happy customers. Positive reviews are critical for the survival of any Amazon seller regardless of whether or not they wish to sell their business. Good reviews increase your rank, boost brand image, and instill trust in potential customers. Make an effort to remove negative reviews and gain positive ones.
Amazon awards badges to sellers for being environmentally friendly, offering extra savings, being the best in their category, etc. These badges give your brand an edge over others by making you more visible and help establish credibility.
By implementing the above strategies, your Amazon FBA should generate more revenue and make your business more appealing to aggregators should you choose to sell.
Conclusion
Most of the buyers of Amazon FBAs know the ins and outs of e-commerce marketplaces. As an Amazon FBA owner, it’s best to cover your bases and know that you’re doing all that you can to ensure your business flourishes and is ready for a big flip when the time comes.
About ZonGuru
ZonGuru is an all-in-one Amazon toolkit that helps private label sellers with product research, niche evaluation, competition analysis, listing optimization, inventory tracking, customer review acquisition, and running day-to-day operations of their Amazon business. Our tools bring you the most accurate data from across ten Amazon marketplaces, including the US, Canada, Mexico, UK, Italy, France, Spain, Australia, Germany, and India. We make selling on Amazon easier.
About the Author
A marketer by trade, a writer at heart, and an Amazon evangelist around-the-clock, Hammad Nafees lives and breathes the world of the smiling A. He can often be found discussing the ins and outs of the marketplace across the web. In the very rare instances when he is not busy educating the audiences, he likes to sit down and have a good me-time watching the latest football action on his large-sized TV screen.
Sources:
https://empireflippers.com/value-amazon-fba-business/
https://www.feedbackwhiz.com/blog/value-amazon-fba-business/
